Down Payment – The down payment is part of the purchase price of a property that the buyer pays, usually in cash, and is not included in the loan amount. Most lenders require five to 20 percent of the purchase price of the home, depending on the type of mortgage loan. Review your budget and make a decision about how much of a down payment you can reasonably afford to pay. If you do not have enough, you may be able to qualify for a loan under various government programs that are available.
Private Mortgage Insurance (PMI) – Any down payment less than 20 percent generally will require Private Mortgage Insurance (PMI), which protects the lender against loss if a borrower defaults on a loan. While it does not protect the borrower, it may allow the borrower to qualify for a loan they could not otherwise get. The premium (the amount of money charged for insurance) is paid up front or financed as part of the mortgage. PMI usually can be cancelled when the homeowner builds up enough equity in the home. Under federal law, PMI on most loans made on or after July 29, 1999, will end automatically once the mortgage is paid down to 78 percent of the original value of the house.
Interest Rate – As you know, the interest rate is the cost of borrowing money. Mortgage loans have repayment terms in the general form of a fixed rate, where the monthly interest payment does not change over time. This is often called a “conventional mortgage.” Another common type of mortgage loan is the variable or adjustable rate mortgage (ARM). An ARM has an interest rate that changes periodically during the loan’s life.
Conventional loans are generally thought of as more stable as they are not subject to fluctuating interest rates that can make dramatic swings over a long period of time. This accounts for the popularity of fixed rates, which often attract borrowers who plan to stay in one place for a considerable amount of time. The length of these loans most frequently selected is the 30-year mortgage, but 15-year and 40-year have grown in popularity.
FHA Loans - An FHA insured loan is a Federal Housing Administration mortgage insurance backed mortgage loan which is provided by a FHA-approved lender. FHA insured loans are a type of federal assistance and have historically allowed lower income Americans to borrow money for the purchase of a home that they would not otherwise be able to afford. To obtain mortgage insurance from the Federal Housing Administration, a mortgage insurance premium (MIP) equal to 1 percent of the loan amount at closing is required, and is normally financed by the lender and paid to FHA on the borrower's behalf. Depending on the loan-to-value ratio, there may be a monthly premium as well.
For more information visit the Government Website at
Some common forms of Predatory Lending:
Unaffordable loans – Loans that are based on equity or assets rather than the borrower’s monthly income and ability to make payments.
Loan flipping – Encouraging repeated refinancing – which requires additional fees and points from the borrower each time – thus draining the borrower’s assets. You could become burdened with higher payments, larger debt and ultimately face the possibility of losing your home.
Fraud or deception – Concealing the true nature of the loan obligation from the borrower.
Bait and switch – Verbal representations of favorable terms are made to sell a loan and different, less favorable terms are presented at the closing.
Pressure – Aggressive sales tactics are used to induce a borrower to sign an expensive, or unaffordable loan contract.
Other Issues to Consider
Lead paint – In houses built prior to 1978, the seller must disclose any known lead-based paint and lead-based paint hazards. The seller must provide the buyer with a lead-based paint disclosure form and any records or reports in their possession. For more information, visit HUD online at www.hud.gov/offices/lead/.
Toxic mold – Contamination can lead to a variety of health and respiratory problems. Make certain your independent home inspector checks attics and crawl spaces for leaks and moisture that could support mold. For more information, visit the U.S. Environmental Protection Agency (EPA) online at www.epa.gov/mold/.
Radon – This is a colorless, odorless gas that, when trapped in buildings, can be harmful at elevated levels. Ask your independent home inspector if radon is a problem in your area and if it will be part of the inspection. For more information, visit the EPA online at www.epa.gov/radon/
Asbestos – Prior to the 1970s, asbestos was used in many different insulation and fireproofing applications. You cannot tell whether a material contains asbestos simply by looking at it unless it is labeled. If in doubt, treat the material as if it contains asbestos, or have it sampled and analyzed by a qualified professional. For more information, visit the EPA online at www.epa.gov/asbestos/.
Megan’s Law – Under New Jersey law, the county prosecutor determines whether and how to provide notice of the presence of convicted sex offenders in an area. Check the New Jersey Police Database for registered sex offenders near your new home.
Off-Site Conditions – The clerks of municipalities in New Jersey maintain lists of off-site conditions which may affect the value of residential properties in the vicinity. Examples of such conditions are proposed construction in the area, or a nearby toxic waste contamination problem, etc. Purchasers may examine the lists and can independently investigate the area surrounding the property to become familiar with any off-site condition which may affect the value of the property.
Stigmatized property – The residential property disclosure form includes an overview of physical and material issues regarding a property. However, some home buyers are also interested in less tangible issues, or potential psychological factors of living in certain properties. Stigmatized property is defined as property that is in some way tainted due to factors unrelated to its physical condition. Some examples of stigmatized property are a house that is alleged to be haunted, or the scene of a violent death. Legally, the seller and agent are not obligated to disclose these issues up front. But if asked, the seller and agent are obligated to disclose any such issues of which they have knowledge.
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Millburn, NJ 07041
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MONMOUTH COUNTY OFFICE
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