Nervous About Signing for a New Mortgage?

Taking on a mortgage is a major life event and a significant financial step. People often enter into their lenders at closing without really knowing what to expect. Unfortunately, after signing dozens of documents, they are left unclear and slightly confused about what they have signed and why they signed it.

In an effort to clarify important mortgage, here is important information to know before you sign on the dotted line:

1.    Loan terms. When loan terms are being discussed, this has to do with time. The terms of a loan have to do with how long a loan will last. Typically, mortgage loans have terms of 15 to 30 years.

2.    Estimated payment. The estimated payment is the amount per month that you will be paying on your mortgage. This takes into account the principal of a loan – or the amount that was borrowed – and the interest that was calculated on the principal.

3.    Interest-only loan payment. A payment on a loan that does not reduce the principal, but only covers the interest due.

4.    Prepayment penalty. A prepayment penalty is a penalty that is assessed if you pay off the principal of your loan before the agreed upon terms of your mortgage. The amount is usually based on a percentage of the remainder of the mortgage or interest. One should try to avoid any loan with a prepayment penalty.

5.    Balloon payment. When you are asked to make a larger than usual payment at the end of a loan because the full amount of the loan was not amortized over the life of the mortgage. These loans are very rare, and care should be paid if someone is attempting to sign you to a balloon payment loan.

6.    Rate-lock period. The rate lock is a promise made to you by your lender that the interest rate and point cost are guaranteed to you while your mortgage application is being processed. This prevents your rates from increasing while you wait for the paperwork to be completed. The rate-lock period should always be closely monitored and at least through to the date of the anticipated closing. In fact, an extension of the rate-lock period could end up costing the borrower hundreds of extra dollars that the seller will not be responsible for.

7.    Closing costs. These are what it takes to complete a mortgage transaction. They include origination fees, title insurance, taxes, home inspection and homeowners insurance. You are expected to cover these when you are scheduled to close on your property. These are always disclosed to you at the outset, and knowing how much money beyond the purchase price is expected of you is very important for planning purposes.

8.    Title insurance. Title insurance protects you against financial loss from problems in the title due to liens against the property, lawsuit or problems with the land ownership records. All banks require mortgage title insurance, and a buyer is wise to consider an “owner’s title insurance policy”.

9.    Homeowners insurance. Homeowners or property insurance protects your home and your possessions from damage or loss. It also is important for providing liability against any accidents that occur in your home or on your property.

So, take the time to know and understand the intricacies of mortgage lending before you sign. For more information about signing up for a mortgage, give me a call today.

Do you have questions?

Count on your experienced team at Ericson, Scalise & Mangan, PC to provide you with sound guidance for your Estate Planning, Elder Law, Real Estate, Probate, Trust & Estate Administration, and other legal needs. For assistance, contact us today at (860) 229-0369, or email us at

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