Real estate transactions are complicated, and real estate agents are usually involved to ensure they are successful and legal. In many cases, there are 2 agents — one representing the buyers interests, one the sellers. In most cases, real estate agents are compensated with a percentage of the transaction, which links their payment to a successful job. In most states, 6% has long been the common commission percentage. This is split — usually in half — when two agents are involved. Real estate commission rates are not set by the government, or by industry bodies. In most states, commissions are legally negotiable. Keep in mind that point above - commission is linked to success. Think about the expertise and work you need them to do to understand how they earn the commission.

The S crow is kind of a mascot here, because there is no such bird. You wont hear the word "escrow" for years, and then youll hear it all the time if youre buying a home. Heres what the word means. Some of the charges connected to a home: Real estate taxes Mortgage insurance Homeowners insurance are applied annually. The escrow account is a bucket where part of monthly mortgage payments accumulate to pay these costs. Escrow account costs may — and usuallydo — change each year, because these charges change. Its useful to understand that the lender is responsible for making those payments on time, from the escrow account. If somethings late, make sure you are not fined or punished.

"Well pull your credit." is the bland phrase you might hear from a lender. What does that mean? Three companies — Experian, TransUnion and Equifax — maintain records of peoples debts and payments. They issue a credit score for you, based on this data. From a lenders perspective, the credit score provides a consistent measure to assess the possibility of a borrower defaulting on a loan. Your credit score can directly affect qualifying for a loan, rate and other terms. The better your score, the better your borrowing situation. A good credit score saves you money, which can help you maintain a good credit score. Its worth checking your credit score regularly, but particularly before a big transaction like a mortgage. If there are issues, start addressing them early. This video may help you understand the score; look for other videos here on credit scores and credit history for more.

Some combinations of loan terms — such as a small down payment — may require the buyer to pay mortgage insurance. (See the video on Private Mortgage Insurance here to learn a bit more about it.) PMI can add yearly costs to your mortgage, but you may not be required to continue carrying for the whole term of the loan. If your loan was consummated after July 29, 1999, and your payments are current, you have some options. Your lender must terminate PMI when principal balance is 78% of the original value of the home. Your lender must terminate PMI if you reach the halfway point of hte loan term (e.g. 15 years on a 30-year fixed loan.) You can request cancellation of the PMI policy yourself when principal reaches 80% of original value. Logically, that suggests that the lender didn’t cancel automatically, so if you’ve hit the 78% market, ask them in writing. Consumers have the right to ask for the date that either of these balances will be in force. If your mortgage is relatively new, ask for the date and put a followup note on your calendar or phone to check — even if it’s years in the future. Follow any steps the lender requires, do everything in writing and keep copies.

Companies involved in the mortgage loan process are required to follow detailed regulations. Many of these are detailed in the Real Estate Settlement Procedures Act — the Federal law commonly called "RESPA." The RESPA rules spell out the information that a lender has to provide to potential customers, step-by-step. They mandate detailed, full information about all costs, servicing details, account and escrow practices. They also mandate that lenders disclose any business relationships that they have with other parties involved in the transaction. In plain English, that means that you should be informed of existing relationships. If the mortgage process requires you to get your car washed, and the lender gets a commission from the car wash across the street, they have to tell you. Same for other not-so-silly business arrangements. The Dept of Housing and Urban Development - HUD - provides information on the RESPA regulations. Here are some of the current links: RESPA page that says nothing particularly useful. Settlement Costs Booklet The Settlement Costs booklet is quite useful and detailed — a recommended resource if youre starting the mortgage journey. HUD also sponsors housing counselors. Some consumers can qualify for counseling without any charges; where charges are involved for counseling, HUD requires that any counseling fees be "commensurate with the level of services provided." The HUD housing counseling agencies directory is here: https://apps.hud.gov/offices/hsg/sfh/hcc/hcs.cfm

When you apply for a mortgage and provide the 6 required pieces of information, a lender must provide a Loan Estimate within 3 business days if the loan is approved. This video explains the basics. The Loan Estimate is a standard form, with required information. Yours will include: Loan terms, including interest and loan schedule Projected payments Costs at closing, including: Total Interest Percentage APR (Annual Percentage Rate) Estimates of costs from lender-recommended providers ("Cant Shop"). Final costs must be in defined limits of these estimates. Estimates of costs that you can shop; these will vary based on your decisions. Be clear that the Loan Estimate is anestimate - not a final, binding contract for loan costs and terms. It will give you a ballpark understanding about this loan, and some limits on the possible changes in final costs. For more assistance (and additional videos) on the specific parts and pages of a Loan Estimate, search "Loan Estimate" on this site.

Intimidated by mortgage loan terms and the list of fees? This short explainer video will help you get a handle on all of it. While a mortgage involves borrowing money for a home, there can be quite a few items and fees in the stack of papers. "Loan origination" -- the process of documenting and evaluating your loan application -- is not free. The "loan application fee" is one of the key components to understand. This fee generally covers: The lenders costs to verify, evaluate and underwrite the loan. This fee also pays for appraisal of the property — a professional valuation for the lender (not for the buyer.) Fees to "pull" your credit history. Other surcharges; ask the lender for a detailed list. Loan application fees are generally non-refundable.

Heres a short explainer video to help you compare mortgage loan options from different lenders. Most of us arent involved in mortgages every day, so the terminology and decision factors can be intimidating. Creating a simple, structured process to compare your loan options can make it a bit easier. Devise your own "checklist", and keep the same details for each lender and loan program as you shop. Your checklist should include company-level details: How big is the lender? (Offices, personnel, number of loans per year, or something other measurable factor.) Do they have local representation? Who is the key contact, and how can you reach them? For each loan, youll want to track consistent details. Some recommended items: Type of mortgage — fixed (15? 30?), ARM, balloon and so on. Minimum down payment required Current interest rate Points options and terms, if applicable. Closing costs Prepayment terms If the lender provides information on loan-processing timelines, that may be helpful to know. Because interest rates can change rapidly — even daily — accumulating this information gradually may not be effective. If you can arrange to call the lenders on your list on the same day, youll have a better basis for comparison. If you are already working with a real estate agent, they may have a list of lenders to help you get started.

The video puts this in more visual terms, however your individual scenario will figure out the very best sort of loan for you. Lenders can assist you utilize your responses to choose which loan best fits your requirements. Do you expect your finances to change over the next few years? Are you planning to live in this home for a long period of time? Are you comfortable with the idea of a changing mortgage payment amount? Do you wish to be free of mortgage debt as your children approach college age or as you prepare for retirement? Lenders can assist you in using your replies to decide which loan is the best fit for you.

Heres a short article and helpful explainer video, giving you some tips on choosing a lender for your mortgage loan. While applying for a mortgage can be intimidating, remember that lenders want your business! You are the customer, making one of the biggest purchases of your life. Companies you consider should be responsive, professional and helpful as you start sizing up your options. There are many advantages to working with a lender that has a local presence. They will have connections with the other businesses and government organizations involved in the purchase, and will know "how to do this" in your particular state and locality. A local presence also helps the lenders personnel be up-to-date on home values and conditions in the area, which could potentially be a factor in your search. Companies without a local presence should not automatically be rejected. Your communication preferences and record-keeping habits might make a national lender with a robust digital loan-processing system a fit. You should be comfortable with calls and video, rather than face-to-face conversation, if that looks like a fit. Advice from friends and family may be helpful, but keep this in mind. People do not buy homes as often as they buy groceries, or even cars. Verify the advice you receive with your own homework, online research, and feel for the situation.