Loan intermediaries

MORTGAGE MONEY-SAVING TIPS

This last section is just a short list of money-saving tips that can be implemented along the way. The goal is to find the best ways you can to save a little money on your mortgage.

Here are five valuable tips:

PRIOR NEGOTIATION

It is entirely possible to get some of your mortgage fees reduced or waived through negotiation with the lender. This might include document preparation fees, or the lender’s attorney fees among others. Keep in mind that the mandatory fees are the appraisal, processing fee, title fees, credit report fees, inspection fees, and private mortgage insurance. Why are those mentioned first negotiable? The reason is that the lender doesn’t make a dime on any of them.

CHOOSE THE RIGHT TYPE OF MORTGAGE

Make sure that you know what kind of loan you want at the beginning. You need to factor in how long you plan to be in a home, as well as what your projected financial status might be. The answers to these two questions can help you choose between 30-year fixed-rate mortgages and ARMs. You want the mortgage loan that will offer the most financial advantages for your circumstances and time in the home.

MAKE EXTRA PAYMENTS

Obviously, the more that you can pay each month on your mortgage, the more of your money will go towards paying the principal of the loan, rather than towards interest. You can potentially shorten your loan term by paying extra payments.

BI-WEEKLY PAYMENTS

Similarly, if you change your payment schedule to a bi-weekly arrangement, you will be able to fit in an extra payment every month. This has the potential to reduce your mortgage term as well. If you have room in your budget to implement this type of procedure, you can use part of your paycheck to make a payment. This may not be viable for every borrower’s circumstances. Regardless, it is great tip.

AVOID PMI

One way to save over the course of your loan term is to wait until you can pay the minimum 20 percent down payment, so you do not have to purchase private mortgage insurance, which is an added expense to your monthly payment. Of course, if you already have PMI, your strategy should be to accumulate 20 percent equity, so you can get rid of the coverage and start saving money.

WHAT IS A PROMISSORY NOTE?

A promissory note is a promise to pay the loan that is signed by the borrower in favor of the lender. The promissory note is secured by the deed of trust and is the evidence of the debt. The note explains the terms of the loan, including the interest rate and any payment obligations.

Normally, the promissory note is not recorded in public records. The lender retains the note for the length of time it takes to repay the loan. Once the loan has been repaid, the promissory note is then marked “paid in full” and given back to the borrower with a recorded Reconveyance Deed, which is simply a returned deed.

It is important for you, as the borrower, to read both documents carefully, including those portions which were printed beforehand. A better idea still is to request that the closer send you copies of blank promissory notes and deeds of trust in advance for you to review, so you are better acquainted with them before the “real” ones arrive.

Since everyone makes mistakes, including preparers, you should take the time to examine these documents. Keep in mind the following items as you are reviewing each:

• Spelling of names

• Principal balance of the loan

• Interest rate (and the rider, if adjustable)

• Payment amount

• Prepayment penalties, if any

• Address of property

WHAT IS A TRUSTEE?

Borrowers are often confused about mortgages and deeds of trust because of the inclusion of an independent third party called a trustee. This party does not represent the lender or the borrower. The trustee does however fulfill a number of important roles in a deed of trust, and has specific authority.

Below is a description the trustee’s various duties:

• Trustees are typically title companies or other business entities that are given the “Power of Sale” if the borrower happens to default on a loan.

• The trustee is responsible for returning the property, once the deed of trust is paid in full.

• If you happen to default on your loan, the trustee will file what is called a “Notice of Default.” In most cases, the trustee will have another trustee come in to deal with the foreclosure proceedings, under the terms of the “Substitution of Trustee.”

• Once the 90-day period in the public records and the 21-day publication period in the newspaper have elapsed, the trustee is authorized to sell the property in public (even on the courthouse steps) without further legal proceedings.

• 90 days (or three months) after a Notice of Default has been recorded, the borrower can actually make an attempt to redeem the property, by paying the trustee’s fees and paying back payments.

• If a trustee sells a property at a Trustee’s sale, the sale is final and legally binding.