Foreclosure
12 September 2007
Foreclosure doesn't just happen to people who don't make their mortgage payments. Your homeowner's association (HOA) can take your house or condo if you're not careful. In one case, a disabled California man lost his home in a foreclosure sale because he was $123 behind on his homeowner's dues. The house was worth $280,000. Unfair? Abusive? You bet!
Read More »
12 September 2007
Foreclosure doesn't just happen to people who don't make their mortgage payments. Your homeowner's association (HOA) can take your house or condo if you're not careful. In one case, a disabled California man lost his home in a foreclosure sale because he was $123 behind on his homeowner's dues. The house was worth $280,000. Unfair? Abusive? You bet!Read More »
Mortgages 101
By Sarah ClarkNFNS Columnist
Which mortgages require insurance? How do I know if my interest rate will adjust? And how much money must I put up front toward the purchase of my home? If you're a first-time buyer, you'll need to know the answers to these and other common home loan questions.The National Association of Home Builders defines a mortgage as "a long-term loan that uses real estate as collateral." The collateral in this case is the home you're purchasing. But that definition is a lot simpler than the process of actually selecting your loan--there are many types of home mortgage loans on the market.
Conforming Mortgages
Conforming mortgage loans are amortized over 30 or 15 years and fall within limits specified by Fannie Mae (FNMA) or Freddie Mac (FRMC). In the past, borrowers were expected to put twenty percent down to obtain a mortgage and buy a home. This created a high barrier to home ownership, especially for first time buyers. Today, borrowers can put down less money and get into their homes by paying mortgage insurance (MI) every month, or by taking advantage of other less traditional programs.FHA-Insured Loans
FHA (Federal Housing Authority) loans are backed by the federal government with the purpose of making home ownership more accessible to buyers at the lower end of the housing market. The loans feature less rigorous qualifying (helpful for first-timers who haven't established much credit yet), and down payments of 3% or even lower. Many lenders are FHA-approved and offer these loans to those who qualify.MI (Mortgage Insurance)
Borrowers who have less than 20% to put down on a property are a riskier deal for lenders, so mortgages greater than 80% of the value of the home generally require that the borrowers carry mortgage insurance--until they have paid the loan down sufficiently or the property has appreciated enough.The Low Down on Loans: Other Options
Buyers with less than 20% down can also take a "purchase money second" or "piggy-back" loan to bring the balance of the first mortgage to 80%. This eliminates the need for MI and may cost less depending on the available second mortgage rates. Still other buyers avail themselves of "portfolio" or "alternative" financing--because lenders keep these loans on their own books, they can create products designed to meet specific buyer needs.Non-conforming Loans
Fewer borrowers than ever drop into the 20-percent-down-thirty-year-fixed-mortgage box. Non-conforming loans, also called jumbo mortgages, exceed the limits set by Freddie Mac or Fannie Mae. Many lenders offer a huge variety of programs for larger loans and it behooves borrowers who need more money to check around and compare rates and terms.Adjustable Rate Mortgages
Adjustable rate mortgages (ARMs) feature mortgage interest rates that change--or "adjust"--periodically. They typically offer an introductory mortgage rate--for anywhere from a month to ten years--that is lower than the rate of a fixed-rate mortgage. These loans were historically very popular among professional real estate investors who didn't hold on to their investments very long. They can also make sense for home buyers who plan to sell their homes before their mortgage rate adjusts upward. They can also help people afford a home that they may not otherwise afford through a conventional fixed-rate mortgage.Source
The National Association of Home Builders: Mortgage Basics
About the Author
Sarah Clark is a freelance writer specializing in a variety of consumer topics.
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