Tips & Advice
What is a reverse mortgage loan?
A reverse mortgage is a type of mortgage loan that's open to homeowners who are 62 or older. These loans allow these homeowners to convert a portion of their home equity into cash. With a reverse mortgage, the borrower doesn't make monthly payments to the lender. Instead, the loan is repaid to the lender via proceeds raised from the sale of the property after the borrower moves out of the home or dies.
How to get a home mortgage
- Take a look at your credit. Strong credit can help you get a mortgage loan at attractive interest rates. Before applying for a loan, take a look at your credit score. A FICO credit score of 670 to 739 is considered good, while a score of 740 to 850 is considered very good or exceptional. If your score is weak, consider taking steps to improve your credit before seeking a loan. You can improve your credit by paying off balances and limiting credit card usage to 20 percent of available credit.
- Know what size loan you can afford. Many experts say your mortgage loan shouldn't exceed 2.5 times your annual salary. Your monthly payment will be dictated by the size of your loan and the amount of your down-payment. You can reduce the size of your monthly payment by increasing the size of your down-payment.
- Get pre-approved by a mortgage lender. Before beginning your home search, it's a good idea to get your loan pre-approved by a mortgage lender. This will let you know how large of a loan you can expect to get. You can use this information to narrow your home search to properties that are priced to fall within the limits of your loan amount.
- Choose a mortgage type. Your choices include a fixed-rate mortgage and an adjustable-rate mortgage, and you can choose a mortgage insured by the government or one that is not.
- Find a home. Once you've found a property you'd like to purchase, the lender will have the property appraised to make sure its value is commensurate with the amount of your mortgage loan. Once the mortgage has been approved, you'll need to do things like order a title search and purchase homeowner's insurance. If you have a government-backed loan, there might be other types of insurance you need to purchase.
- Fixed-rate mortgage. This is a mortgage that has a fixed interest rate over the entire life of the loan. The benefit is that it offers predictable payment terms and the fixed interest rate allows the size of your monthly payment to stay the same year after year.
- Adjustable-rate mortgage (ARM). With this type of mortgage, interest rates change from time to time to reflect current market conditions. In many cases, the rate remains fixed for an initial period, and then it is adjusted on a yearly basis. For example, with a 3/1 ARM loan, the 3 in the name indicates that the loan has a fixed interest rate for the first three years. Afterward, the rate is adjusted on a yearly basis, as indicated by the 1.
- Conventional mortgage. This is a mortgage loan that is issued with no government backing. A conventional mortgage might come with a fixed rate or an adjustable rate.
- Government-insured mortgage. This is a mortgage that is backed by the government, such as Federal Housing Administration (FHA), the U.S. Department of Veterans Affairs (VA), or the U.S. Department of Agriculture (USDA). A government-backed loan might come with a fixed rate or an adjustable rate, and typically requires a smaller downpayment than a non-government issues loan.
- Conforming mortgage. A conforming mortgage is one that falls within loan limits set by the FHA. These limits vary by real estate market. Expensive real estate markets like Los Angeles and San Francisco have higher loan limits.
- Jumbo mortgage. A jumbo mortgage is one that exceeds loan limits set by the FHA. In most markets, a jumbo loan is one that exceeds roughly $400,000. However, in expensive markets like New York City and San Francisco, the limits are higher; in these markets, a jumbo loan is one that exceeds roughly $600,000. Jumbo loans usually require higher down-payments and excellent credit.
How to find the owner of a vacant property
- Research the property's tax and mortgage records. These records are usually available online. Tax and mortgage records should be able to provide you with the name and address of the property's owner, and they might also provide you with a phone number.
- Ask the neighbors. In some cases, neighboring residents will be able to provide you with the name of the person who owns a vacant property, and maybe even a forwarding address and phone number. When communicating with neighbors, make it clear that you're someone who's interested in purchasing the property. Otherwise, neighbors may think you're a debt collector, and this could make them reluctant to provide information.
- Hire a skip tracer. A competent skip tracer can help you find the owner of a vacant property. These private investigators are skilled at locating people, and they are often able to generate results within 24 hours. It can cost as little as $20 per search.
What is a mortgage payment?
A mortgage payment is made by a borrower to a lender that has provided a loan used to finance a real estate purchase. This payment typically includes both principal and interest, and it's made until the original loan has been fully repaid. Mortgage payments are typically made on a monthly basis, and these loans usually come with 15- or 30-year terms.
A mortgage loan is used to finance a real estate purchase. The lender provides the borrower with the funds needed to complete the property purchase. The borrower agrees to fully repay the loan with regular payments that cover principal and interest, spread out over a set number of years. If the borrower fails to make the agreed-upon payments, the lender has the right to take possession of the property.
Are mortgage loans public record?
Mortgage loans are public record. In the spirit of government transparency, Freedom of Information laws allow the public to access certain records held by the government, including mortgages.
Accessing information regarding mortgage loans can be useful for potential property buyers who are seeking to make an offer on a home. For example, this information can let you know how much a property's value has changed over the years from one sale to the next. These records can also let you know how often a property has been listed for sale.
Public mortgage records can usually be accessed via an online search. You'll need the name of the current homeowner, as well as the property's full street address.
What is a loan forgiveness program?
Loan forgiveness is the cancellation of a borrower’s obligation to repay a student debt. There are several qualifiers, including employment. Under the Public Service Loan Forgiveness (PSLF) act, if you have made 120 monthly payments, and you work for a qualified employer, you might be eligible for loan forgiveness. If you are a public school teacher in a low income area, if you join the military, work in the non-profit sector, or in the government, you might be eligible for debt forgiveness.
What is a prepayment penalty?
A prepayment penalty is a clause in a mortgage agreement that states that, if the mortgage is paid off early, a penalty fee will be imposed. If you refinance too early that can even qualify for a penalty. It might seem weird that repaying the loan early is penalized, but it is set up that way to ensure profits--the interest on the loan is the profit--and the longer you are paying interest, the more money the bank makes. They want protection against losing those profits, and that’s why prepayment penalties can be included in some contracts.
A business loan one that can be used to fund start-ups, pay for expansions, pay staff, or even buy business-related equipment, like computers. The borrower repays the loan under the normal terms of the agreement. Many business loans require a guarantor, someone who signs off, to guarantee the loan’s repayment. If the business defaults, the guarantor can be on the hook to repay the loan--and if the guarantors are the business owner, their personal assets may be at risk.