Purchasing a home involves getting a mortgage. A mortgage is a written pledge of property used as security for the repayment of a loan. The property you purchase is the collateral for the mortgage. If you fail to make payments on the loan, the lender can repossess your home. As a result, the lender has some legal rights on your property as you pay off your mortgage. Unlike a standard loan, the mortgage is used to enforce the lenders rights to the property if the borrower does not repay the home loan. If the borrower does not keep up with his/her monthly mortgage payments, the borrower can obtain the home through what is called foreclosure. Foreclosure is the forced sale of a home or property that is pledged as security against a mortgage. The property is sold so the lender can recoup its losses on the loan.
Home mortgage loans are offered commonly in 15 or 30-year fix rate periods. The term refers to the amount of time the lender allows for the mortgage loan to be repaid. Therefore, a 30-year loan spreads loan payments across a 30-year time span. The fixed-rate refers to the interest rate. The interest rate is a percentage of the loan the borrower must pay to the lender, in addition to the monthly payment, for lending them the money. In a fixed-rate mortgage, the interest rate does not change. It remains constant throughout the term of the loan.
The actual amount of the mortgage is called the principal. When the borrower first starts paying off the loan, interest is paid off first, then the principal. For example, if the interest rate on your mortgage is 6% per year, and the loan amount is $100,000, each year you will pay – in addition to the principal – $6,000 in interest to the lender. The lender includes interest into the monthly payments, however, the principal and interest isn’t split 50/50 for each monthly payment. Interest is paid first; anything remaining goes toward paying off the principal. To figure out the percentage of your monthly that will go to interest payments, the lender takes your mortgage interest rate (6%) and breaks it down into a decimal (.06). Then the lender divides that decimal by 12 (.06/12 = .005). Then the lender takes the new number and multiplies it by the principal of the mortgage (.005 x 100,000 = 500). The end result is the monthly interest rate payment. If your overall mortgage payment is $700, $500 goes towards paying off the interest, and $200 goes toward paying off the principal.
However, as you pay down the principal, the actual dollar amount paid to interest compared to what is paid to principal changes each month. Your overall monthly payment doesn’t change, but the ratio between interest-to-principal pay off does. For example, after you pay your first month’s mortgage payment, the next month’s payment is based on the principal being $99,800 ($200 less than the first month). So, when the formula is applied to the next month’s payment, the interest and principal payments are adjusted based on what is still owed ($99,800), the interest rate, and the established monthly mortgage payments.
Fixed-rate mortgages aren’t the only home loans offered. Some loans have fluctuating interest rates while others have shorter terms. Most new homebuyers stick with a fixed rate 15 or 30-year mortgage because there are no surprises; the interest rate and monthly payments remain the same.
If you’re about to buy a home, be aware of how your standard mortgage operates, and establish early on if you have the finances to afford a mortgage. If you get involved in a mortgage and later discover you can’t afford it, it could cost you your new home.
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Help answer the question about mortgage
If you have a mortgage, who is responsible for filing a Homestead and mortgage exemption?The taxes in our area when up drastically. My friend asked me to review his tax bill and I noticed he did not have a Homestead or Mortgage exemption. He has a 30 year mortgage on the property and it is his only & primary residence. He's had the mortgage for five years. Is there a way for him to recoupe some of those taxes because he didn't have those exemptions. Is his mortgage company responsible?
What about the back money that is owed to him because the county was over charging because he did not have those exemptions for 5 years
If your goal is to pay off your existing loan, your only option is to refinance. A HELOC is essentially nothing more than it sounds – a line of credit backed by your house and therefore with a lower rate than unsecured instruments like credit cards. You would use a HELOC if you were satisfied with your current mortgage rate and wanted to consolidate a bunch of payments into a single one with a more attractive rate.
So, when you refinance your home at a better rate, property taxes and insurance (both types: mortgage insurance if less than 20% equity and homeowners) will both be components of your "PITI" payment (principal, interest, taxes, insurance, [mortgage insurance])
Congratulations on buying your first home! Owning a home is a good, if major investment. The key to it value is equity. In terms of home ownership the equity in your home is the difference between the market value of your home and the outstanding loans on your home. For example, let us say you bought your house a year ago for $200,000. Let's say you made a down payment of $40,000 and got a mortgage for the remaining $160,000. Now, during the last year lets say that real estate prices in your neighborhood rose 10%, plus through your monthly mortgage payments you have reduced your home loan by $6,0000. So lets put this all together; due to the rise in real estate prices your house is worth $220,000 (remember they rose in your neighborhood by 10%,) and outstanding mortgage is $154,000 (you have been paying it off,) so subtract the mortgage from your market value (220,000 – 154,000 = 64,000/
so your equity (answer to #1 – the monetary value of difference between the market value of you home and outstanding debt on the home) is $64,000. This equity is what you can use to get a second mortgage. Sometimes people do this in order to undertake major improvements to their home. For example, if you wanted to add a solar heating system to your home, this could cost about $50,000. Very few people have $50,000 sitting in the bank, but as we noted above you have $64,000 in equity in your (imaginary) home. You can use this equity to go to a bank and get a second mortgage for $50,000 (this is called a loan against your equity.)
Now once you sign a loan agreement, you are borrowing money against the value of your home and paying interest on that money. But interest rates change. So perhaps 3 years from now, interest rates have dropped. Your original mortgage was (we will pretend) at 6.5% and your (imaginary) second mortgage (that you used to install solar heating) was at 7%. But over these last three years interest rates have dropped (because we elected a Democratic president who rebalanced the budget and began to pare down the National Debt,) so now home loans are offered at 6%. You go to the bank and "refinance" your house by getting a new loan (at a lower interest rate) that allows you to pay off your two older loans. Sometimes, when owners refinance they also "take out" equity by increasing their mortgage, ( remember on your "imaginary" house you added your solar heating which adds value, you continued to pay off your mortgage, which decreases your debt, and, perhaps, real estate values continued to rise in your neighborhood, so when you come to refinance, the market value of house may have grown to $290,000 when you refinanced, so you may decide to have a $200,000 mortgage on your home.)
so in conclusion:
1) equity is the difference between the market value of your property and the outstanding debts on your property.
2) homestead is the legal term (from the old Homestead Act of 1862) for your title to your property.
3) refinancing is when you want to get a new loan (usually at better terms) on your property in order to: a) retire older loans at higher interest; b) "take out" some of the equity you have built in your home by paying off your loan and having property prices rise.
Here is a site for California (I don't know where you are) for preparing your homestead declaration:
https://www.1stoplegalforms.com/FormLs/LFL_0101.asp
And finally, yes it is normal for loan papers to be "sold" at discounted prices among financial institutions (this is exactly how a lot of giant finance house like Lehman Brothers or Goldman Sachs started out buying and selling loan papers.) This sale cannot change the terms of your loan, only the final receiver of the loan money. There is an especially big market in second mortgage papers. Companies like Fannie Mae make a lot of their money in this trade. Anyway, sorry for being so long, I hope this helps you a little, one word of advice – for your own economic interest, do not totally mortgage your property (always keep a margin of equity) this leaves you some "emergency" collateral, and helps ensure your title to the property. Good luck.
Without looking at your offer I dont know how to answer specifically but here is what a "subject to" clause means:
"I will do all the things I am promissing you to do as long as certain things happen". These types of clauses are common and used prior to closing, but it sounds like in your case it is an escape clause that can be used after closing. If the investor took title then the doctrine of merger would apply and the agreement that he owns it subject to him selling doesnt really sound right unless a document was signed at closing showing what real interest you have if any and what real interest the investor has and under what conditions. Sounds awfully fancy to me. I'd ask the Title company attorney to explain the agreement to you before you close. There really is no need to get that fancy when you are selling a home.
Get away from an interest-only loan as soon as you financially can. Sounds like a pretty good fixed mortgage.
What part of the country do you live in? If you live in Florida or the Southwest, I would recommend holding out as long as you can. Prices on homes may plummet another 40% or more before bottoming out. In other parts of the country, where prices are more stable, I would recommend buying as soon as you can. Yes the prices may drop a little more, but it's going to be hard to beat today's mortgage rates.
Get a 30 year fixed mortgage if you can.
The first poster was right about location being the most important thing. Don't buy something in the middle of nowhere. OPEC is already working on getting gas prices back up.
Don't buy something you are only half satisfied with, where you will want to move again in a couple years. The smartest thing to do is move infrequently and not incur broker commissions and closing costs every few years.
Don't shy away from using the listing agent. The prospect of making 2x the commission might make him motivated to sell to you vs. holding out for someone else. You just need to have a good handle on what a fair price is if you do that.
uhh idk i did not read the whole thing! that is soooooooooooooooooooooooooooooo long! i read two words! lol. srry tho. i will later.
Mabye!!!!:):):):):):):):
Guaranteed Rural Housing Loans (Section 502)
INTRODUCTION
The Rural Housing Service (RHS) is a part of the U.S. Department of Agriculture (USDA). It operates a broad range of programs that were formerly administered by the Farmers Home Administration to support affordable housing and community development in rural areas. RHS both provides direct loans (made and serviced by USDA staff) and also guarantees loans for mortgages extended by others.
The RHS National Office is located in Washington, D.C., and is responsible for setting policy, developing regulations, and performing oversight. RHS employs a central collection and servicing center in St. Louis, Mo. and a computerized system called DLOS for Section 502 direct and Section 504 loans. In the field, RHS operations are carried out through the USDA's RD offices. Each RD State Office administers programs in a state or multistate area. The organization of Rural Development offices within a state varies, but typically Area or District Offices supervise Local Offices (also termed county or community development offices) and do the processing and servicing of organizational loans and grants. Local Offices process single family housing applications, assist District Offices with organizational applications and servicing, and provide counseling to applicant families and backup servicing as needed.
PROGRAM BASICS
Purpose
The Section 502 Guaranteed Rural Housing Loan Program is designed to serve rural residents who have a steady, low or modest income, and yet are unable to obtain adequate housing through conventional financing. These loans enable low- and moderate-income rural residents to acquire modestly priced housing for their own use as a residence through the purchase of a new or existing dwelling or the purchase of a new manufactured home. In this variation of the Section 502 program, RHS does not make a loan directly to an eligible borrower, but guarantees a loan made by a commercial lender. This guarantee substantially reduces the risk for lenders, thus encouraging them to make loans to rural residents who have only modest incomes and little collateral.
Eligibility
An eligible applicant must have an adequate and dependable income (up to 115 percent of adjusted area median income [AMI]) and a decent credit history, and be unable to qualify for conventional mortgage credit. RHS uses two formulas to determine a family's ability to undertake the responsibility of a mortgage. First, the burden of principal, interest, taxes, and insurance (PITI) must be 29 percent or less of gross monthly income. Second, the total of monthly debts must be 41 percent or less of the gross monthly income.
Terms
Loans must be from lending institutions that have been approved by RHS. Loans have 30-year terms and fixed rates at market interest rates. Loans may be for up to 100 percent of market value or for acquisition cost, whichever is less. The maximum loan amount is based on what the homeowner can afford. Loans may include closing costs, legal fees, title services, cost of establishing an escrow account, and other prepaid items as long as the appraised value is higher than the sales price. In addition, RHS charges the lender with a one-time guarantee fee of 2 percent of the loan amount. The lending institution may choose to pass this charge along to the borrower. No private mortgage insurance is required, and the loans have Fannie Mae and Ginnie Mae acceptability on the secondary market.
RHS guarantees the loan at 100 percent of the loss for the first 35 percent of the original loan and the remaining 65 percent at 85 percent of loss. The maximum loss payable by RHS cannot exceed 90 percent of the original loan amount.
Standards
The residence to be purchased with the guaranteed loan must conform to the CABO Model Energy Code and to the structure, facility, and termite standards established by the U.S. Department of Housing and Urban Development. There are no restrictions on size or design. Typical amenities, except in-ground swimming pools, are allowed. Manufactured homes must be new and permanently installed.
Approval
Interested borrowers should contact their local Rural Development office for more information on the program and a list of approved lenders. The loan application itself is made with the approved lender, and is subject to their schedule for loan approval. Approximately 30 percent of guaranteed 502 loans are made to families with incomes below 80 percent of AMI.
Basic Instruction
Instruction 1980-D.
Differences Between the Section 502 Guaranteed and Direct Loan Programs
There are several other Section 502 loan programs, but the only one which approaches the guaranteed program in number of loans granted is the Homeownership Direct Loan Program. This program once accounted for almost all the Section 502 loans, but the number of guaranteed loans has greatly increased in the last few years. In Fiscal Year 2001, the guaranteed program obligated approximately $2.3 billion for 29,326 loans, while the direct program obligated approximately $1.07 billion for a total of 14,789 loans. The important differences between the Section 502 guaranteed and direct loan programs are as follows:
* The lender for Section 502 guaranteed loans is a private savings and loan institution, bank, or mortgage company which also handles all the loan servicing. The lender for the direct program is the Rural Housing Service; Rural Development handles the servicing.
* Income levels for Section 502 guaranteed borrowers are capped at 115 percent of the area median income. Income levels for the direct program must be no more than 80 percent of the AMI.
* Payment assistance subsidy is not available through the guaranteed program. Payment assistance, which can reduce the interest paid on the mortgage to as low as 1 percent, is available for borrowers in the direct program and is based on the borrower's income as a percent of AMI.
* Borrower protections differ between the programs. Applicants for guaranteed loans do not have the rights of moratorium or of appeal that accompany the direct program. Also, in the case of default, Section 502 guaranteed loans are liquidated by the commercial lender, while direct loans are liquidated by the government.
ADDITIONAL INFORMATION
For additional information on Section 502 and RHS, contact the RHS National Office, 1400 Independence Avenue, S.W., Room 5037S, Washington, D.C. 20250; 202-720-4323. Contact your Rural Development State Office to find out the location of the Local Office closest to you. (Visit http://www.rurdev.usda.gov/recd_map.html for the address and telephone number of your State Office.) Copies of RHS regulations are available at http://www.rurdev.usda.gov/regs/.
HAC's publications list, all information sheets, and most full-length manuals and reports may be obtained free from HAC's web site at http://www.ruralhome.org. A printed copy of the publications list is available free, and copies of manuals and reports are available for a charge to cover costs, from HAC, 1025 Vermont Avenue, N.W., Suite 606, Washington, D.C. 20005; 202-842-8600.
This Information Sheet was prepared by the Housing Assistance Council. The work that provided the basis for this publication was supported by funding from the Ford Foundation; an earlier version was supported by funding under Cooperative Agreement H-5925 CA with the U.S. Department of Housing and Urban Development. The substance and finding of that work are dedicated to the public. The publisher is solely responsible for the accuracy of the statements and interpretations contained in this publication and such interpretations do not necessarily reflect the views of the government.
I don't like TV very much, so I don't have cable period. I think it saves me a great deal of money. Locally, you can get a slower DSL here for about $25. I could not do without the Internet; I do a lot of actual work on it, and also volunteer work on it etc. You could always use the computer at the library and you can get free movies there.
I agree with you that there are better ways to spend your money than cable and internet. One time at a hotel I watched an entire show on salt. I can't see me paying money for that. Paying off bills and saving are a much higher priority.
I like the way you think.
First things first. Affordability. Dont let the house mortgage be your master