b'MB-906 2020-21 Relo - Single Page_MB-706.qxd2/19/20209:55 AMPage 64FINANCING AHOMECONVENTIONAL FHA-INSURED LOANS professional before they approve yourMORTGAGES The Federal Housing Administration mortgage, but its a good idea, even ifConventional loans with a down (FHA) offers several low down payment they dont. Home inspections, whichpayment of less than 20% typically mortgage products for eligible typically cost between $300 and $600,require private mortgage insurance to participants. FHA-insured loans are can reveal structural problems that mayprotect the lender if the homeowner available from most lenders who offer impact the selling price and yourdefaults. conventional loans. For information and interest in the home. eligibility requirements, contact your Home inspectors are licensed by theADJUSTABLE-RATE lender or visit: hud.gov/fha/loans.cfm. state. Under Wisconsin law, buildingMORTGAGESVA-GUARANTEED LOANS inspectors are liable for damages thatWith an adjustable-rate mortgage arise from an act or omission relating toIf you are a veteran of military service, their inspection. In addition, they are(ARM), the interest rate changes period- reservist, or on active military duty, you prohibited from performing any repairs,ically. They are typically characterized by may qualify for a loan guarantee from maintenance or improvements on thethe amount of time that must pass the Department of Veterans Affairs.before the rate can be changed (1, 3, 5, These loans have low down payment. inspected property for at least two years7 or 10 years, for example). Rates are after the inspection has occurred. Forgenerally lower than fixed-rate mort- more information about regulations or togages, but ARMs carry the risk that an Home Inspections check the status of an inspectorsincrease in interest rates will lead to Lenders may require that you have your license, please call (608) 266-2112 orhigher monthly payments.prospective home inspected by a visit drl.wi.gov.Common Financial Terms\x1f APR (Annual Percentage Rate): which increases the buyers monthly payment of home-related services andBecause it includes points, expenses payments. must be satisfied at the time a home isand other costs charged by the lender, \x1f Escalator Clause: A provision that sold.this is the actual interest rate you will allows the lender to change the inter- \x1f PITI: An acronym that stands for prin-be paying. Since all lenders must calcu- est rates or loan amount of a loan if cipal, interest, taxes and insurance.late this figure the same way, the APR market conditions change This is the total monthly paymentprovides an excellent method for com- owed to the lender. It includes pay-paring mortgage proposals.\x1f Fixed-Rate Mortgage: A loan with a ment on the principal and interest, as\x1f Appraisal: An estimate of the proper- fixed interest rate that remains con- well as money escrowed for insurancetys market value based on the condi- stant over the life of the loan and taxes. tion of the structure, the value of the \x1f Home Warranty: Insurance purchased \x1f Points: Interest that is paid in advanceland and the neighborhood. Appraisals by the seller that covers the cost of of the loan. A point is equal to one per-are usually needed whenever a home repairing major appliances, such as the cent of the loan value. Three points onis bought, sold or refinanced. furnace and water heater, if they fail a $100,000 mortgage is equal to\x1f Assumable Loan: A mortgage that can within a year of the purchase date $3,000. Paying points lowers thebe taken over by the buyer for a fee. \x1f Interest-Only Mortgage: A loan in monthly payments.These mortgages avoid closing costs which the mortgage holder makes pay- \x1f Private Mortgage Insurance (PMI):and loan fees. ment only on the interest Insurance that protects the lender in\x1f Closing Costs: Payments made on \x1f Joint Tenancy: A type of ownership the event the homeowner defaults onclosing day to cover attorney fees, that allows two or more parties to own the mortgage. It is typically requiredappraisals, credit reports, escrow fees, a parcel of property together. In the when the down payment is less thanprepaid insurance premiums and other event of one joint tenants death, own- 20 percent of the homes cost but canfeesership of the property automatically vary according to the lender.\x1f Common Area Assessments: Also passes to the surviving joint tenant(s). \x1f Title: A document that indicates aknown as homeowner association \x1f Loan-to-Value Ratio: The percentage buyer has clear ownership of a proper-fees, these are charges paid by unit of a propertys value that can be lent to ty. In order to protect themselves,owners to maintain the property a borrower. Typically, financial institu- lenders typically will not issue loans\x1f Down Payment: The amount of cash tions will not lend more than 80 per- without this document.paid by the homeowner at the time of cent. \x1f Title Insurance: Insurance thatclosing. Any down payment that is less \x1f Mechanics Lien: A lien against the protects the homeowner and thethan 20 percent of the purchase price title of a property for work done on a lender in the event there is anusually requires mortgage insurance, house. Courts impose liens for non- ownership dispute64 YOUR RELOCATION RESOURCE'