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What are lender credits? Not everyone has the ability to pay the closing costs. If you are in the position where you are purchasing a home, but are not able to pay the upfront closing costs, you might want to consider lender credits. Lender credits are money given to you from your lender to help cover all of part of your closing costs associated with your home purchase. This can be upwards of several thousand dollars in credit. Afterward, this credit is applied to your mortgage. Before choosing to use this option, consider what choosing a lender credit may do...
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Subprime vs Prime Mortgages There are two major categories for loans for borrowers, prime mortgages and subprime mortgages. Subprime mortgages are designed for people with lower or blemished credit scores. As such, they are riskier for lenders and usually cost the borrower more. Subprime Mortgages A subprime mortgage is a type of loan awarded to those with poor credit histories, usually below 600, but often times, anything below 620 is considered low. These people would otherwise not be able to qualify for conventional mortgages. Subprime borrowers pose a higher risk to lenders. As such, subprime mortgage rates are higher than...
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What is a chattel mortgage? A chattel mortgage is a loan agreement where movable personal property is used as security for the loan and guarantees the loan. For an object to be considered movable, the item in question cannot cause any change or damage to the real estate property, such as the building or land that is owned by the borrower. A chattel mortgage is different from a conventional mortgage as the loan is secured by a lien on real property. How is a chattel mortgage different? In a traditional mortgage, the lender may seize the property that serves as...
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Delinquency and Mortgage The term delinquent describes something or someone that fails to accomplish what is required, such as failure to make a required payment. There are consequences if this happens, depending on the loan type, duration, and the cause of the delinquency. For a mortgage, delinquency happens when a borrower does not pay their loan on time. In this case, a lender can start foreclosure proceedings. Delinquency vs. Default Delinquency occurs when a borrower misses a payment. Default is when a borrower fails to repay the loan as specified in the contract. Delinquency is often a precursor to default....
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What is a second mortgage? A second mortgage, or junior lien, is a loan you take out using your house as collateral while still having another loan on your home. If you take out a second mortgage, it’s likely that you will be charged a higher interest rate. This is used as a precaution as your primary mortgage lender is paid first. There are a few different types of second mortgages. Some mortgages are considered open-end. This means that you can take cash out up to the maximum credit amount. As you pay down the balance, you can draw again...
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Buydown Mortgages There are many different options when it comes to payment for a mortgage loan. One of those options is a mortgage buydown. A mortgage buydown has upfront cash payments that reduce the borrowers’ monthly mortgage payments on their loan. Mortgage buydowns include principal and interest in each monthly payment. This means that during the life of the loan, the loan balances grow smaller instead of bigger. The builder or the seller of the property usually provides payments to the lender, which lowers the buyer’s monthly interest rate and mortgage payment. However, the seller will usually increase the home’s...
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The Loan-to-Value Ratio The loan-to-value (LTV) ratio is a lending risk assessment that lenders use to examine before approving a mortgage. Assessments with higher LTV ratios are generally seen as a higher risk. If the mortgage is approved, the borrower’s loan generally costs more. A loan with a higher LTV may also require the borrower to purchase mortgage insurance to offset any risk to the lender. What exactly is the LTV ratio? The loan-to-value ratio is the amount of the mortgage lien divided by the appraised value of the property. It is expressed as a percentage. The LTV ratio is...
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Define: loan to value ratio Definition: The loan to value ratio is the relationship between the loan amount and the value of the property expressed as a percentage of the property's value.
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A divorce means splitting up the assets you have obtained throughout your marriage. One of the more difficult assets to split can be the home. Even after you decide who is going to get the home, a lender will not see the ties that bind as severed until the ex is taken off the mortgage. There are a few different ways that you can remove an ex’s name from a mortgage. Refinance the loan in your name only This option is one of the most labor-intensive ones but may be the best solution. You may be able to refinance if...
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The Differences Between Conforming & Non-Conforming Loans Many people apply for loans when paying their mortgage. Two common types of loans are conforming and non-conforming loans. Conforming Loans Today, conforming loans are sold to Fannie Mae, Freddie Mac, or the Federal Housing Agency (FHA) within a few days of closing. This allows lenders to create a stable cash flow so they can write new loans. Fannie Mae and Freddie Mac are governed by rules set by the Federal Housing Finance Agency. The FHA has its own policies. A big difference between conforming and non-conforming loans is the loan’s limits. On...
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