UNDERSTANDING YOUR MORTGAGE CONTRACT


When you head to the settlement table, you’ll see a copy of your note. This is a contract between you and the lender and spells out specific tasks both you and the lender are bound to perform. This contract is rather wordy and your settlement agent and loan officer will help point out the important items but you can expect to read the following:

Your interest rate will clearly be highlighted. This is not the annual percentage rate provided to you when you first applied for the loan but the rate lenders use to calculate your monthly payment. This is your note rate. The mortgage contract will also show when the payments are due, when considered past due and how much the late fee would be if you don’t pay on the first of the month. Most mortgage contracts require the loan to be considered past due five days after the first and asses a late fee of 5.0% of the past due amount on the 15th of the month.

The amount borrowed is your original loan amount and will be highlighted in your mortgage papers. If you escrow or impound for property taxes or insurance or both, escrow account information will be presented including how much you’ll pay each month in addition to the principal and interest payment.

The mortgage contract will also spell out how and when a mortgage lender can foreclose on the property due to nonpayment. A mortgage company won’t foreclose on someone because they’re past the due date or the date a late fee is applied. A mortgage company won’t foreclose on someone if they’re more than 30 days past the due date. When and why a company can foreclose on someone is clearly spelled out in the mortgage contract, usually when a payment is delinquent more than 90 days past the due.

Don’t disregard this contract at the closing table and make sure you ask all questions about what you’re about to sign. You do have a three day rescission period to change your mind when refinancing but not with a purchase. Your questions need to be answered before, not after you close on your home.

For more information or questions about mortgage loans,
Please visit Majestic Home Loan

Or Call  (855) 757-8748

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