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Mortgage Information


Want to buy that home of your dreams? Like most people, unless you have cash in the bank, we go to banks and mortgage lenders and borrow the money to buy our dream house. The bottom line? A mortgage is a loan that is to be used to finance the purchase of property. The property itself is used as security to ensure repayment and the lender holds the title or deed to the property either directly or indirectly (depending on where you live) until you have repaid the entire amount plus interest.

We can't stress this enough! One of the most important things you can do before committing yourself to any type of mortgage is to sit down with a mortgage professional and examine all options available to you. This will enable you to determine which product is best suited to your current situation and your future plans. Let Tim & Pam from CENTURY 21 Gemini Realty assist you in finding a local, knowledgeable, mortgage professional that will make you feel comfortable and provide you with solid advice. We work with these professionals on a daily basis and will be glad to provide you with recommendations.

1. The Mortgage Amount

Your mortgage amount is the total amount of money to be borrowed by the purchaser and applied toward the price of the property. Basically, the mortgage amount plus the down payment equals the purchase price.

2. The Down Payment

Your down payment is the lump sum you pay upfront that reduces the amount of money you have to finance.  You can put as much money down as you want, or you can sometimes pay as little as 3 to 5 percent of the purchase price. The more money you put down, though, the less you have to finance and the lower your monthly payment will be.

3. The Term of the Mortgage

The period of time during which the loan contract is active is the term of the mortgage. During the term the borrower makes periodic payments (usually monthly) to the lender and at the end of the term the balance of the loan is due and payable.

4. The Mortgage Payment

The mortgage payment is made up of:

Principle - This is the total amount of money you are borrowing from the lender (after you've made your down payment). It is the amount of money you are financing.

Interest - This is the money the lender charges you for the loan. It is a percentage of the total amount of money you are borrowing.

Taxes - Money to pay your property taxes is often put into an escrow account, meaning that the money is placed in the hands of a third party until it is time to pay or certain conditions are met. A portion of your property tax is added to your monthly mortgage payment and held in escrow until it is due.

Insurance - There are several types of insurance that can come into play when you obtain a mortgage. It is dependent upon where you live and the location of the property. Some types of insurance are hazard insurance to protect against losses from fire, storms, theft, etc., and if your home is in a flood risk zone it is possible you'll have to get flood insurance. Unless you have at least 20 percent equity in your home then private mortgage insurance (PMI) may be required.





There are many types of mortgages you can choose from. Which type you choose usually depends on the length of time you think you'll be in your home or the other financial obligations you have. If you think you'll be there for the long haul, then you may want a fixed rate mortgage with the lowest interest rate you can get.


There may be other considerations, however. What if you have kids who are going to be entering college in 10 years? In that case, you might consider getting an adjustable rate mortgage or a mortgage with a balloon payment so you can keep your payments low for the first few years in order to save for college. Once the kids are out of college, you can refinance at the current rate. If you don't think you'll be in your home for that long, then you may also want to look at other options.


The mortgage payment is made up of:

  • Fixed-rate mortgage - This mortgage offers an interest rate that will never change over the entire life of the loan. Traditionally, a fixed rate mortgage is one of the most popular types. They are typically taken out over a 30-year period but there are lengths of 15 to 25 years. The interest rate and monthly mortgage payment on a fixed rate mortgage remain the same on the entire life of the loan. The main advantage of this type of mortgage is that the borrower knows exactly what their monthly costs will be.
  • Adjustable-rate mortgage (ARM) - An adjustable-rate mortgage has an interest rate that changes based on changing market rates and economic trends. They usually offer an initial interest rate that is two to three percentage points lower than fixed-rate mortgages, but they don't offer the stability or assurance of a known mortgage payment in the years to come. If you don't expect to be in your home for many years, however, an ARM may be just what you need. How often your interest rate adjusts is determined by the terms of the loan. You may choose a six-month ARM, a one-year ARM, a two-year ARM, or some other term. There is usually an initial period of time during which the rate won't change. This might be anywhere from six months to several years. There will also be caps, or limits to how high your interest rate can go over the life of the loan and how much it may change with each adjustment. Interim or periodic caps dictate how much the interest rate may rise with each adjustment. The interest rates for ARMs can be tied to one-year U.S. Treasury bills, certificates of deposit (CDs), the London Inter-Bank Offer Rate (LIBOR), or other indexes. When mortgage lenders come up with their rates for Arms, they look at the index and add a margin of two to four percentage points. Being "tied" to these index rates means that when those rates go up, your interest goes up with it. The flip side is that if they go down, your rate also goes down.
  • Balloon mortgage - A balloon mortgage offers an initial interest rate that is lower than fixed-rate mortgages. It keeps this low fixed rate for five to seven years and then requires a "balloon" payment. The balloon payment is the final payment of the loan and pays off the entire balance. Monthly payments are low because the payments for those first five to seven years are amortized at a low interest rate over the total length of the loan. If you plan on either selling your home, paying it off, or refinancing it before the balloon payment is due, then this type of mortgage is good deal.
  • Government loans - Government housing loans help lower the costs of mortgages so that more people can afford to own their own home. Here are a few:

§                                 The Federal Housing Administration (FHA) offers a mortgage financing program that insures home loans. The FHA doesn't make the loans itself; rather, it serves as an insurance policy for lenders. Because the financial requirements for FHA loans are relaxed compared to traditional commercial loans, more people are able to afford to buy homes. FHA insurance makes lenders more willing to work with someone who might not completely fit their usual loan qualification requirements. In order to qualify for this type of loan certain requirements on the property must be met as well as maximum loan amounts. These requirements vary region to region. HABS Real Estate Group and HABS New Homes Group and/or a mortgage specialist can provide you with information for New Hampshire.

§                                 The Veterans Administration (VA) loans are designed for qualified US veterans for the purchase of a home with no down payment and lowered closing costs.

§                                 The Fannie Mae and Freddie Mac loans are independent and privately run companies that operate under special congressional charters. These companies compete with each other for mortgage business. This competition is good as it ensures there is an ample supply of low cost mortgage money available to the home buyer.


5 Credit Score Factors


Credit scores range between 200 and 800. Scores above 620 are considered desirable for obtaining a mortgage. These factors will affect your score.

1. Your payment history. Whether you paid credit card obligations on time.

2. How much you owe. Owing a great deal of money on numerous accounts can indicate that you are overextended.

3. The length of your credit history. In general, the longer the better.

4. How much new credit you have. New credit, either installment payments or new credit cards, are considered more risky, even if you pay promptly.

5. The types of credit you use. Generally, it's desirable to have more than one type of credit-installment loans, credit cards, and a mortgage, for example.


8 Ways to Improve Your Credit


Credit scores, along with your overall income and debt, are a big factor in determining if you'll qualify for a loan and what loan terms you'll be able to qualify for.

1. Check for and correct errors in your credit report. Mistakes happen, and you could be paying for someone else's poor financial management.

2. Pay down credit card bills. If possible, pay off the entire balance every month. However, transferring credit card debt from one card to another could lower your score.

3. Don't charge your credit cards to the maximum limit.

4. Wait 12 months after credit difficulties to apply for a mortgage. You're penalized less for problems after a year.

5. Don't purchase big-ticket items for your new home on credit cards until after the loan is approved. The amounts will add to your debt.

6. Don't open new credit card accounts before applying for a mortgage. Having too much available credit can lower your score.

7. Shop for mortgage rates all at once. Too many credit applications can lower your score, but multiple inquiries from the same type of lender are counted as one inquiry if submitted over a short period of time.

8. Avoid finance companies. Even if you pay the loan on time, the interest is high and it will probably be considered a sign of poor credit management.


VISIT OUR WEBSITE: www.reinnh.com for more useful REAL ESTATE INFORMATION.





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