Where can I get basic, straightforward home-buying advice on the web?
You’ve come to the right place. Your credit union is proud to present CU Mortgage Online, a resource for our members when entering the home-buying market. Basic information can be found in our ‘Advice’ section, with new articles being added regularly. Our comprehensive glossary will define the basic and not-so-basic terminology that is frequently used in mortgage lending. And, of course, we are always open to your content suggestions. What would you like to see? Let us know, then visit us often, as we intend to continually grow this useful member resource.
At what stage of the home-buying process should I visit my credit union?
It is best to visit your credit union’s mortgage department before you even begin to shop for that new home. A basic pre-qualifying exercise will give you a feel for how much home you can afford. Mortgage Pre-approval will take this one step better, and will not only provide you with affordability information, but also will give you a leg-up in the negotiation process. There is no doubt that a buyer with a guaranteed funds has more leverage in a negotiation than one who is still waiting to hear back from their lender.
What is a first mortgage?
A first mortgage is exactly what it says it is – the first loan on a certain piece of property. No other lien has been taken out on this home. When you first buy a house, the loan you typically receive is a first mortgage.
What is a second mortgage?
A second mortgage is also what it says – the second loan against a specific piece of property. Consider this example: Let’s say you have a first mortgage on your home. The value is $100,000 and you have a $60,000 balance left to pay on your loan. The $40,000 difference is considered equity, or the part of the home that you own outright. If you wish to further borrow against that $40,000, you would be taking out a second mortgage on the home in order to do so. Why borrow against this equity? In many cases, the interest rate you pay on your mortgage is lower than many other types of loans. Interest is also frequently tax deductible for a first or second mortgage, but not necessarily for a car loan or a credit card. (Consult your tax advisor for more information on tax deductibility and home loans)
What does it mean to ‘sell my mortgage on the secondary market’…?
Fear not – This phrase is not nearly as ominous as it sounds. Frequently, your credit union can get you an extremely competitive rate on the secondary market. This is simply a network of large mortgage lenders that work with the credit union to deliver low rates to borrowers. If the member chooses, they can finance their home loan with a secondary market lender, and can do so through the credit union. The credit union may technically hold the loan for a very short period of time before ‘selling it’ to this other lender. The member often makes their loan payments to and receives loan servicing from this secondary market lender.