Understand the Language that Mortgage Broker Companies Use

The process of purchasing a home involves many steps. From finding the home to writing the offer to securing the loan and moving in, each step comes with it’s own set of challenges. One of those challenges is understanding the lingo from mortgage lenders. They tend to speak quickly and if someone is not used to the terms they are throwing around, they can find themselves feeling frustrated or embarrassed to ask questions.

Before agree to any contract or terms from a mortgage lender or mortgage broker be sure to understand all terms being discussed. Here is a look at some commonly used terms, their definitions and how they might be used during the home buying process.

Variable Rate

A variable rate refers to a rate that can change along the way. These rates are usually based on monetary indexes around the world. For instance, one of the more common indexes is the LIBOR. A variable rate loan may be written to be 3 percentage points above the LIBOR interest rate. So if the LIBOR interest rate is 2 percent, then the variable rate loan would be five percent.

The danger to this type of loan is that as the base rate increases so to does the interest rate on the mortgage. However the advantage to a variable rate loan is that if money is cheap to borrow and the borrower has a short term time horizon, they can save quite a bit of money without absorbing too much risk.

Rate Cap

Another common term mortgage lenders use is something called a rate cap, or they may say “the rate is capped at…” this is the number at which the interest rate can no longer be raised on a variable rate loan. So if the base rate on a variable interest loan rises the rate cap may say that the interest rate can not be raised more than 2 percentage points per year with a cap of 8 percent. The rate cap is a protection built in for the buyer so that the payments do not become astronomical and have a finite high point.

 

Interest Only Loan

An interest only loan is a mortgage product by which the borrower is merely paying the interest on the note every month. This means they are never paying down any principal. The advantage to this type of loan is that if the real estate market is rising, the property will gain equity over time. This will allow the borrower to make smaller payments to the mortgage company and “buy more house.” The downside risk is that in a flat or down real estate market, the buyer is not building any equity. This means when they go to sell their property, they will have need to saved cash to pay the real estate agents as well as place a downpayment on a new home.

Points or Buying Down Points

Mortgage lenders often offer several different kinds of loans to a client when trying to secure a loan. Some of those packages might include something called points. A point is one percent of the total loan amount. A borrower may buy points to get a cheaper interest rate over the life of the loan. The mortgage lenders get the benefit of more money in their pocket at the time of the loan, while the buyer gains the advantage of smaller monthly payments because of a better interest rate. Points are usually available to buy in halves or quarters starting at a half point and going to about two points depending on current market conditions.

Eliminate Debt and Lower Expenses: Financial Empowerment is a Springboard to Working Freedom

Debt elimination is a primary key to eliminating concerns around money for entrepreneurs and self-employed leaders. Because it can take six months or more to build a client base as an at home worker, people who decide to move into at home work by crossing the telecommuting bridge might find it wise to put off new, unnecessary purchases until their at home business is starting to generate enough income to cover their basic living expenses.

At Home Workers Lowering Expenses and Eliminating Debt

Lower weekly and monthly living expenses call for lower sustained income levels. Just knowing that it is possible, well within reach, to earn a living doing what one loves and pay the bills can help to propel at home workers over lag times in their business.

Before they take the leap into a work at home lifestyle, people who are thinking about working at home might find it beneficial to create a spreadsheet and listing their current monthly living expenses by item. A Microsoft Excel, Lotus or Macintosh spreadsheet will work well when doing this exercise.

These and similar calculating software packages can be purchased for about $30 to $50 from office superstores like Office Max, Staples or Office Depot. At home workers can also simply write their living expenses down on a standard sheet of paper.

At Home Workers Tracking Expenses to Grow Revenue

Write down items such as the mortgage, rent, groceries, utilities, LAN line and cell telephones, cost of internet access, cable and more. Those who have a car note should write down the cost of their monthly payments as well as the cost of their monthly car insurance installments.

 

Doing this certainly removes the guess work and assumption out of one’s living expenses and extraneous debt. This exercise can also encourage entrepreneurial business leaders to look for ways to trim or eliminate their expenses and debt. After all, what’s the sense of earning one million dollars a year if one creates an annual debt level that exceeds one million dollars?

This exercise can be a true eye opener. At home workers might be surprised at their reaction to seeing the costs of their living expenses placed in bold print directly in front of them on the spreadsheet. People who decide to lower their expenses and eliminate their debt can work through their accountant or a credible debt elimination firm to lower their monthly expenses.

About Working With Debt Elimination Companies

Those who do decide to hire a debt elimination or debt consolidation firm to review their existing finances and help them to finds ways to lower or eliminate their debt are advised to do their homework. Ask the company for customer referrals.

Reach out to a few of the customer referrals to find out what their experience working with the company was like. Contact area better business bureaus and state government income tax agencies to ascertain whether the company is official and not a scam.

Oddly when there is a perceived need across the human landscape, people and organizations have in the past been known to rise up and claim to fill that need for the right price. At home workers who conduct their due diligence prior to agreeing to allow a company to review their financial records can save themselves heartache and worry.