Mortgage Contract Essay

556 Words2 Pages

UNDERSTANDING YOUR MORTGAGE CONTRACT

As a first time homebuyer, your mortgage contract provides proof of your entry into real estate. The contract protects both you and the mortgage lender. The contract dictates the terms and conditions agreed upon by you and the lender, all negotiations made relating to collateral and interest rates and fees.
You must familiarize yourself with fundamental conditions of your mortgage contract, so that will be aware and be able to plan accordingly.
Basic Mortgage Loan Terms
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Analyze your mortgage contract. First, take note of the principal amount. The mortgage principal tells the loan amount used to buy the property. The mortgage contract also indicates how long you have to be able to pay off the loan. Usually, mortgage durations are 10, 15 or 30 years.
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Second, take note of the agreed interest rate. The …show more content…

It should describe the frequency and amount of monthly payments. Usually, most mortgage contracts specify that payment due date is at the 1st of every month. Also, some include a sentence or two giving you a grace period of 15 days. To avoid any late payment penalties, you must pay the amount before the end of the grace period.

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Check the mortgage contract for information about escrow account. A portion of your monthly payment goes into an escrow account to pay for property tax and insurance. Mortgage insurance protects the lenders if you default on your loan.
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Review when your loan is considered defaulted and the actions the lender will take if you do. Usually, your loan gets into default when you have not made any payment after the grace period has passed. When you have defaulted, the lender has the right to foreclose on your property .
Calculate the Interest Rates
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Lenders charge interest rates according to risks levels. First time homebuyers and investors who have little to no debt with a high income provide less risk so they can negotiate lower mortgage interest rates.

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