Mortgages: Home Loans on the Web
Buying a first home is an important milestone in anyone's life. But even if it's your fifth home purchase, the financial jargon and seemingly endless paperwork involved in getting a mortgage can overshadow the excitement of owning your new home. On the Web you'll be able to find resources that help you understand what a mortgage is and how it works; decide which type of mortgage works best for you; find a reputable lender; and even understand what happens after you get your loan. For a Spanish-language version of the Guide, click here.
Expand All Guide SectionsHow does a mortgage work?
It would be nice if getting a mortgage were as simple as asking for one and then getting a check in the mail. But lenders don't give out hundreds of thousands of dollars so easily; you'll fill out lots of financial paperwork, spend days and weeks waiting for answers, and even subject your new home to various inspections. To make sure that you don't find yourself surprised at what you're required to do to get a home loan, take a few moments to read some Web sites that explain the process to you.
Dulcinea's Insight
- Many sites that provide mortgages also provide some sort of step-by-step review of the process. If you are unclear about the details of how your mortgage will progress, check the Web site of the lender.
- To read about developments in the mortgage world, try RealEstateJournal.com, a great news source for real estate-related information and part of The Wall Street Journal.
Dulcinea's Picks
How mortgages work ...
Bankrate.com
has a "Mortgage Basics" series that explains how a mortgage works, what paperwork you should expect to fill out, how your mortgage payments are calculated, even what can happen after you've closed on the mortgage.
The Motley Fool
has a "Finance Your Home" article with useful (and witty) explanations of the mortgage process. After reading this, you'll know the difference between using a mortgage broker and a bank for funding, and between a fixed-rate mortgage and an ARM. You'll also know where to look for a loan, and you'll understand some mortgage terminology.
The Mortgage Professor's Web site
is written by Jack M. Guttentag, a Professor of Finance Emeritus at the University of Pennsylvania. The unimpressive design of this site is balanced by the wealth of information available. Here you'll find articles to help you prepare to buy a home, tools to help you calculate what you can afford and to compare mortgages, answers to questions about buying (or building) a home, and even mistakes to avoid. If you are unfamiliar with certain mortgage topics (such as ARMs or interest-only mortgages) try taking one of the mortgage tutorials.
For an overview of costs associated with a mortgage ...
The Federal Reserve Board
has this online brochure called "A Consumer's Guide to Mortgage Settlement Costs" that explains the costs related to the mortgage as well as from the lender. This also goes over estimated costs, costs associated with transferring ownership, and has a settlement costs worksheet.
Investopedia
has a "Mortgage Basics" guide with a section on costs. Here you'll learn about the major costs incurred when getting a mortgage as well as what to expect to pay for your down payment and closing costs.
Choosing the right type of mortgage
Choosing the right type of mortgage can be as important as choosing the right home. Instead of wandering into a lending institution and letting them lead you through their mortgage process, take the lead yourself by researching the different types of mortgages online and seeing for yourself what's out there. The Web sites in this section help you figure out how much to borrow and how to borrow it by providing unbiased information that's easy to understand.
Dulcinea's Insight
- The two basic types of mortgages are fixed-rate and adjustable-rate mortgages. A fixed-rate mortgage has an interest rate that's set when you first borrow the money and never changes over the life of the loan; adjustable-rate mortgages have interest rates that can go up or down depending on changing federal interest rates.
- There are lots of different versions of the two basic mortgage types; for additional information about different types of mortgages try the sites listed below or try searching for a definition in a search engine, like this: "definition: balloon mortgage."
Dulcinea's Picks
To figure out how much loan you can afford ...
Mortgage-calc
has almost every finance-related calculator you could ever need: mortgage, amortization, debt consolidation, mortgage refinancing, and others. This site even has a calculator that tells you how long it will take you to become a millionaire.
CNNMoney
has real estate calculators that help you decide how much house you can afford and what your monthly payments will be, as well as a cost-of-living calculator.
To help you choose the right type of mortgage ...
RealEstate.com
has a finance center with helpful articles and guides (from quickenloans.com). You'll find mortgage rates, mortgage calculators, and articles like "How To Choose the Right Loan." This site is affiliated with Lending Tree.
MSN Money
has some tips and articles that can be helpful when considering your mortgage. In the "Home financing" section, you'll find advice like "8 big mortgage mistakes to avoid" and "Don't rush to pay off that mortgage."
The Federal Reserve Board
, in its brochure about understanding the home mortgage process, has this "Where to Shop and What to Look For" section about how to get started shopping around for a home loan. It suggests going to your banking institution first, and discusses mortgage considerations such as ARMs and the difference between government-insured and conventional mortgages. The Federal Reserve Board also has a consumer handbook about adjustable-rate mortgages (ARMs) that shows you how they work and gives some consumer cautions to consider before getting an adjustable-rate mortgage.
For information about rates and points ...
Applying for a home loan
Once you have found your dream home you want to be able to move in as quickly as possible; sometimes it's handy to get pre-approved for a loan to get the process moving before you even start your house hunting. Before you wander from bank to bank (or mortgage broker to mortgage broker) applying for home loans, take a look at the information available online to get an overview of what to expect from the mortgage process, to help you decide what kind of lender would suit your needs, and even where you can find the lowest interest rates.
Dulcinea's Insight
- Loans from Internet-based providers can sometimes be offered at lower rates than those from brick-and-mortar banks because the Internet-only providers often have lower overhead costs.
- Lots of private lenders (such as quickenloans.com) have tips and tools to help you choose a loan or lender, but know that ultimately the goal of these sites is to get you to borrow money from them, so be aware that they recommend themselves first. Most banks offer mortgages. Try looking at your bank's Web site to see if you can get a special rate or reduced closing costs as an existing customer.
- Keep track of the rates and fees that are given to you by different lenders (using a spreadsheet or even a pad of paper); sometimes a lower interest rate, after additional fees, actually turns out to be a worse deal than a slightly higher interest rate with fewer fees. If you do the math yourself you'll be able to compare apples with apples to determine what is really the best mortgage for you.
Dulcinea's Picks
For help beginning the process ...
Ginnie Mae
has a "Homeownership 101" section that helps you determine if you are ready to buy, what cash you need to get started, how to choose a mortgage, and an explanation of the people involved in the mortgage process. Ginnie Mae is a government-backed company that guarantees payment to investors for some mortgage-backed securities.
RealEstateABC's "Mortgage Guide"
gives you resources such as a checklist of things you need when you apply for a loan as well as articles such as "What is Missing in Mortgage Ads on Television?" The index of this guide is a little text-heavy, but take a moment to look through it and you'll surely find a helpful article or two.
To know how your credit score is determined ...
Privacy Rights Clearinghouse
has an article called "Your Credit Score: How It All Adds Up" that tells you what rights you have concerning your credit score, how your score is determined, and tips for improving your credit score.
To help you choose a lender ...
The Federal Deposit Insurance Corporation (FDIC)
has an online brochure called "Looking for the Best Mortgage" that will guide you through collecting cost and fee information from multiple providers. This gives a brief glossary of terms, explains fair lending, gives resources for learning about your credit score, and even has a "mortgage shopping worksheet" for you to fill out to help you compare mortgages.
GovLoans.gov
is a portal to information about government loans and opportunities to aid people in finding affordable housing. This site is especially useful for those with a low income or who belong to a group such as veterans, Native Americans, those in rural areas, or those that have experienced a natural disaster.
HSH Associates
helps you compare the rates of lenders in your area. Choose the type of loan (either "good credit" or "bad credit") and then you'll be directed to a page with the lenders nearby. Click on the name of a lender to see their current rates.
To understand the difference between a bank and a mortgage broker ...
Bankrate
has an article called "Banker or broker-which is better for your mortgage?" that helps you determine what kind of lender best suits your needs as a homebuyer.
To find a broker ...
The National Association of Mortgage Brokers
has a searchable directory of certified brokers. Search using your city and state (or search for a broker by name). Not sure what the different certifications mean? Check out the certification page to find out.
For organizations that oversee fair lending practices ...
The Federal Reserve Board
provides articles about fair lending practices and mortgages (scroll down the page to find them) such as "Interest-Only Mortgage Payments and Payment-Option ARMs: Are They for You?" and "Home Mortgages: Understanding the Process and Your Right to Fair Lending."
The U.S. Department of Housing and Urban Development
has an article called "Don't be a Victim of Loan Fraud" that explains what predatory lending is, how to be a smart consumer, and some common tactics used by predatory lenders.
The Better Business Bureau
provides a reliability report for a company of your choice when you search for the company's name in the search box. The reliability report lets you know what, if any, complaints have been filed with the BBB.
After mortgage approval: switching lenders, foreclosure, and tax breaks
Once you cross all those t's and dot the i's on your mortgage paperwork, you can finally enjoy your new home, right? Well, there are a few things that can happen after you've closed on your mortgage: You can take advantage of tax breaks on the interest; your mortgage can be sold to another lender; you can refinance; and if you miss enough payments you can go into foreclosure. To make sure that you are prepared for all of these post-closing possibilities, we've assembled a collection of sites that explain and assist you with any of these issues.
Dulcinea's Insight
- Discuss issues like foreclosure and prepayment with your lender before you close on your mortgage so that you know what penalties, if any, you will incur for late (or sometimes early) payment.
- After foreclosure, you are occasionally entitled to money back from the principal you have paid. Check with your lender to see if this applies to you.
Dulcinea's Picks
If your mortgage is sold to another lender ...
Bankrate.com's "Mortgage Basics"
has a chapter about your mortgage after closing. Here you'll find out what happens when your mortgage provider sells your mortgage, why your payments might change, and information about refinancing and prepaying.
For information about tax breaks associated with your mortgage ...
The Internal Revenue Service
has a question-and-answer page that tells you what parts of your mortgage payments (if any) you are allowed to deduct on your tax return.
For information about foreclosure ...
The U.S. Department of Housing and Urban Development
has compiled a list of questions and answers useful for understanding the process of foreclosure and how to prevent it. Read through the page for advice on dealing with an impending foreclosure, numbers to call for help and assessment, and a first look at some of your possible options.
The Legal Assistance Resource Center of Connecticut
also explains the foreclosure process but includes a very useful section concerning specific steps along the way. Look over the sample documents to see what sample complaints and motions really look like.
Home equity debt
You can't always plan for your future financial needs. One way to readily access credit is to use the equity in your home to get a loan or a line of credit. There are a number of ways to use your home equity for immediate financial liquidity; take a look at the following sites to help you determine if home equity debt is your best option for additional funds.
Dulcinea's Insight
- Home equity refers to the value of your house, minus any outstanding debt. For example, if you bought your house for $100,000 and after 10 years still owed $50,000 on your mortgage but your house now had a value of $150,000, you would have $100,000 in equity ($150,000 value - $50,000 owed = $100,000 equity). Lenders will usually allow you to borrow up to 80 percent of your home's value.
- Most banks and mortgage lenders offer home equity loans; you should be able to find out if your lender offers this kind of loan by checking its Web site. Be aware of termonology such as, HELOC, which is a common abbreviation for "home equity line of credit."
- Before applying for any home equity loan or line of credit through an online lender, make sure to check its credibility through an organization that oversees fair lending practices. (There is a list of these in the "Applying for a home loan" section of this guide.) Home equity debt is accrued when you use the equity that you've earned on your house as collateral to get a line of credit or a loan.
Dulcinea's Picks
For information about a home equity loan ...
Bankrate
has a home equity section that provides you with almost anything you could want to know about home equity loans or home equity lines of credit. Especially helpful for beginners is the "Home Equity Basics" section that takes you through what home equity is, how to apply for a loan or line of credit, and things to watch out for. Check out the home equity loan versus home equity line of credit calculator to help you determine which one is right for you.
eHow
has a "How to Get a Second Mortgage on Your Home" article that gives you a very quick overview of the necessary steps involved in taking out a home equity loan. At the bottom of the article you'll find tips and warnings to consider when looking at this type of loan.
For information about a home equity line of credit ...
The Federal Reserve Board
has a consumer handbook about home equity lines of credit. This guide includes information such as what to look for in a home equity plan, the costs associated with a home equity line of credit, repayment options, and a comparison of a line of credit versus a second mortgage.
How reverse mortgages work
Reverse mortgages are almost like taking an advance on the sale of your house; when you take out a regular mortgage you gain equity and lose debt as you pay it off, but a reverse mortgage takes away equity as you collect money from it.
Dulcinea's Insight
- A reverse mortgage is a way to get cash based on the value of the home that you own; it will decrease the equity that you have earned on your home. Sometimes there are age requirements for getting a reverse mortgage.
- Be cautious before entering into a reverse mortgage contract with any lender on the Web. Check the Better Business Bureau Web site for an evaluation (or possible complaints against a company) before you agree to a reverse mortgage with any company.
Dulcinea's Picks
Reverse.org
has quick and easy explanations of reverse mortgages and how they work (for example, how much you can borrow and how you pay them back). This site hasn't been updated in 10 years, but we're still showing it because it has a comprehensive FAQ section.
AARP
has a section on reverse mortgages that gives you a basic overview of what they are, how they work, who qualifies for a federally insured reverse mortgage, alternate options to consider before taking a reverse mortgage, how to select a lender, and other helpful articles. AARP also has a reverse mortgage calculator so you can find out how much money you could get through a reverse mortgage.
The Federal Trade Commission
has a cautionary guide for consumers to review before settling on a reverse mortgage. This site also has resources for homeowners who feel that they may have been a victim of reverse mortgage fraud.
Real estate and mortgage news
If you want to stay current on market trends or read what others have to say about mortgage rates or housing prices, take a look at the publications and blogs about real estate and mortgages available online.
Dulcinea's Insight
- If you have a specialty real estate or home loan publication that you regularly enjoy in print, look for the online version by typing the name of the publication into a search engine or by simply adding ".com" to its name.
- If you are looking for housing or mortgages in your local area, look for the online version of your local paper and see if there is a real estate section that might be able to give you more specific information than you'll find in national publications. You also may find listings for local mortgage lenders in such publications.
Dulcinea's Picks
RealEstateJournal.com
is a division of The Wall Street Journal that focuses on realty. Look for information on buying and selling homes, improving and building onto your current home, or even find out about gardening and landscaping. Use this extensive online publication to learn about realty or to post and browse real estate listings.
Realty Times
is a source of tips and advice for using the real estate market to your advantage. Click on the "Local Market Conditions" for specific information on trends and market ratings and then use the Web site's "News and Advice" section to use this information advantageously. If this information proves useful and you want to learn more, sign up for the newsletter.
The Mortgage Reports blog
is the (almost) daily chronicle of Dan Green, a Certified Mortgage Planning Specialist. Here he reviews and interprets the current happenings within the world of mortgages. Although keeping your mortgage knowledge up to date requires some background knowledge, this searchable blog also teaches some concepts through helpful analogies, just as the author claims he does with his clients.
© 2012 Dulcinea Media, Inc.
