Once a home buyer engages the services of a real estate agent to help look for a house, or when he has an offer to buy a house accepted, the agent would usually ask the buyer to work with a loan officer or mortgage broker to obtain financing for closing.
Whether you have already obtained financing or not, it’s almost certain that the agent would highly recommend that you speak with his or her referral.
Why would your agent do that?
Equity grabbing refers to the unethical practice of lenders who give out predatory loans to gullible borrowers with the hidden intention of acquiring ownership of the borrower’s equity in a property when default occurs.
This means that the lender’s strategic agenda was not to make a profit from interest in the first place but to include terms in the lending contract that can induce default when invoked, then proceed with acquisition of equity based on that premise.
The most common terms that causes defaults in future are usually associated with sudden interest rate spikes, especially with teaser rate loans.
An annual cap is a provision clause contained in a adjustable rate mortgage (ARM)loan contract which limits the potential increase of interest rates within the year.
This rate increase limit is often stated in the loan agreement in terms of percentage points.
For example, a cap of 1% on an ARM currently at 3% would mean that the maximum interest rate would be 3% + 1% which equates to 4%. This applies even when the current market rate for new home loans is 6%.
A package mortgage is a loan for home buyers that is not just made up of funds to purchase a house, but also consist of money to buy household items like furniture as well.
However in such cases, personal property bought with funds from the package mortgage would also be pledged as collateral for the loan.
The special feature of these types of home loans can be especially attractive for home buyers who don’t have a lot of savings but has strong cash flow.