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Mortgage Information


Selecting a Mortgage.

Fixed Rate Mortgage Loans

Fixed rate mortgage loans are one of the most popular home financing options available.  The basic benefit is the security of knowing you'll have the same monthly principal and interest payments from your first payment until your last.

Fixed rate loans are available for a variety of terms, from 10 to 30 years.  Many borrowers choose the traditional 30 year term because it offers the lowest monthly payment, but you may also benefit from a short term loan.  Although your monthly payments will be higher with a shorter term loan, your total interest over the life of the loan will be reduced substantially.  And your home equity will increase faster since the loan is paid off sooner.

Typically, shorter term fixed rate mortgage loans also have lower rates than comparable 30 year fixed rate loans.

A few of the reasons fixed rate loans are attractive;
  • Security of having a fixed monthly payment.
  • Increased interest rates will not affect your mortgage.
  • You plan to be in your home for more than 3 years.
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Realtor, Licensed in Minnesota, Equal Housing Opportunity
Phone:
320.587.7969

Email:

Serving Glencoe MN and surrounding area.

A & S LINDAHL REALTY, LLC
524 Kay Street SW
Hutchinson, MN 55350



Adjustable Rate Mortgages (ARMs)

With an adjustable rate mortgage loan, your interest rate is subject to change on a regular basis, based on market conditions and the kind of ARM you have.  Some ARMs have rates that adjust annually, others adjust every few years.  There are a variety of terms available for ARMs to suit your needs.

ARMs offer many benefits, including an initial interest rate that is usually lower than a fixed rate loan, and limits on how much the interest rate can be adjusted at one time.  Some ARMs even offer the option to convert to a fixed rate loan in the future.

Some home buyers choose ARM loans because with a lower initial rate, they can qualify for a larger loan amount than would be possible with a fixed rate option.  Or, they may be planning to be in their home for only a few years.  In this case, a lower initial rate can save money.

Finally, some home buyers choose an ARM because they anticipate that their income will grow over time.  An ARM will give people in this situation the security of lower monthly payments during the early years of the mortgage, making their home purchase more affordable.
A few of the reasons ARMs are attractive;
  • Interest rates are expected to go down during the term of your loan.
  • Plans to move in about 3 years.
  • You expect an increase in income over the years.
  • The home you want requires a larger loan than expected.
  • Your payments are lower in the early years of the loan.

Balloon Loans

If you plan to live in your home less than 7 years, you might want to consider a balloon loan.  These short term loans offer payments amortized over 30 years, giving you a short term fixed rate loan with a manageable monthly payment.  Interest rates are generally lower than fixed rate loans with longer terms.

With balloon loans, repayment of the full mortgage loan amount is required at the end of the term.  This usually happens as a result of the sale of your home.  If however, you decide to remain in your home, you may be able to refinance your home under another program.

Contract for Deed Loans

A contract for deed is a loan between the buyer and seller and is therefore usually unique in many ways.  Contract for deed loans almost always have one or more balloon payments involved.  In fact, the deed to the property remains in the seller's name until all payments are satisfied or the buyers establish a standard mortgage through a financial institution of their choice.

A contract for deed usually requires a down payment of 20% of the purchase price.  Contract for deed can be risky because if the terms are not met, buyers can lose the home and all money they have invested.


Processing, Approving and Closing Your Loan.

Processing Your Loan

Once your application is complete, your loan processor reviews the file to make sure all of the required documents and information are included and accurate.  Typically, the loan processor will:
  • Verify the information by contacting financial institutions listed on your application and employers to confirm that all of the information provided is complete and accurate.
  • Obtain a credit report from a reliable reporting agency that outlines how you've handled payment of debts such as credit cards, auto loans, school loans, etc.
  • If you've already found a house, arrangements for an appraisal will be made.  If you've applied for a loan before house hunting, this process will be completed as soon as you've identified a property.
As the documentation described above is being processed, it's possible that additional information will be needed.  If this is the case, you will be contacted.  A prompt response will help keep the processing time to a minimum.

Approving Your Loan

After the documentation is received, the loan processor will forward your completed file to an underwriter.  The underwriter will analyze all of the information in your file using industry accepted guidelines to determine whether you can reasonably be expected to repay the loan amount requested and whether the property you have chosen provides adequate security for a loan.  As soon as your loan is approved, you and/or your real estate agent will be contacted by phone with the details, including the interest rate, term and monthly payments.

Closing Your Loan

Once the loan is approved, your real estate agent or the loan officer will contact you to set a convenient time and location for the closing.  You will be provided with a list of items which you will need to bring with you to the closing.

Usually, these items are:
  • Two forms of ID, one in which needs to be a photo ID.
  • Social security number and/or Federal Tax ID No.
  • A cashier's or certified check made payable to yourself or in many cases to the title company, for the balance of your down payment and closing costs.
  • Your personal checkbook to cover any extra charges, if necessary.
  • A list of addresses for the past 10 years.

Several people will probably attend the closing, including you, your real estate agent, the seller, the seller's real estate agent, attorney(s) representing you and/or the seller, and a closing representative.
During the meeting, which usually takes about an hour, you and the seller will review all of the relevant closing papers, many of which you will sign.  Some of the documents presented at closing are:
  • Mortgage Note
    This states that you as the buyer will pay back the entire loan amount to the lender, plus interest at the note rate.
  • Mortgage or Deed of Trust
    This pledges the real property being purchased as security for the debt.
  • ALTA Settlement Statement
    This provides an itemized breakdown of all your fees and charges.
  • Closing Disclosure
    This provides important information about the loan terms and closing costs.

Toward the end of the meeting, the title to the property you are purchasing is legally transferred from the seller to you.  You are now the proud owner of your new home!


Home Is Where Your Story Begins.



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