What Happens If Your Mortgage Is Foreclosed
There are two ways a lender can collect if you fall behind on payments through the courts in a process called judicial foreclosure, or with a trustee in a process called non-judicial foreclosure. If you cant make your payments, its essential you know the timeline and processes for how long a foreclosure will take.
Judicial foreclosure. A judicial foreclosure is a court process and generally takes much longer than a non-judicial foreclosure. It gives you more time to either find a way to bring the mortgage current or make plans for other housing arrangements.
Non-judicial foreclosure. If you signed a note and a deed of trust at your closing, then you are probably in a state that allows a non-judicial foreclosure process. The courts are not involved in this process, and the foreclosure process timeline may be much faster, leaving you with less time if you are unable to bring the payments current.
Types Of Security Interests In Realty
Four types of security over real property are commonly used in the United States: the title mortgage, the lien mortgage, the deed of trust, and particularly within the State of Georgia, the security deed. In the United States, these security instruments proceed off of debt instruments drawn up in the form of promissory notes and which are known variously as mortgage notes, lender’s notes, or real estate lien notes.
The deed of trust
The deed of trust is a conveyance of title made by the borrower to a third party trustee for the purposes of securing a debt. In lien-theory states, it is reinterpreted as merely imposing a lien on the title and not a title transfer, regardless of its terms. It differs from a mortgage in that, in many states, it can be foreclosed by a nonjudicial sale held by the trustee through a power of sale. It is also possible to foreclose them through a judicial proceeding.
Deeds of trust to secure repayments of debts should not be confused with trust instruments that are sometimes called deeds of trust but that are used to create trusts for other purposes, such as estate planning. Though there are superficial similarities in the form, many states hold deeds of trust to secure repayment of debts do not create true trust arrangements.
The Security Deed: a State of Georgia specialty
Is A Balloon Mortgage Worth It
A mortgage with a balloon payment can help make homeownership more affordable to a borrower on a monthly basis, but it comes with huge risk.
If the borrower doesnt have enough cash to pay the balance, they could lose their home. While refinancing may avert this situation, it can be difficult to qualify. Typically to refinance, lenders look for a minimum amount of home equity, but if the balloon mortgage only required interest repayments, for example, the borrower would have little to no equity to draw from, and be left with few choices when the payment comes due.
Recommended Reading: How Does The 10 Year Treasury Affect Mortgage Rates
Recommended Reading: Requirements For Mortgage Approval
What Are The Different Types Of Mortgage
Firstly, it is usually a good idea to make sure you understand the different types of mortgage available and how interest on them is calculated. You can then start to figure out how much you can borrow, based on your savings and income, using affordability tools.
You can also get financial advice from third parties, such as mortgage brokers, who will search the mortgage market for a deal that is suited to your particular situation. Speaking to a broker can be useful because as well as getting access to their expertise, you can also save time on research and get their help with filling out paperwork. Some brokers may charge a fee for their services, or will sometimes charge lenders commission instead. You should always check that your broker is on the Financial Services Register, to ensure that they are properly authorised.
You can also speak directly to a bank or building society about what types of mortgage they would be able to offer you. They will ask for some basic information about your earnings and and will try to find out what sort of mortgage product will be suitable for you. You might then be able to get a mortgage in principle, which indicates that they would be willing to lend to you, should you fulfil all their requirements.
Your Land Title Registry Offices Role
Land title registry offices are part of your provincial or territorial government. These offices register official property titles. They have processes to make changes to a propertys title.
You, your lawyer or your notary must provide your land registry office with all the required documents. Once it receives the documents, your land registry office removes the lenders rights to your property. They update the title of your property to reflect this change.
Also Check: Reverse Mortgage On Condo
How Do You Pay Back A Reverse Mortgage
A reverse mortgage is paid off by selling the home in most cases. As a secured loan, the lender has the right to be repaid from the proceeds, and you can keep anything leftover. If you have a reverse mortgage and pass away, your heirs can repay the loan using the loan’s proceeds, or find other means to repay the balance if they want to keep the home.
The Bottom Line: Do I Need A Mortgage Broker
Working with a mortgage broker can save the borrower time and effort during the application process, and potentially a lot of money over the life of the loan. In addition, some lenders work exclusively with mortgage brokers, meaning that borrowers would have access to loans that would otherwise not be available to them. Brokers can get lenders to waive application, appraisal, origination, and other fees.
It’s critical to examine all the fees, both those you might have to pay the broker, as well as any fees the broker can help you avoid, when weighing the decision to work with a mortgage broker.
Also Check: Can You Get A Reverse Mortgage On A Condo
Why Can Balloon Payments Be Risky
One of the most complex financial products on the market are balloon payment loans. For this reason, only eligible borrowers with stable income and significant cash on hand should use this kind of financing. Balloon payments are ideal for investors who want to free up capital or businesses that need financing immediately and have extremely reliable future cash inflows.
Unfortunately, this means that balloon loans arent ideal for the average borrower. This is because, as an average borrower, it is challenging to predict whether or not your future income will grow substantially. Instead, it is safer to take out a loan that is affordable based on your current income since it is steady and reliable.
If you like the structure of balloon payments, but cant afford it, a wise alternative is to make a bigger down payment upfront. Of course, youll need to wait until youve saved enough money to make the down payment you want. If youre not in a rush, this is an ideal option for the average borrower instead of using balloon payments.
What is a loan origination fee? Check out this article to learn more.
Transcript: The Components Of A Mortgage Payment
A mortgage payment is typically made up of four components: principal, interest, taxes and insurance.
The Principal portion is the amount that pays down your outstanding loan amount.
Interest is the cost of borrowing money. The amount of interest you pay is determined by your interest rate and your loan balance.
Taxes are the property assessments collected by your local government. Lenders typically collect a portion of these taxes in every mortgage payment and hold the funds in an account, called an escrow account, until they are due.
Insurance offers financial protection from risk. Like property taxes, homeowners insurance payments are typically held in an escrow account, and then paid on your behalf to the insurance company.
Two main types of insurance can be included as part of your mortgage payment.
Homeowners insurance is required financial protection you must maintain in case your property is damaged by fire, wind, theft, or other hazards. Depending on your geographic location, you may be required to get additional flood insurance.
Mortgage insurance protects your lender in case you fail to repay your mortgage. Whether or not mortgage insurance is required usually depends on the size of your down payment and other circumstances.
In the early stages of your mortgage term, only a small portion of your monthly payment will go toward repaying your original principal.
As you continue to make payments through the years, a greater portion will go to reducing the principal.
Recommended Reading: 10 Year Treasury Yield Mortgage Rates
What Does A Mortgage Closer Do
After your loan is approved by the Underwriter, it moves to the Mortgage Closer. At this point the loan is approaching the finish line!
In this final step, the Mortgage Closer looks over all the paperwork to ensure the collected data is accurate, organized properly, meets state and federal regulations, and is on track for the loan to be funded.
The Mortgage Closer coordinates the closing schedule with the title company and provides a settlement document for review and approval. Once they have given the okay, the Mortgage Closer provides the complete closing package which the buyer will sign at the closing. This package includes the final loan application, loan estimate and closing disclosure, title insurance documents, deed of trust, bill of sale, affidavit of title, and tax documents, among others.
Another responsibility of the Mortgage Closer is preparing the final loan estimate and closing disclosure to the borrowers and real estate agents so everyone can review them prior to closing.
The role of Mortgage Closer is important in making sure the mortgage closing process goes as smoothly as possible.
The above information is for educational purposes only. All information, loan programs and interest rates are subject to change without notice. All loans subject to underwriter approval. Terms and conditions apply.Always consult an accountant or tax advisor for full eligibility requirements on tax deduction.
Mortgage Bankers Vs Loan Officers And Brokers
Mortgage bankers provide a larger set of services than loan officers and mortgage brokers. Loan officers accept loan applications and assist at closings but dont take as active a role in underwriting as mortgage bankers. Like mortgage bankers, loan officers are employees of banks, credit unions and online lenders and can only offer loans that are part of their employers product offering.
Mortgage brokers help borrowers find the best deal among offerings from many different lenders. They will assist borrowers with applications by asking questions about income and debts and credit history. Brokers dont actually approve applications, underwrite loans or actually lend money, however.
Brokers can connect borrowers with a wider array of loan products because they arent limited to one financial institutions offerings. They will forward applications and supporting documents to lenders and help borrowers answer questions from the underwriters but turn the closing over to a representative from the actual lender.
Also Check: Rocket Mortgage Qualifications
How Do Mortgage Rates Work
Twelve factors make up your mortgage rate.
Some factors are within your control, such as the state you buy your home inand your FICO credit score. Other factors are outside your control, such as inflation rates.
The starting point for all mortgage rates is a Wall Street instrument called mortgage-backed securities .
Mortgage-backed securities are bonds that trade Monday through Friday, from 8:00 AM to 4:00 PM ET. As bond prices change, so do mortgage rates, and bond prices are unpredictable.
However, mortgage bonds are denominated in U.S. dollars, so there are two basic rules:
During periods of low inflation and political stability, the U.S. dollar tends to be strong. That’s good for U.S. mortgage rates. Economic instability, on the other hand, is terrible.
You can’t affect geopolitics or the world economy, though, so focus on your personal traits.
Mortgage lenders reserve the best mortgage rates for home buyers with high-tier credit scores 740 and higher. Then, for every 20 points your credit score drops, mortgage rates increase.
Your mortgage rate is also affected by:
- The state you buy your home in
- The size of your mortgage loan
- The number of years in your loan term
As a home buyer, present yourself as a low-risk buyer, and you’ll get the lowest rate. If you need help with this step, ask us how.
I Can Borrow As Much As I Want Right
This seemed to be the thinking a few years ago, and things didnt turn out very well. When you borrow more than you can realistically pay, thats a sub-prime mortgage. Banks sold a lot of those to people who assumed the housing market would keep rising like gangbusters. Their home values would go up, giving them nearly instant equity and they could refinance quickly at a lower rate or sell the home for a quick profit. Lenders sold these loan products because they were making the same bet, and interest rates are always higher on sub-prime loans. Even if some ended up in foreclosure, the lenders would still make a tidy profit. Unfortunately, it was a bad bet for almost everyone.
As the housing market shows more upward movement, the temptation to borrow more than you can afford becomes enticing. Thats why its important to really look at how much you can spend. Your mortgage payment should be comfortable even if its a stretch, not a weight that drags you down each month. The lender will look at your income, debt and savings, and is required by federal regulation to demonstrate your ability to repay a loan. So while that determines how much you can borrow, it isnt necessarily what you can afford.
Read Also: Bofa Home Loan Navigator
Brokers Often Do Not Guarantee Estimates
When a mortgage broker first presents you with offers from lenders, they often use the term “good faith estimate.” This means that the broker believes that the offer will embody the final terms of the deal, but this is not always the case. In some cases, the lender may change the terms based on your actual application, and you may end up paying a higher rate or additional fees.
What Is The Relationship Between Mortgage Rates And The Stress Test
The qualifying rate youâll be stress tested against is the higher of 5.25% or your contracted mortgage rate plus 2%. Until recently, discounted mortgage rates were low enough that almost everyone was stress tested using a qualifying rate of 5.25%, but thanks to a sharp rise in mortgage rates more Canadians are being subjected to an even tougher stress test. If you were to get a 5-year fixed mortgage with todayâs best rate of 3.59%, your lender would calculate your debt service ratios using a qualifying rate of 5.59%.
You May Like: Chase Recast Mortgage
Process Of Mortgage Brokerage
Since a mortgage broker serves as the middleman between lenders and borrowers, the process often begins with a client wishing to buy a new home or seeking to refinance.
The client approaches a mortgage broker, and the broker approaches different lenders and finds out the requirements and rates to provide options suited to their situation.
The broker collects documents such as proof of employment, proof of income, credit reports, details of the clients assets , and any other important details that may be required to determine the borrowers ability to secure financing from the lender.
The mortgage broker makes an estimation of the appropriate loan amount and type for the borrower and the loan-to-value ratioLoan-to-Value RatioThe loan-to-value ratio is a financial ratio that compares the size of a loan to the value of an asset that is purchased using the proceeds of the loan.. The broker then submits the financing application to a lender for approval, acting as a liaison for the lender and the borrower during the entire process.
Once approved, the funds are loaned , and the broker collects an origination fee from the lender for the services rendered. The payment is only received by the broker once the transactions been finalized.
How Do You Apply For A Mortgage
Before applying for a mortgage, you’ll want to do some prep work. First, check your credit score to make sure it’s as healthy as possible and take a look at your credit report to ensure there are no inaccuracies that could be bringing your credit score down. Mortgage lenders will be checking both of these to determine your future interest rate. The higher your credit score, the lower your interest rate will be, which means your monthly mortgage payments will be lower.
You can view your credit score and with Experian. If it turns out your credit score could use some improvement, try using a service such as *Experian Boost, which links to your bank account and analyzes your transactions for regular utility and subscription service payments, then uses this activity to help bump up your FICO® score.
- Debt-to-income ratio
- Loan-to-value ratio
Lenders will typically provide homebuyers with a mortgage pre-approval letter once you have been pre-approved for a loan amount. These letters are usually valid for 60 to 90 days once you have it, you’ll want to start looking at homes as soon as possible before this timeframe expires.
It’s important to note that your mortgage lender may not always be your mortgage servicer, as many lenders end up transferring servicing rights over to another company, which will then be the one to send you mortgage statements and handle all associated administrative tasks the terms of your mortgage shouldn’t change, however.
Don’t Miss: 70000 Mortgage Over 30 Years