What You Need to Know Before Getting Started!

• Borrower’s Biggest Mistake:
  
  When commiting to buying a home, it seems that the most common borrower mistake is they don’t read what essential is their biggest financial responsibility, the mortgage related financial documents; and all it takes is one mistake, one late payment, and disaster can set in.



• What Is The Perfect Credit Score?
  
  A credit score is a single number that helps mortgage lenders and others decide how likely you are to repay your outstanding debts. One kind of credit score is a FICO score (FICO stands for Fair Isaac Corporation Inc., the company that developed a common scoring method). FICO scores range from 400 to 900 points.



• What are Mortgage Costs?
  
  Mortgage settlement--sometimes called mortgage closing costs--can be confusing. A settlement may involve several people and many documents and fees. This information will help you understand all that is involved. Although the focus of this guide is on mortgage closing costs for home purchases, much of it will also be useful if you are refinancing a mortgage.



• What are Debt Ratios?
  
  In the commercial or investment real estate context, the debt ratio, also known as a debt service coverage ratio or debt service ratio, is the ratio of net operating income to debt payments. The higher this ratio is, the easier it is to borrow money to purchase or improve the property. In the personal finance context, a debt ratio is the ratio of personal debt to income.



• What Is Loan-to-Value?
  
  A loan to value ratio (LTV) is a ratio used by mortgage lenders to figure out what amount of a mortgage they will loan you based on the appraised value of the property (or purchase price of the property, whichever of the two numbers is lower). Lenders consider the LTV ratio whether you are purchasing new property or refinancing property you currently own.



• What Is A Rate Lock-in?
  
  When you are looking for a mortgage, you are likely to shop among lenders for the most favorable interest rate, and the lowest points and other up-front charges. When you find the most favorable terms and the lender that you want, you will apply to that lender. But when you get to settlement, will you actually receive the terms you applied or bargained for? Or will you find that the rate has changed -- and that your costs have gone up?



• What Is Escrow?
  
  Once you close your purchase transaction, you may have an escrow account or impound account with your lender. This means the amount you pay each month includes an amount above what would be required if you were only paying your principal and interest. The extra money is held in your impound account (escrow account) for the payment of items like property taxes and homeowner’s insurance when they come due. The lender pays them with your money instead of you paying them yourself.



• What Is Loan Prequalification?
  
  Because they sound similar, people often think that being pre-qualified for a home loan is the same thing as being pre-approved for one. However, being pre-qualified for a home loan is quite different than being pre-approved for one, and it is important to know the difference and not confuse the two. Basically, pre-qualifying is the first step in the mortgage process; pre-approval is the second to last step, right before full approval.



• What Is An Option ARM?:
  
  Owning a home is part of the American dream. But high home prices may make the dream seem out of reach. To make monthly mortgage payments more affordable, many lenders offer home loans that allow you to (1) pay only the interest on the loan during the first few years of the loan term or (2) make only a specified minimum payment that could be less than the monthly interest on the loan.



• What’s An Interest-Only Loan?:
  
  Whether you are buying a house or refinancing your mortgage, this information can help you decide if an interest-only mortgage payment (an I-O mortgage)--or an adjustable-rate mortgage (ARM) with the option to make a minimum payment (a payment-option ARM)--is right for you. Lenders have a variety of names for these loans, but keep in mind that with I-O mortgages and payment-option ARMs, you could face:



• How Do I Shop For The Best Mortgage?
  
  Shopping around for a home loan or home mortgage will help you to get the best financing deal. A residential mortgage--whether it’s a new home purchase, a mortgage refinancing, or a home equity loan--is a product, just like a car, so the mortgage price and mortgage terms may be negotiable. You’ll want to compare all the mortgage costs involved in obtaining a new home loan. Shopping, comparing, and negotiating may save you thousands of dollars.



• Top 100 Q&A Buying a House:
  
  Knowledge is said to open doors. This is literally true when it comes to buying a home. To become a first-time homebuyer, you need to know where and how to begin the homebuying process. The following questions and answers have been carefully selected to give you a foundation of basic knowledge. In addition to helping you begin, this brochure will give you the tools necessary to navigate the entire process - from deciding whether you’re ready to buy, all the way to that final proud step, getting the keys to your new home.



• Today’s Mortgage Rates:



• Mortgage Glossary (with Terms and Definitions):

For more helpful mortgage tips on mortgage refinancing, home loans, reverse mortgages or a home equity line of credit, contact FreeLoanComparison.com today!

Last update: November 14, 2008