Mortgage Terms Explained
The following articles will explain some of the most common mortgage terms. We’ll look at ARMs, 2/1 buy-down mortgages, rate locks, and USDA Loan programs. These mortgage terms can help you determine which type of mortgage is right for you. Once you know what you need, you can start shopping. In the meantime, you can learn about ARMs and USDA Loans. After all, you’re paying thousands of dollars for a home, and you want to make sure you’re getting a good deal. 아파트담보대출
The initial interest rate on an ARM is lower than the initial rate on a fixed-rate mortgage, but the ARM’s maximum increase may be as high as nine percent. Despite this limit, ARMs often result in a higher monthly payment. Nonetheless, an ARM can make sense if you plan to move in the next few years or if you anticipate a major salary increase in the near future.
2/1 buy down mortgage
A 2/1 buy down mortgage, pronounced “two one,” is a mortgage that allows a borrower to qualify for a lower interest rate than the current market rate for the first year of the loan. After the first year, the interest rate increases by one percentage point, and then stays the same for the remainder of the loan. Borrowers typically refinance at the end of the second year, but you can keep the loan for three more years.
ARM rate lock
One of the benefits of an ARM is that a borrower is guaranteed a certain interest rate for the initial period of the loan. This period may range from five to seven years. After that, the interest rate is subject to change based on changes in the index and the margin. Mortgage servicers are required to provide an estimate of the new payment two to four months before the loan adjusts. An ARM rate lock in mortgage terms provides borrowers with peace of mind in the event that the market changes significantly.
Loan program guaranteed by the U.S. Department of Agriculture (USDA)
USDA guarantees 90 percent of mortgage loans for low and moderate income home buyers. USDA direct loans are issued to those who are unable to qualify for conventional loans or decent housing. This program is available to those with low and moderate incomes and the income limits vary by location. To apply, complete the online application form. Once approved, you will be able to purchase a home for no money down.
Depending on the type of mortgage you’re taking out, closing costs can be quite substantial. While specific costs vary by state, loan product, and purchase agreement, you should expect to pay at least 2% to 5% of the total purchase price. You’ll also have to pay for property taxes, homeowner’s insurance, and homeowner’s association dues. These costs can be rolled into the mortgage loan amount or paid for in monthly installments.
Mortgage lenders require borrowers to set up escrow accounts to minimize the risk of default. If the homeowner does not make the required payments on their mortgage loan, unpaid taxes or insurance can result in liens on the lender’s home. By setting up a separate account, borrowers can smooth out these non-mortgage costs. But, how do escrow funds work? Let’s explore. Using a mortgage as an example, escrow funds are used for a different purpose.
Qualified written request
If you believe that your mortgage servicer has made an error in reporting certain information on your account, you can submit a written request for a change in your mortgage terms and conditions. A qualified written request, also known as a QWR, is an official letter that you send to the company that accepts your monthly mortgage payments. Note that the company may not be the same one that issued the loan, so it’s important to be clear about this distinction before you send the request.