Don’t assume that because you can speak the lingo of mortgage fluently you can also speak to jingoistic lenders with equal fluency. Here, we explain basic loan lingo related to home loans that cut across all income brackets. Read through the various mortgage loan options and see what they are all about.

Government or conventional loans: The United States is a large player in the residential mortgage market. About 20 percent of home loans are either guaranteed or insured by an agency of the federal government. These mortgages are also called government loans. The remaining 80 percent of residential mortgages are referred to as conventional loans. These loans are mortgage loans usually provided by lenders who are not government-sponsored such as the FHA, VA or RHS.

Federal Housing Administration (FHA): Set up in 1934 during the Great Depression to encourage the U.S. housing industry, this body encourages people of low-to-moderate income to get mortgages by giving federal insurance against losses to those lenders who make FHA loans. The FHA, however is not a money lender. In fact, borrowers must look for an FHA-approved lender such as a bank or financial institution that will give them a mortgage which the FHA will then insure.

Department of Veterans Affairs (VA): This provision enables people on active duty and veterans to buy homes. The VA does not have money of its own but acts as a lender that guarantees mortgages and loans granted by lending institutions. In fact, VA loans are usually sponsored by the U.S. Department of Veteran Affairs. They offer competitive interest rates, little or no down payments and very little declaration of income.

Farmers Home Administration (FHA): Like the above two bodies, this one too is not a direct lender. Contrary to its name, one doesn’t have to be a farmer to obtain a loan from this institution. But you do need to buy a home in the countryside for which the FHA insures mortgages. These loans come with minimal down payment and are easier to obtain than others. These loans are FHA loans are overseen by the Federal Housing Administration.

These loans come from lenders with attractive features such as minimal cash down payments, long loan terms, penalty-free if you repay before time, and lower interest rates. But these loans are targeted towards specific kinds of home buyers, have comparatively low maximum mortgage amounts, but take very long to obtain approval.

Apart from these three basic loan types, you can also choose from:

Fixed rate loans: Easy to qualify for, lenders to this mortgage offer you this loan which comes in 20 and 30 year schemes and gives you a good chance to keep your mortgage payments easy on the pocket over a long duration. If you plan to live in your home for several years and keep your expenses at a minimum, this loan is for you.

Adjustable rate loans (ARMs): Though this loan scheme has a low adjustable rate, it is not unusual for lenders to give you a maximum period of 10 years for repayment. The rule is that the low start rate means a short time before you start paying the first mortgage installment.

Combination (hybrid) loans: These loans combine a fixed rate with ARM loans. They have a built-in delayed adjustment period of which the initial period is fixed. They carry very little risk—usually lesser than one year and come with an interest rate that’s lesser than fixed-rate loans. Though they begin as fixed rates loans, they adjust to ARM after a few years. This is meant for people on the move as lenders of a combination loan allow buyers to make use of low interest rates for repayment in the initial years of the mortgage scheme.

Balloon mortgages and pledge asset loans: Here, your monthly mortgage installments are based on a fixed term up to 30 or 15 years amortization. At the end of this balloon period, your lender will tell you that the remaining mortgage loan amount is due for payment. Pledged asset mortgages are loans meant for those with sufficient income to pledge their investments as collateral in place of a cash down payment.

The world of mortgages can be very overwhelming when you first look at all of the options. There are so many terms, regulations, different fees, options, and different forms that it can become very confusing. But with a little understanding and research on exactly what mortgages are all about, you will find that it will be a lot easier to apply and get the home of your dreams. Below is some information on mortgages and some of the things that go along with them, like fees and terms, to help give you a little understanding on the subject.

Types of mortgages:

There are many types of mortgage options available. The three main types are fixed rate, convertible and special loans.

The fixed rate home loan in which you have options like:

30year loan – where you pay a fixed fee over the course of 30 years.

15 year loan – where you pay a fixed fee over the course of 15 years

Biweekly – where you pay your repayments every two weeks.

Adjustable rate mortgage or ARM – where you pay you variable amounts each repayment, they are based on the interest rate.

Convertible loans that include:

Hybrid and convertible ARM – where you can covert between a fixed rate or an ARM

Interest only loans – where you only pay the interest each payment until you are able to put down a lump sum.

Balloon loans – where you pay only the interest and at the end of the term you pay the total amount due all in one large payment.

Reverse mortgage – for equity rich seniors and don’t have to make any repayments until sale of the house.

Buy down loan – a loan that works on points to lower interest rates.

And the last category of loans is special loans:

FHA loan – for first home buyers and people with credit problems.

Veteran Affairs mortgage loan – only for people and widowers of the armed forces.

With all these mortgage options and more there will definitely be one that will suit your needs.

Fees:

There are many types of fees when it comes to mortgages, some of these fees and what they are for include:

Appraisal – where you pay for a person to do an appraisal on what your completed home’s value will be.

Organization – a fee that pays the lender and their workers for processing your application and other related duties.

Down payment – what you put down on a deposit on your home, this is usually about 1–20%

Closing costs – this pays for the transfer of your ownership of the home, this is usually 1-3% of your loans total but it can vary.

Other terms:

There are many other terms that you should know when going into the mortgage field. Below are some of them and what they mean.

Points – these are used to lower your interest rate and are usually done by a lump sum payment at the closing.

Good faith estimate – this is when you are given that total in amount of fees you will have to pay when it comes to the closing.

Loan locks – this is where you and the mortgage company or lender agree on a set interest rate at the beginning of the mortgage process, if you don’t lock your loan the interest rate can increase or decrease.

A truth in lending disclosure – this form gives you the complete cost of your loan in both a percentage and dollar form.

Pre qualifying – this is where you qualify for a loan before you actually go for one, it is a good way to review your financial status and lets you determine what amount of loan will suit your budget.

PITI – this means principle (amount of your loan), interest, taxes and insurance, all of these things are crucial to your mortgage and your repayments.

Escrow – this is where money and important information is held by a third party while two people are in a business transaction.

There is so much information you need to take in when you go into the world of mortgages but hopefully the above has given you a little bit of understanding of what it is all about. This should help you ease into the mortgage field a little easier. A financial professional or your lender will be happy to go through all the details with you when you are having trouble.

Your mortgage off early

One niggling question that perhaps gnaws at everyone’s peace of mind at some point of time or other is: Should you pay off your home loan or invest the money? You’ll be amazed by the variety of answers this question can elicit, and from this alone you can realize that there’s no one answer for everyone. Though theoretically, the concept is simple: If you think of extra mortgage payments as an investment and your return as the interest on the loan, you need to now consider if you can get higher returns elsewhere? “Yes?” Then, keep the mortgage and invest the money securely.

Having said that, it’s a matter that requires great thought whether you should pay off your mortgage payments or carry them for longer. It depends on several factors such as your tax bracket, how your cash-flow picture looks and what you think about carrying a big loan on your head. Your decision really depends on your mental make-up and your situation in life.

For instance, if you are at the peak of your career, you should hold on to your mortgage. No, don’t consider paying off an early mortgage just yet. If you are in the high income bracket, it means higher income tax too. The good news is that your mortgage interest is just one more income tax deduction you can claim to pay a lower tax. This is the happy side to your loan and you never realized it, did you?

Now, you can even get the most out of your mortgage-interest deduction if you pay off the greater part of your interest early on in your loan term. You can do this by paying one or two more installments during the year. Now to balance your budget, take care to save for a rainy day, for your children’s education, etc.

If mortgage rates are low, invest your money in schemes that give you better returns. But when mortgage rates are higher, invest it in to your home since this guarantees you a higher rate of interest. If for example, you have a 14% mortgage, you can get a 14% rate of interest if you pay it off. Then, before you know it, you will be loan-free.

If you are reaching retirement age, you perhaps want to expedite the repayment of your loans so that you are debt-free when you hang up your boots. Ensure that paying off your mortgage payments in a rush doesn’t actually become counter-productive.

So suppose you decide to refinance your mortgage so that your term is shortened to 15 years and you have a zero balance on your home loan by the time you’re 65 years old. Due to this, your principal and interest payment stand at $950 a month instead of $750 a month. When you reach pay-off day, you can now invest that $950 in a fund that gives you 9% interest. Give yourself another 15 years and you’ll have a tidy sum of $360,000.

Now let us suppose you’ve been retired for a few years now. Considering this, you’re sure to have been paying off more principal than mortgage interest. If this is so, paying off the mortgage loan becomes your prime interest in life, besides also proving to be a cash flow problem. If you know that post-retirement your cash flow will be largely restricted, it would be wiser for you to concentrate on paying off your mortgage. But if you have a few assets or none, it might be a better idea for you to diversify your investments. You could consider saving in either a savings or money market account which would give you healthier returns than the interest you are paying out on your mortgage.

If you’ve just sold a big house and are cash-rich, taking out a mortgage makes complete sense, just so long as your investment returns are larger than your mortgage interest. If you don’t tie up all your cash in real estate, you can take full advantage of tax deduction, invest in other schemes and have greater liquidity at your command. Not only will your loan be paid off, but you will have peace of mind in your sunset years.

Open house is a great opportunity for both the buyer and the seller.  It gives the seller the chance to showcase their home and the buyer can view the home in all its glory.  Buyers love to scope out potential homes and many offers are made at open houses.  After all, open houses are really sales presentations. In order to have a successful open house, there are some tasks that should be completed by the seller beforehand.

The most obvious task is cleaning.  The house should be spotless, including appliances.  If you work full time and don’t have the time to get the house cleaned, hire a house cleaning service.  The money spent is well worth it if you are able to sell quickly.  It might be hard to keep it clean if you are still living there, but you must make a concentrated effort to try.  Your home presentation must be impeccable.

Keep foul and mysterious odors away.  The first thing a potential buyer will notice is an offensive odor and you will probably never see them again.  Regularly inspect your home for potential odor sources and keep a steady supply of candles and air fresheners on hand.  If you have an indoor cat, keep the litter box out of sight and scooped out daily. 

Clutter is a major turnoff to potential buyers.  It just isn’t comforting to see piles of clutter everywhere.  Keep small appliances stored instead of out on the countertops.  Remove photographs and knick-knacks.  You want people to envision their belongings in the house.  Clean out and organize the closets.  If there is no reason for something to be displayed, get rid of it.

If you can, remove non-essential furniture to make the rooms appear larger.  Spacious rooms are more appealing to the eyes.  Keep your boxes of junk stored out of sight.  It is a good idea to start figuring out what you need and what you can live without.  It would be a good idea to have a garage sale before you put the house on the market.  If you can’t bear to part with anything, rent a temporary storage unit.

You cannot ignore the outside of the house either.  The outside presentation has a major impact on the buyer.  Clean the leaves out of the drain gutter, don’t let garden hoses or other tools pile up outside.  Pick them up and store them elsewhere.  Make the effort to beautify the front entry.  If the door handle is rusty or the whole door looks junky, get a new one.  Keep the flower beds neat and free from weeds.

Look at the walls and try to put yourself in the buyers’ shoes.  How would you look at the walls in someone else’s house?  Is the paint chipping or is the color outdated?  It would be well worth your time to give the walls a fresh coat of paint.  Nothing makes a room come alive more than a fresh coat of paint.  Give the rooms a little bit of a makeover with new décor that compliments the wall colors.  If you have a garden, bring in some fresh flowers and put them in attractive vases.

Establish a pleasant atmosphere by baking bread or cookies.  Candles add a nice touch along with background music.  Classical or jazz music are both good choices.  You want to convey style and elegance to your audience.  First impressions go a long way.

When trying to sell your house, you should be prepared for a showing at any time.  Last minute requests are very common and can turn into offers.  You have the option to request 24 hours notice before a showing, but in doing so you limit your home’s exposure.  Try to be as flexible as possible.  Accommodating the hectic schedules of a potential buyer will make you and your home look that much better.

It is a good idea to not be present for the showing.  Buyers might not feel comfortable in your presence or they might be afraid to ask a particular question for fear of offending you.  If they can’t view the house fully, they will probably just move on to the next one.  You don’t want that.  They are supposed to fall in love with your house.

Buying a house for whatever reason should be a fun and exciting time.  Open houses are an enjoyable event.  You may even visit three or four different homes in one day.  There are special things to look for when going to see these houses.  An open house is used to check the market and let potential buyers window-shop.  There are certain criteria you have in mind when searching for the perfect home.  Jot those ideas down and compare them to the homes you view.

Take a notepad with you to each house and make a note of the address of the homes you visit. Jot down things you like and dislike about each house. This will help you keep track of which house is which.  Make note of nearby schools, the general neighborhood, how close is freeway access, where are the shopping malls, and any other information that will help you decide on your choice of home. The commute to work is a vital piece of information.  Many forget to consider how far away the job is.  The last thing a person wants to do is spend too much time on the road instead of with the family.  When attending an open house, remember that the neighborhood surroundings are an important aspect to purchasing a house.

Check the condition of the house, the road and the yard.  Is it suitable of children or pets?  Who will take care of the yard or can you hire a gardener?  Whatever you desire, be sure to think of everything and take plenty of notes.  A poloroid camera is well worth taking. Clip instant snapshots to your notebook to help you remember specific houses. Buying a house is an important step, so make sure you know what to look for.  Check everything.   Notice cabinets, appliances, doors and even views out of the windows.  Listen to noises that could be bothersome, such as a train that passes near by or a freeway. Make sure there is plenty of living space or room to add more if you desire.  Most people forget to ensure there is enough closet and storage room.  Write down vital pieces of information which should include anything that will help you with your decision.

At the open house, an owner or broker is likely to be present. If there is one in attendance, ask questions.  Find out all the little secrets about the house.  Granted they will not always be straightforward.  Have a memo of each inquiry.  Put in writing all the answers.  When you make the choice on a house you can add these questions into the sales contact and re-ask the query.  If these replies differ in the writing stage you may not want to do business with these people after all.  All homes have concealed facts.  Some are not real terrible but others can be horrendous.  Interrogating the owner or broker is an ideal way to find out things that are not visible.  Do not be shy about wanting to know how your dream home is really shaped.

Many times, several brokers, lenders or agents frequent open houses.  They want your business as soon as you step foot onto the property.  Do not sign anything.  Even if this were the house you would like to purchase.  On sight people have one agenda, to sell you something.  Usually the brokers who visit many different open houses will try and get you to view other properties.  Which is fine, however they do not know anything about your wishes of the home you want.  The mortgage lenders may try to sell you a different house at a better rate.  However, in the end it is more likely you will end up paying more.  At the stage of an open house it is most probable you are playing the field.

Going to an open house is a time-honored tradition.  Open houses are for looking and sometimes even buying.  With an important and expensive decision to make, it is better to research and look at all of your options.  When venturing upon an open house, understand all the choices offered.  Try not to be persuaded in making rash decisions.  You have the option of looking, taking those important notes, returning to look some more, and even moving on if this house is not for you.