Many home buyers are unclear on the difference between a mortgagee and a mortgagee. It’s easy to get confused because some of the terms in mortgage agreements are used interchangeably. For example, the term mortgage debtor may also be called the grantor or consignor.
The distinction between the mortgagor and the mortgagee is that the former refers to the individual requesting the borrowed money and the latter refers to the entity or person providing the financing.
Another way to remember the difference is by using word association tricks. For example, the words used to describe the borrower (mortgagor, grantor, consignor) include the letter “o”. Words used to identify the lender (mortgagee, dealer, and consignment) include the letter ‘e’.
The mortgage notes are secured with a promissory note which is a written promise to repay the borrowed funds. Real estate promissory notes are legal documents, so mortgages should read the fine print before attaching their signature.
The promissory notes provide all parties involved with the details of the transaction. The document should include the principal of the loan, the interest rate, the dates and amounts of the payment installments, the amount of the prepayment penalty, the default clause and the due date.
The principal of the loan refers to the cost of the house. Lenders charge interest on the principal amount. The interest rate is based on several factors, including the type of loan and the FICO scores of the mortgages. Borrowers with excellent scores get lower interest rates than those with good or average scores.
Most lenders assess prepayment penalties in the event that borrowers pay off their loan early. Mortgages should review the Truth in Lending (TIL) statement provided with the loan agreements. Additionally, loan applicants receive a good faith estimate that includes the amount of the penalty.
There are good and bad points to obtaining home loans that contain a prepayment clause. The advantage is that these types of loans have a low interest rate. The downside is that mortgages could incur losses when they sell their home or pay back the loan too soon.
The biggest mistake buyers can make is neglecting price comparison lenders. Searching for the best deal can help buyers obtain lower interest rates and lower settlement costs. Lowering interest rates by a quarter percent can add up to thousands of savings over the life of the loan.
Few people would say that buying a home is an overwhelming process. However, learning how the process works will improve confidence and allow buyers to make informed decisions.
Several sources provide information on homeownership. Some of the most trusted include the Department of Housing and Urban Development, Fannie Mae Homepath, and Freddie Mac Homesteps. In addition, the FDIC offers a free home buying guide filled with valuable information.
For us, the purchase of real estate is the most important purchase in which we will be involved. For this reason, it’s crucial to learn everything you can to ensure a smooth home buying experience. Otherwise, poorly informed decisions could result in foreclosure that wreaks havoc on credit scores.
