If you are the victim of a house fire, one of the first things you may wonder about is your mortgage. So what happens to your mortgage if your house is destroyed by fire?
The lender doesn’t just cancel your mortgage, it remains in effect. However, your insurer should pay off the mortgage as part of your settlement.
Your insurance company may also pay to provide you with temporary shelter until you rebuild or move. If you decide to move, that means you’ll need to sell your fire damaged house and get a new mortgage.
Here are some tips for getting the best mortgage possible for your new property.
Buying a home is about more than finding a place to live … it’s also about buying a very expensive financial product – a mortgage loan.
A mortgage loan is quite simply one of, if not, the biggest financial commitments you’ll make in your lifetime.
Selecting the right mortgage can make a huge difference in your monthly payments as well as in the overall cost of the loan.
Here is a quick example of just how important a mortgage can be to your financial health.
If you buy a $300,000 mortgage at 6.25% and you keep that mortgage for the full 30 years you would end up paying $365,000 just in interest over the course of that loan – that’s significantly more than the original cost of the loan!
So you can see that a mortgage is definitely a big expenditure and should be treated with care and consideration.
Unfortunately, Searching for a Mortgage in Today’s Marketplace is Not Easy …
In fact, the whole experience can be very frustrating.
Prospective home buyers must deal with unfamiliar terms and confusing options and then they may have to select from a whole host of banks, online lenders and others who are all eager to take their loan application.
The sheer number of options that a home buyer faces can quickly become overwhelming.
To help simplify the process for you, here are answers to the seven most common questions that home buyers face when they decide to buy a house and start looking for a mortgage.
7 Essential Mortgage & Home Buying Questions Answered!
Q1. When is a good time to buy a home?
A1. Too many people get caught up in real estate valuations, home price cycles, the number of homes listed, buying in the winter instead of the summer and their guess about which way interest rates are going. But don’t get caught up in all of that. There is no right answer. Buy a home because you want to, rather than for an investment. Buy a home that you can call your own. Begin saving for the future by building equity.
Q2. How do I become pre-qualified for a mortgage?
A2. Your loan officer will ask you about your income, your credit score and your monthly debt payments. He estimates the taxes and insurance cost on a home in your desired value range. Then he calculates the maximum mortgage you’re likely to get. Based on the money you have for down payment and closing costs, your loan officer will calculate the approximate home value you can afford and finance.
Q3. Is pre-qualification the same as pre-approval?
A3. No. Pre-approval requires verification of the information you gave your loan officer in the pre-approval process. You must furnish him with W-2’s, tax returns, bank statement and pay for a credit report. You will need to furnish this information and more proof of your financial situation to the lender through the loan officer when you actually apply for your mortgage. But if you are pre-approved before you make an offer on a home, you are more likely to have your offer accepted, especially if you are competing with another buyer who is not pre-approved.
Q4. Does it make sense to look for the lowest mortgage interest rate?
A4. Not necessarily. The interest rate you’re offered on the mortgage you apply for will depend on the type of mortgage, the amount of your down payment, your ability to pay closing costs, your credit score and the cost and type of home you’re buying. There is an interest rate unique to every borrower and these factors. Once that interest rate is determined, you may also choose to pay “points” at closing to buy down the interest rate or to pay a higher interest rate to obtain a credit to your closing costs, if you’re short of cash. This is one of the most important times when choosing the right loan officer will pay off for you, because he will help you choose the mortgage program that will accomplish your true purpose in buying a home.
Q5. Why choose a fixed rate versus an adjustable rate mortgage?
A5. Statistics show that the average homeowner holds onto a mortgage for 3-5 years; then he either refinances or sells the home and buys another. The problem with statistics is that they have little to do with the unique you. Five year adjustable rate mortgages (ARM’s) usually have lower interest rates than 30 year fixed interest rate loans. But if you’re planning on staying in your home for a long time, the 30 year product locks in your rate. The five year ARM may adjust to a higher rate on its fifth anniversary, and annually after that. So an important question is: What are your plans for your future?
Q6. What about FHA, VA and USDA loans? Are any of them right for me?
A6. Perhaps, if you qualify. Ask your loan officer to help you determine your qualifications for one or the other of these programs. Special mortgage programs like these may offer unique benefits to qualified borrowers, such as low or no down payment, lower interest rates, reduced closing costs and so on.
Q7. Why would I want to refinance my mortgage?
A7. The most common reason is to lower your interest rate and your monthly payment. Or you may want to switch from an ARM to a fixed rate mortgage or vice versa. Also common is refinancing to consolidate debt, especially credit card debt where interest rates are sky high. Your loan officer can help you calculate how long it will take you to recover the closing costs of a refinancing loan using your lower payment.
Here’s a bonus question and answer: Should I hire a mortgage broker?
In the end only you can decide. However, a good mortgage broker may simplify the confusing mortgage process and could save you money. Brokers might also have more options for people who have blemished or less well-established credit.
Of course that still leaves the problem of finding a reputable broker – as with any profession there are people who are good at it and people who are not.
When hiring a broker you should look for someone with experience and a long list of satisfied clients.
Want to Sell Your Fire-Damaged House?
We Buy Fire Damaged Houses pays cash and buys fire-damaged houses in “as is” condition. That means you do not need to go through a stressful repair process. To see if your fire-damaged house qualifies for a free quote, fill out the form below.