Your Chances | Mortgage
Application Checklist | Questions
For Your Lender
Financing Options | Home
With inventory diminishing
daily and multiple offers being extremely common, it is of great
importance that you position yourself to have the "Best Chance"
to get your offer accepted. You enhance your chance of getting
the home of your choice by doing the following:
- Get pre-approved for the purchase:
This takes very little time and is of great value. At this
time, identify the price range for which you qualify and
which fits your lifestyle.
- Submit a strong competitive offer:
Submit the offer as if there will be multiple offers.
- Include substantial earnest money
Acceptance of an offer is sometimes determined by the amount
of the deposit. A larger amount may signify a bigger commitment
to the seller.
- Minimize or eliminate contingencies:
The fewer contingencies, the stronger the offer.
- Make a buyer profile available:
Time on the job, flexibility, reason for purchasing seller's
- Be prepared to preview a new property
Homes sell sometimes in hours. Be prepared to make decisions
quickly and be accessible to change the terms instantly.
- Buyer and agent to have instant
Let us maintain instant access to each other via office
phone, voice mail, fax, pager or cellular phone.
- Copy of your Purchase & Sale Agreement.
- Your present mortgage information.
- Two year history of employment and verification
of all income sources.
- If self-employed, copies of past two
years Federal Income Tax Returns.
- Information about your checking, savings
and credit card accounts.
- Name, account number and outstanding
balance of each of your debts.
- Application deposits.
- Information about any assets.
- Information regarding any other assets
that will be used as funds to close.
- If FHA - Copy of Social Security card
and photo ID.
- If VA - Certificate of Eligibility or
- If Employee Relocation Client - include
relocation information and copy of offer, promissory note
and copy of check on bridge loan.
For Your Lender
Are both fixed-rate and
adjustable mortgage loans available?
What is the interest rate?
How long can I "lock-in"
the financing at the current interest rate?
Is a float down lock available
in case rates drop after I have locked in?
What are the other fees
a lender may charge me in conjunction with my loan?
Are funds for a second
On adjustable loans:
- How often will the interest rate
be adjusted? Is there a maximum
limit on each rate change? How
often will the monthly payment be adjusted? Is
there a ceiling on payment adjustments? Can
the term of the loan be extended? What
is the maximum rate that can be charged over the life
of the loan? Is there any potential
for negative amortization?
Is there a pre-payment
penalty clause? This involves extra charges for paying off
the loan before maturity. About 80% of all loans in the United
States are paid off early.
What is the "grace" period?
How late can a monthly payment be made before a late charge
is assessed? What will happen if a payment is missed?
If you sell your house,
will the new buyer (if he/she qualifies) be able to assume
your mortgage at the same interest rate?
Do you have to pay "points"
to get your new mortgage? Usually lenders charge points for
the cost of giving you a mortgage loan. A "point" is 1% of
Will the lender require
Is the loan serviced locally
or is the servicing sold?
Ask for a written "good
Fixed Rate MortgageThe
interest rate stays the same throughout the term of the loan
- usually 15 or 30 years - so the principal interest portion
of your payment remains the same. Payments are stable but initial
rates tend to be higher than adjustable rate loans and often
cannot be assumed by a subsequent buyer.
is a loan which must be paid off after a certain period. The
advantage they offer is an interest rate that is lower than
a mortgage that is made for 30 years.
interest rate is linked to a financial index, such as a Treasury
security or a cost of funds - so your monthly payments can vary
up or down over the life of the loan - usually 25 to 30 years.
Interest rates can change monthly, annually, or every 3 or 5
years. Some ARMs have a cap on the interest rate increase, to
protect the borrower. Other terms relating to adjustable-rate
- Adjustment period: The
length of time between interest rate changes. Example: one
year ARM-interest changes annually. Cap:
The limit on how much an interest rate or monthly payment
can change at each adjustment or over the life of the loan.
Conversion clause: A provision
in some loans that enables you to change an ARM to a fixed
rate loan, usually after the first adjustment period. This
may require additional fees. Index:
A measure of interest rate changes used to determine changes
in the loan's interest rate over the term of the loan.
Margin: The number of percentage
points a lender adds to the index rate to calculate the ARM's
interest rate at each adjustment.
VA does not lend money, it guarantees a portion of the loan
so that lenders who originate the loan feel comfortable with
their risk. Qualified veterans can obtain loans up to $203,000
with no down payment. VA-guaranteed loans can be combined
with second mortgages and are assumable upon qualifying by
any future buyer.
does not lend money or make a loan; rather, it insures loans.
The down payment can be as low as 2.25%. Discount points may
be paid by either buyer or seller. FHA charges a 2.25% up
front Mortgage Insurance Premium (or as little as 2% for a
first time home buyer) that can be financed in the mortgage
amount or paid in cash (no premium is required for condominiums).
The borrower must also pay an annual Mortgage Insurance Premium
or .5% which is collected monthly.
seller of the house lends the buyer enough to make up the
difference between the purchase price and the down payment
plus first-mortgage balance (a commercial lender may also
make this kind of loan). The terms including the interest
rate, are based on buyer/seller agreement. It is often a short-term
(5 to 15 year) loan; sometimes "interest only" payments until
the term date when the balance is due in full. A buyer can
then refinance the home.
"takes over" or assumes the mortgage obligation of the seller
(with concurrence of the lender). The interest rate doesn't
change and is sometimes lower than current rates. Often the
loan fees are less as well.
Home Buying Glossary
A person acting on behalf of another, called the principal.
expert judgment or estimate of the quality or value of real estate
as of a given date.
Assessed Value- The valuation placed upon property by a public tax assessor as
the basis for taxes.
Bill of Sale- An instrument which transfers title to personal property (chattels);
a "Deed" transfers real property.
CC&R's: Covenants, conditions and restrictions- A document that
controls the use, requirements and restrictions of a property.
Certificate of Reasonable Value (CRV)-
A document that establishes the maximum value and loan amount
for a VA guaranteed mortgage.
Certificate of Title- A document signed by a title examiner or attorney stating that
the seller has a good marketable and insurable title.
Closing Statement (Settlement)-
The computation of financial adjustments between buyer and seller
as of the day of closing a sale to determine the net amount of
money which buyer must pay to seller to complete purchase of the
real estate and seller's net proceeds. Also, "settlement sheets,"
Commission- Payment to a real estate broker for services performed.
Condominium- A form of real estate ownership where the owner receives title
to a particular unit and has a proportionate interest in certain
common areas. The unit itself is generally a separately owned
space whose interior surfaces (walls, floors and ceilings) serve
as its boundaries.
Contingency- A condition that must be satisfied before a contract is binding.
For instance, a sales agreement may be contingent upon the buyer
Deed- A formal written instrument
by which title to real property is transferred from one owner
to another. Also, "conveyance".
Trust- Like a mortgage, a security instrument whereby real property is
given as security for a debt. However, in a deed of trust there
are three parties to the instrument; the borrower, the trustee,
and the lender (or beneficiary).
Due-On-Sale Clause- An acceleration clause that requires full payment of a mortgage
or deed of trust when the secured property changes ownership.
Earnest Money- The portion of the down payment delivered to the seller or escrow
agent by the purchaser with a written offer as evidence of good
Equity- The interest
or value which owner has in real estate over and above the debts
against it. (Sales Price - Mortgage Balance - Equity).
Escrow- A procedure
in which a third party acts as a stakeholder for both the buyer
and the seller, carrying out both parties' instructions and assumes
responsibility for handling all of the paperwork and distribution
Federal National Mortgage Association (FNMA)-
Popularly known as Fannie Mae. A privately owned corporation created
by Congress to support the secondary mortgage market. It purchases
and sells residential mortgages insured by FHA or guaranteed by
the VA, as well as conventional home mortgages.
Fee Simple- An
estate in which the owner has unrestricted power to dispose of
the property as he wishes, including leaving by will or inheritance.
It is the greatest interest a person can have in real estate.
What was formerly personal property which is now permanently attached
to real property and goes with the property when it is sold.
Graduated Payment Mortgage- A residential
mortgage with monthly payments that start at a low level and increase
at a predetermined rate.
Hazard Insurance- Protects against damages caused to property by fire, windstorms,
and other common hazards.
Report- A qualified inspector's
report on a property's overall condition. The report usuallyincludes
an evaluation of both the structure and mechanical systems.
Plan- Protection against failure of mechanical systems within the property.
Usually includes plumbing, electrical, heating systems and installed
Joint Tenancy- An equal undivided
ownership of property by two or more persons. Upon the death of
any owner, the survivors take the decedent's interest in the property.
Lien- A legal hold or claim on
property as security for a debt or charge.
Listing Contract- Between a home owner (as principal) and a licensed real estate
broker (as agent) by which the broker is employed to market the
real estate within a given time for which service the owner agrees
to pay a commission. Also, "listing agreement".
Loan Commitment- A written promise
to make a loan for a specified amount on specified terms.
Ratio- The relationship between the amount of the mortgage and the appraised
value of the property, expressed as a percentage of the appraised
Market Value- The highest price
which a buyer, ready, willing and able but not compelled to buy,
would pay, and the lowest price a seller, ready, willing and able
but, not compelled to sell, would accept. Basis for "listing price',
or "asking price".
Mortgage- A lien or claim against real property given by the buyer to the
lender as security for money borrowed.
Mortgage Life Insurance- A type
of term life insurance often bought by mortgagors. The coverage
decreases as the mortgage balance declines. If the borrower dies
while the policy is in force, the debt is automatically covered
by insurance proceeds.
Mortgage Note- A written agreement to repay a loan. The agreement is secured
by a mortgage, serves as proof of an indebtedness, and states
the manner in which it shall be paid. Also, "deed of trust note."
Negative Amortization- Negative
amortization occurs when monthly payments fail to cover the interest
cost. The interest that isn't covered is added to the unpaid principal
balance, which means that even after several payments you could
owe more than you did at the beginning of the loan. Negative amortization
can occur when an ARM has a payment cap that results in monthly
payments that aren't high enough to cover the interest.
Origination Fee- A fee or charge for work involved in evaluating, preparing, and
submitting a proposed mortgage loan. The fee is limited to 1 percent
of FHA and VA loans.
PITI- Principal, interest, taxes
Planned Unit Development (PUD)-
A zoning designation for property developed at the same or slightly
greater overall density than conventional development, sometimes
with improvements clustered between open, common areas. Uses may
be residential, commercial or industrial.
Point- An amount equal to 1 percent of the principal amount of the investment
or note. The lender assesses loan discount points at closing to
increase the yield on the mortgage to a position competitive with
other types of investments.
Penalty- A fee charged to a mortgagor who pays a loan before it is due.
Not allowed for FHA or VA loans.
Principal- This word has several
Mortgage Insurance (PMI)- Insurance
written by a private company protecting the lender against loss
if the borrower defaults on the mortgage.
Prorate- To allocate between seller and buyer their proportionate share
of an obligation paid or due. For example a prorate on real property
taxes, fire insurance, or condominium fee.
Purchase Agreement- A written document in which the purchaser agrees to buy certain
real estate and the seller agrees to sell under stated terms and
conditions. Also called a sales contract, earnest money contract,
or agreement for sale.
Realtor- A real estate broker or associate active in a local real estate
board affiliated with the National Association of Realtors®.
Regulation Z- The set of rules governing consumer lending issued by the Federal
Reserve Board of Governors in accordance with the Consumer Protection
Survey- A map or plat made by a
licensed surveyor showing the results of measuring the land with
its elevations, improvements, boundaries, and its relationship
to surrounding tracts of land. A survey is often required by the
lender to assure a building is actually sited on the land according
to its legal description.
Tenancy in Common- A type of joint ownership of property by two or more persons with
no right of survivorship.
Title Insurance- Protects lenders and home owners against loss of their interest
in property due to legal defects in title.
Title Search or Examination- A
check of the title records, generally at the local courthouse,
to make sure the buyer is purchasing a house from the legal owner
and there are no liens, overdue special assessments, or other
Transfer tax- State tax, local tax (where applicable) and tax stamps (in some
areas) required by law when title passes from one owner to another.
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Century 21 Adams Realty
486 Common Street, Belmont, MA 02478
Phone 617.489.6900 Cell 781.454.9900