BUYING/SELLING REAL ESTATE & MORTGAGE LOANS:

The basic principal of a mortgage loan is that you borrow money to buy a property. The property then becomes security for the loan, which you pay off, along with interest, over a period of time in regular installments. Technically, you are the mortgagor, because you are mortgaging your property to a lender (the mortgagee) to obtain the loan.

Getting the mortgage and buying the property are actually two separate transactions, although both take place at a meeting called the "closing." At the closing you receive the title to the property. In other words, you become the actual owner, with all of an owner's legal rights and obligations.

FIXED RATES AND HOW THEY WORK:

30 Year Fixed Rate Program -30 year fixed mortgage is a type of mortgage loan that is repaid by the borrower making 360 equal monthly payments over a period of 30 years. Since the borrower's payments are 'fixed', the borrower can expect to make the same monthly payment for the entire term of the loan. A 30 year mortgage loan is the most widely accepted program used to finance a residential purchase, and is available for FHA and VA, conventional and jumbo loans.

15 Year Fixed Rate Program - A 15 year fixed mortgage is a type of mortgage loan that is repaid by the borrower making 180 equal monthly payments over a period of 15 years. Since the borrower's payments are 'fixed', the borrower can expect to make the same monthly payment for the entire term of the loan. A 15 year mortgage loan is the most widely accepted program used to finance a residential purchase, and is available for FHA and VA conventional and jumbo loans.

ARM’s - 1, 3, 5, 7, 10 Year Adjustable Rate Loan Programs - An Adjustable Rate Mortgage (ARM) is a mortgage loan that is most widely known for its low starting interest rate (when compared to the 30 & 15 year mortgage loans). This 'low' introductory rate is used to calculate the mortgage payment for a specified period of time. Once this introductory period is over, the interest rate is adjusted periodically based on a pre-selected index. The most commonly used index is the yield on the one-year Treasury bill.

The new interest rate is determined by adding this index to a set margin (which is determined by the lender). Although there are a variety of adjustable rate mortgage programs available, the most common program is the One-Year Adjustable Mortgage.

The interest rate on the one-year ARM is adjusted once each year, for 30 years. APR's on variable rate loans are subject to increase but may decrease from year-to-year, the borrower should be prepared to handle an increase in his/her monthly payment (should the index rate increase).

Jumbo Loans Program - A jumbo mortgage is a mortgage loan which is larger than the limits set by Fannie Mae and Freddie Mac ($417,000 as of 2006). Since these two agencies will not purchase these types of loans, they usually carry a higher interest rate (to enhance their value and marketability to investors).

TITLE INSURANCE AND REAL ESTATE CLOSING:

You will want to do a title search to make sure that the house or property really belongs to the person who is selling them to you. Old records will be reviewed to make sure there are no undisclosed problems with the seller's title.

The title insurance policy, which you (the buyer) or the seller will probably have to pay, for the protection of the lender, guarding him against loss of the principal amount of the loan. If you want your total investment in your new home protected, you should buy your own title insurance policy. Since you can take advantage of the title search that has just been conducted, the insurance won't cost very much and it's definitely worth having. If some claim should ever arise in the future, the title insurance company would defend you in court and pay any losses.

HOMEOWNER'S INSURANCE: