Georgia Realtors

Home Ownership

Get to know the Mortgage Industry

Soon you`ll start meeting with the professionals who`ll
help you buy a house. Those in the mortgage business
have their own vernacular. Understanding their language
can help make that first meeting with the loan officer-
not to mention the entire home-buying process-less
intimidating. Here are some key people, programs and
products you should know:

Mortgage broker, loan officer or consultant
You`ll confer with this person about the type of home
loan that best suits your needs and budget, based on
the length of time you plan to stay in the home. It`s
their job to shop around and find an appropriate bank
or financial institution to lend you the money.

Loan processor
This person collects your W2s, pay stubs, tax returns
and all the documents needed to support your loan
application. He or she keeps tabs on all the paperwork
to ensure it`s processed in a timely manner before it
goes to the Underwriter, who actually reviews and
approves the loan. Keep in touch with your processor
and supply him or her with all the needed documents.

Closing agent or attorney
Depending on where you live and the laws of that state
or region, you may use an attorney or a closing agent
to help you complete the financial transaction. Make
sure that the deal you bought is what comes across
the table.

The Programs
The Federal Housing Administration (FHA) and
Department of Veterans Affairs (VA) guarantee loan
programs that are designed to assist first-time home
buyers. With an FHA loan, you can buy a house with
as little as 3 percent down, and 100 percent of the
money can be a gift from a relative or a down payment
assistance program. The VA loans, which are for active
and former members of the U.S. armed forces, often
offer 100 percent financing-that`s no money down!
Interest rates on both loans are competitive, and
qualifying for them is often easier than for a loan from
a large bank.
The Fannie Mae and Freddie Mac agencies purchase
home loans from lenders. If you need a big loan, they
can help. The maximum loan amount(known as the
conforming limit) that these agencies can buy in 2006
is $417,000 for single-family homes in the United
States. They also have other progams for first-time
buyers. Fannie Mae has a Flexible 100, in which
borrowers can get up to 100 percent of the loan
amount, and they only need $500 down.

The Products
Fixed-rate mortgage-This loan has a fixed interest
rate that`s guaranteed not to change over the life of
the loan, no matter how the market shifts. It`s
usually fixed for 15 or 30 years, but 40 and 50 year
fixed-rate mortgages have recently hit the market.
Adjustable-rate mortgage (ARM)-It`s a little riskier
than a fixed-rate loan but works well if you`re not
planning to stay in the house longer than five to
ten years. Interest rates can fluctuate every year or
stay fixed for three,five,seven or ten years (known
as hybrid ARMs) and then fluctuate after that
period.
Interest-only loan-Initially you`ll pay only the interest
on the loan, which will keep your monthly mortgage
payment lower. But you`re not building any equity
(unless the price of the home appreciates). One
caveat: Eventually the interest-only period will end,
and unless you refinance before that happens, your
monthly payments will increase significantly.

The Protection
Home owner`s insurance-This is a must, and it
should help you recover from a fire or other
catastrophe by providing you with enough cash to
replace anything that is damaged or destroyed. All
lenders will require that you have home owner`s
insurance prior to funding your loan. If you`re in a
flood zone, you`ll need to get flood insurance
through the federal government.
Private mortgage insurance(PMI) If you have less
than 20 percent of the purchase price for a down
payment on your home, you`ll probably have to
obtain private mortgage insurance. This protects
the lender in case you default on the loan. Once
you`ve paid down your mortgage to 80 percent of
the purchase price, lenders will cancel the PMI.