Let's Talk Mortgage!

Everything You Need to Know About Mortgages

Do you feel lost when it comes to mortgages? For most of the first-time homeowners, mortgage terms

are nothing more than gibberish. Most of the experienced REALTORS® assume that their clients are very well aware of the mortgage industry. If you are trying to make some sense out of the financing discussion, here is a quick help guide for the cause.

What is Mortgage?

According to Investopedia.com, Mortgage is

“A debt instrument, secured by the collateral of specified real estate property, that the borrower is obliged to pay back with a predetermined set of payments. “

In a residential mortgage situation, the homeowner pledges his/her house to the mortgagee (financial institution or bank) and agrees to make payments as per the agreement. After all the successful payments, the pledge is completed and homeowner owns the property. In case of failure, the property goes to the bank for further processing through short sale or foreclosure.

Who are the main players involved in a Mortgage?

Since this is your first home mortgage, it is best to be aware of the different participants in the process. Some of the most important roles in a mortgage are:

1. Mortgagee/lender: Mortgagee can be a lending institution including bank or federal loans. The common term for mortgagee is lender.
2. Mortgagor/borrower: Person receiving the loan is known as the mortgagor or borrower.
3. Mortgage Broker: An intermediary who tries to get the best possible rate and term for the borrower’s loan. The responsibility of mortgage broker is similar to your travel broker.
4. Loan Officer: If you do not have mortgage broker, loan officer is the person you need to contact. Loan officer helps with loan preapproval and filing documents for the processing of your loan. Loan officer represents the lender in the transaction.
5. Loan Processor: Loan processor handles your loan from preapproval until the closure. The role of loan processor is to verify the income source and credit rating of the borrower and provide the same details to the lending institution.
6. Underwriter: Underwriter is the person who is going to analyze your income, risk faced by lender in giving credit, analyze your payment history, and current value of proposed property.
7. Appraiser: Appraiser determines the market value of the property and can be a third party licensed professional.
8. Escrow Company: Third party companies whose purpose is to manage funds between both the parties. They work according to the consent of both the parties involved in the process.
9. Title Company: This Company checks the history of the house and past owners of the property. They look out for any liens, home taxes, HOA fees payment and title of the current owner.

Key Terms in Mortgage/Loan

• Principal: It is the original sum of money you borrow
• Amortization: It is the repayment period of the mortgage/loan
• PITI: It is an acronym for your monthly mortgage payment representing principal, interest, taxes, insurance

Fees Involved in Mortgage

• Closing costs: It includes all the expenses that incurred in home financing and they are negotiable in nature.
• Escrow impounds: The owner needs to make an advance payment for property taxes and insurance cost of the house. Escrow company charges this amount before closing the loan processing (escrow).
• Point: It is the amount lender charges for originating the loan and every point counts for one percent of the total loan amount.
• PMI (Property Mortgage Insurance): Borrower is required to pay for PMI, which protects the lender in case the borrower fails to pay for the loan. 

With all of these details, you can confidently choose a mortgage and be aware of the ongoing process while buying a new home. 

Provided courtesy of Yvette Belisle - Alaskan Spirit Realty

Real Estate Brokers of Alaska

The future belongs to those who believe in the beauty of their dreams." -Eleanor Roosevelt

Alaskan Spirit Realty | (907) 868-2811

yvette.belisle@gmail.com | www.alaskanspiritrealty.com

Real Estate Brokers of Alaska | 1577 C Street, Ste 101 | Anchorage, AK 99501

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