Boise Real Estate Home > In My Opinion... > Know Your Mortgage Documents

In this Economy Good Financial Health Means Knowing Your Docs:

Source: http://boiserealestateinfo.net
Publish Date: 11/21/2008

Borrowers need to gather up and then carefully review their mortgage documents to avoid credit crisis problems – including potential foreclosure.

Plenty of controversy has sprung up within the past year regarding what is written in the small print of mortgage documents, and after studying their contracts many Americans have filed legal complaints alleging mortgage fraud. If you do not know what your mortgage paperwork says – and how that might affect you and your finances – then you may be setting yourself up for a rude awakening.

Above all, keep a copy of the closing papers you signed when you took out the loan. Make sure that these documents include the important HUD settlement statement that the lender gave you at closing. It contains information that will help you understand your mortgage and can help you calculate capital gains or losses for tax purposes if you sell your home.
The most recent mortgage loan account statement should include a fairly accurate estimate of how much you owe in principal and interest, and you should also know how much cash is held in escrow accounts for paying taxes and insurance. Keep track of these vital numbers for a pretty good overall snapshot of where your mortgage debt stands at any given time.
If you have an ARM loan, study the terms of the mortgage to determine the maximum rate it can hit at the reset or rate adjustment period. Your rate may have a cap to limit it from going up past a certain level. Some loans, for instance, can only rise two percent in a single year. But without a cap you might experience a dramatic spike in your monthly payments.
Ascertain the underlying adjustable rate index to which your particular loan is tied. Some mortgages are connected to U.S. Treasury bills, while others take their direction from the Libor index – based in Europe. Another is the COFI. Knowing which one of these your loan is tied to allows you to track changes in your interest rate as those indices go up or down.
If you have a mortgage but your mortgage company has gone bankrupt or changed hands, don’t panic. You aren’t alone, because millions of homeowners are now in the same situation. Your lender should send written notice with instructions on how to continue making payments. But keep making your payments as scheduled. And don’t fret, because these changes of mortgage company ownership are generally swift and smooth.

Dig out those documents, review them with a fine-toothed comb and a magnifying glass, and if you do not like what you see or do not understand what is contained in the numerous clauses talk to your lender or your lawyer and get satisfactory answers. Keep copies in a safe and easily accessible place so that you can get prompt and accurate answers if needed.

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