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A Beginner’s Guide To Mortgages

Todays Date: December 16, 2018

It is important to know what a mortgage is and all its features. A mortgage is a loan, which is taken out to finance and purchase a house. To get it financed, a property needs to be placed as collateral with the bank or financial institution. This gives complete authority to the financial institution to take ownership of your property in case you default on the payment.

The mortgage process for a financial institution is started by the first step of checking your credit report, which will tell the bank about your previous loan repayment conduct. By this way the bank minimizes their risk. According to them there are two types of customers, the one with good credit are low risk customers and the others are high-risk customers, hence it is important to check the potential customer’s credit report.

There is an upper limit to the amount of money that you can borrow from a bank. This depends on your annual income. Each bank has its own set of norms and you should therefore make enquiries at several banks, mortgage brokers, lenders and credit unions. This will give you some indication of how much money you could borrow. Mortgage brokers will tell you about home insurance and home expenses. If you are searching for institutions that would provide home loans, do not restrict yourself to banks. You should also explore mortgage assistance programs, community services, state mortgage programs and housing agency mortgages.

When calculating the cost of your home loan don’t forget to add other expenditures like underwriting fees, broker fees, commissions and mortgage insurance among others. You should also consider the annual percentage rate and not the monthly mortgage rate when calculating the amount of interest that needs to be paid.

You must weigh the pros and cons of fixed rate home loans and adjustable rate mortgages, and look into how each applies to your case. You must also learn about home equity loans and refinancing. If you do not understand why a particular charge is levied, you should not hesitate to ask the reason for it.

Before signing any documents, obtain all needed info that pertains to the loan, like the down payment, conditions and terms of the loan, and interest rates. Also obtain all info pertinent to the interest rate that is charged on this loan, the percentage rate and if it is adjustable or fixed, and all conditions and terms relating to both kinds.

To begin with, all features of your mortgage should be as per your satisfaction. Once you have analyzed this well and are completely sure then it is time to place an offer to your lender or broker. It is unlikely that your lender or broker will accept the first offer. He may give you another offer. It is advisable not to immediately accept the offer, as this will make you look desperate to get the loan. It is also better if you do not give such an impression to the lender. This is a good time to negotiate and ask for a discount in the broker fees and to alter the terms and conditions to suit your needs best.

After you have submitted an application and any supporting documents, the lender will prepare a written loan agreement setting forth the rate, repayment period and other terms and conditions of the loan. Your signature is your agreement to accept the funds under the terms offered.

The author specializes in getting people great deals on a FNB home loan. To read more on homeloans visit SecureBonds.co.za

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