2. US Mortgage Corporation (NMLS ID#3901). Corporate Office is located at 201 Old Country Road, Suite 140, Melville, NY 11747; 631-580-2600
or (800) 562-6715 (LOANS15). Licensed Mortgage Banker-NYS Department of Financial Services- AK, AL, AR, CA, CO, CT, DC, DE, FL, GA, IA,
ID, IL, IN, KS, KY, LA, MA, MD, ME, MI, MN, MS, MT, NC, ND, NE, NH, NJ, NM, OH, OK, OR, PA, RI, SC, SD, TN, TX, VA, VT, WA, WI, WV, WY State
Banking Departments/Regulators. Rates, fees and program guidelines are subject to change without notice. Some loans arranged through
third parties. First mortgages only. Not all products and/or programs are available in all states. Certain restrictions may apply.
4. What Is A
Mortgage?
Mortgage is a way of financing purchase
of a property. If you apply for a home loan
to purchase a home, apartment, or plot
for residential purpose, the mortgage is
called a residential mortgage. A mortgage
taken out for commercial properties such
as factories, offices, malls, etc., is called a
commercial mortgage.
If you wish to buy a property, you can approach
a bank or any other lender to finance you for
your purchase. The loan will include a principal
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5. amount (total money that you borrow) on which
you will be charged an interest over a period of
time. The property that you buy will be held as
security for the loan you borrow. If you default
on the loan, the lender may foreclose on
your property.
If you have taken a loan on your property, you will
be obliged to make monthly mortgage payments
until the time that the entire loan is repaid. The
mortgage agreement ends only when the loan
is paid or when the property is foreclosed. The
borrower always has the legal rights and can
reside on the property during the period of the
mortgage agreement. But, if you default on the
loan, the lender will have to take full ownership
of the property, evict you, and sell it to redeem
the balance amount. Mortgage is a very tricky
process and includes many important factors.
The following chapters will explain more on
the subject.
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7. You have to think of financing your home
purchase well before the day of purchase. When
you seek a home loan, there are many factors
that play a role in your loan application. Let us
look at some of these factors in detail.
Credit Report Or Credit Score
This is a major factor in your loan application
process. In order to weigh your finance options,
make a request for your credit report in advance
of your purchase. You can get your credit report
for free every year from any of the three credit
bureaus - TransUnion, Equifax, or Experian. You
can get it online by applying on the Annual Credit
Report website. Borrowers with higher credit
scores are more likely to get pre-approvals on
their mortgage loans than those with lower credit
scores. The higher credit score holders can get
the loans at lower interest rates with flexible
terms of payment. Lenders are often hesitant to
provide loans to low credit score holders, as they
are more likely to default on their payments. If
you have a low credit score, it is a better option
to approach mortgage lenders or brokers.
Mortgage Broker
Do not confuse a broker with a lender. A broker is
merely a liaison between buyers and lenders. He
or she can help you find the best mortgage deals,
find the right lender, and fill out the necessary
paperwork for a mortgage application. Brokers
are not involved in loan approval process. They
just assist you with your application, as most
first-time buyers are unaware of the mortgage
process. If you wish to finance your purchase
with a loan, your real estate agent can guide you
through the process.
Mortgage Lender
Typically a mortgage lender can be any financial
institution. Banks are usually restricted in their
lending processes and are open only to those
borrowers with a good credit report. Even if
banks may offer loans to not-so-good credit
holders, they charge a heavy interest on the
principal amount.
Down Payment
In most cases, a seller will set a deadline
for the purchase of a property. You will be
one of the bidders who can negotiate an
agreeable price with the seller. If the seller
and you reach an agreement, you can
sign to purchase the property by making
a down payment of 1-10% on the price of
the property. You will then be given a grace
period when you can make arrangements
to fund your purchase.
Mortgage Limits
Most times you might have to fund a
certain percentage of your purchase on
your own while the rest will be covered by
the mortgage loan. If you do fund a part of
your purchase on your own, it would help
you reduce your mortgage payments.
Interest Rates On Mortgage Loans
Lenders try to make money by offering
loans. This is accomplished by charging
an interest on the principal amount of the
loan. The interest rate is usually known
as APR (annual percentage rate). It may
be fixed or can vary according to the type
of lender and credit scores of borrowers.
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8. Mortgages are classified based on the type
of interest rates charged on them. Depending
on the state laws, increase in interest rates,
changing terms in loan agreement, and lender
policies, there are many types of mortgages.
However, the amount to be paid monthly is
altered over time.
Adjustable-Rate Mortgage
An adjustable or variable rate mortgage is a type
of loan where the interest rates are adjusted
periodically. It may be defined or discrete.
Types Of
Mortgages
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9. Graduated Payment Mortgage
In this case, the interest rate on the loan remains
the same. But, the amount to be paid monthly is
altered over time. This accelerates the payment
process and reduces the period of the mortgage
agreement.
Fixed-Rate Mortgage
The interest rates on the mortgage loans remain
the same throughout the mortgage agreement
period. The mortgage payments are fixed for
every month without any variation throughout the
payment period.
Participation Mortgage
When two or more people hold equity on a
property, the mortgage loan offered is charged
with a participation interest where the interest
rates depend on the share of the property owned
by each of the members. If the party defaults
on the payment, the lender sells all the shares
of the property to redeem the remaining debt.
It may have a balloon payment, interest, and
principal payments. Sometimes the terms of the
loans may not include all these payments. The
terms are altered in case of a group purchase.
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11. You may get a chance to pay off your
existing mortgage early with a new mortgage
if the interest rates reduce or if the terms
of the existing mortgages are changed.
Refinancing options can be provided for
many reasons, including changes in your
credit report, changes in lender policies, and
other such factors. You can take advantage
of this situation to reduce your burden in
paying off your debt. Here is how you can
use refinancing in ways that can be useful.
• You can take a new mortgage to pay off
your existing mortgage at lower monthly
payments.
• You can repay your debt in a shorter period
of time using a loan at lower interest rate.
• You can combine all your existing debts
in one and repay them using a new single
mortgage with lower interest rate, flexible
terms, and shorter term of payment.
• You can change the structure of your
mortgage plan, like shift from adjustable-
rate to fixed-rate mortgage.
There are fees for transaction if you wish
to refinance your loans. If you clear your
fixed-term loans well before the deadline,
you might encounter the consequences of
penalty clauses included in the terms of the
loans. You will have to review your options
very carefully before deciding to refinance,
as it may involve huge costs for the process
itself.
Refinancing loans are of two types. If your
home is worth more than the debt you owe
to the lender, you can opt for the cash-out
refinance loan. You can use the additional
value of your house as collateral for the new
loan. If your home is worth less than the debt
you owe, you can opt for a cash-in refinance
loan. Here, you can pay the lender a part of
the debt to get a better mortgage rate.
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12. All You Need To
Know About
Reverse Mortgages
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13. Factors Involved In Allocating
Amount Of Reverse Mortgage
There are a few factors that determine the
loan limit available to a borrower. They are:
• Age of the borrower – If you are older, it
is likely you will receive a larger amount.
• Value of the property – The value of
your property will be estimated based on
market value, condition of the property,
expenses for property maintenance and
existing property liens. If the property
value if high, you would get a higher
principal amount.
• Type of income through mortgage –
Depending on the type of withdrawal
you choose from monthly income, line of
credit or as a complete amount, the loan
will be awarded to you.
The loan would have to be paid in full upon
your death including the interest and all
charges incurred during the processing of
the loan. If the payment is not made by any
of your family or friends, the lender would
sell your property to cover the costs of the
loan. If there is a balance amount from the
property sale, it will be distributed according
to the terms stated in your will.
Reverse mortgage is a loan for senior citizens
where you can acquire a part of the equity value
of your property. You can receive a monthly
income from a principal sum for your lifetime at
the end of which, the lender can sell the property
to redeem the loan amount.
A homeowner or a borrower is not required to
make any mortgage payment to the lender.
The accrued interest on the principal amount is
added to the balance of the mortgage amount.
A homeowner can retain rights to the property
for a lifetime after which, depending on whether
the loan has been repaid, the lender will sell
the property and redeem the balance. If the
property has accumulated equity over time, a
homeowner can obtain another mortgage for the
increased value.
Eligibility For Reverse Mortgage In The USA
You must be a minimum of 62 years of age to
acquire a reverse mortgage. You must also
reside on the property for as long as the reverse
mortgage is in function. You must be able to
repay pending loan balances with the income
from the reverse mortgage. There are no credit
or minimum income requirements. The income
from reverse mortgage will not be taxable. You
have to attend a counseling session with an FHA
approved counselor so you can understand all
the terms of the mortgage.
Limit Of A Reverse Mortgage
There is a maximum loan limit of USD625500
that you can borrow through a reverse mortgage.
However, if the value of your property exceeds
this amount, you can opt for a Jumbo loan.
Jumbo loan is not insured by the FHA and might
include charges higher than the charges included
for a conventional reverse mortgage
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