What’s a FICO
FICO is the most common credit scoring model used by lenders to determine your creditworthiness. Scores range from 300 to 850. A higher score indicates lower risk, which translates to lower interest rates on your mortgage.
The Advantages of Different Types of Mortgage Lenders
Mortgage brokers, retail banks, and direct lenders each offer unique benefits. Brokers have access to multiple loan products, while direct lenders may offer faster processing. Understanding these differences helps you find the most competitive rates and terms.
Which ARM is the Best Alternative
Choosing the right Adjustable Rate Mortgage (ARM) depends on how long you plan to stay in the home. Hybrid ARMs, like the 5/1 or 7/1, offer a fixed rate for the first few years before adjusting, providing a balance of lower initial costs and predictable payments.
The No-Cost Thirty-Year Fixed-Rate Mortgage
In a ‘no-cost’ mortgage, the lender pays the closing costs in exchange for a slightly higher interest rate. This allows buyers to keep more cash on hand at closing, though they will pay more over the life of the loan due to the higher rate.
Land Contract
A land contract is a form of seller financing where the buyer makes payments directly to the seller instead of a bank. The seller retains the deed until the final payment is made. This can be an option for buyers who don’t qualify for traditional mortgages, but it carries risks for both parties.
The Biweekly Mortgage: Who Needs It
A biweekly mortgage involves making half-payments every two weeks. Because there are 52 weeks in a year, you end up making 26 half-payments, which equals 13 full payments annually. This extra payment helps pay off the principal faster and can save thousands in interest.
Where Does the Money Come From for Mortgage Loans
Mortgage funds primarily come from the secondary mortgage market, where loans are bundled and sold to investors. Major players like Fannie Mae and Freddie Mac provide the liquidity that allows local banks and lenders to issue new loans to home buyers.
Why Do You Need Title Insurance?
Even the most diligent search can miss ‘hidden hazards’ like forged deeds, missing heirs, or clerical errors in public records. Title insurance provides a legal defense against such claims and compensates for financial loss, giving you peace of mind in your investment.
The Functions of an Escrow
Escrow acts as a neutral third party that holds funds and documents until all conditions of a real estate contract are met. The escrow officer coordinates with lenders, agents, and title companies to ensure that the money is distributed and the title is recorded correctly.
Required Reporting to the IRS
Federal law requires that real estate transactions be reported to the IRS on Form 1099-S. The person responsible for closing the transaction (usually the escrow officer) must report the seller’s name, social security number, and the gross proceeds from the sale.