What is a home mortgage?

If you own home or have ever dreamed about owning one, you already know what a home mortgage is. Very few people out there can afford to pay for a home immediately, so they need to find a way to pay for the home over time. In order to do it, they turn to a home mortgage, which is essentially a document that gives you ownership of a home with the expectation that you will be making mortgage payments on it over time (typically for the duration of 30 years).

Recently, news about home mortgages has been everywhere as different families struggle to pay their mortgage as the nation goes through the biggest economic recession in years. Because of this, many of them have been forced to foreclose on their home mortgages or essentially move out and forfeit the right to live in them due to financial troubles. This isn’t the only reason someone might run into problems with their mortgage though. Keep reading to hear about some of the other dirty tricks that lenders play in order to avoid having trouble with your mortgage.

Why everyone is suddenly talking about home mortgages

With all the talk surrounding failed subprime mortgages and mortgage foreclosures in America, you don’t need any help finding ways to put your mortgage in harm. This clip from CBS’s 60 Minutes explains why mortgages have become such a hot topic recently.

Video: The Mortgage Meltdown

Three secrets from a former mortgage lender

When you decide to purchase a home, the first thing you’ll need to do is qualify for a loan from the bank that grants you a mortgage. Then, you can move into your new home and start living your life. But there are three industry secrets you should know before you even apply for a mortgage. Watch out for these three tricks when you apply. They could put your mortgage into jeopardy and cause you trouble down the line.

Watch out for “no closing cost” scams: Many banks or lenders may advertise “no closing cost” in order to get you interested in a mortgage from them to buy a home. Closing costs are paid just before you buy a home and are usually placed at somewhere around 10% of the total price. So you may feel as though you are getting a great deal when that fee is waved. However, it is almost never waived. Rather, you end up paying a higher interest rate over time. Because you may not be planning to pay that cost, it could put your mortgage at risk. So be sure to ask how “no closing cost” may harm you later.

Avoid paying for private mortgage insurance: Lenders want to protect themselves when they loan your money for a mortgage. Should you default, they want to be sure they don’t lose out on money. In order to do this, most require you to pay for private mortgage insurance if you are putting down a downpayment of less than 20% on your new home. This insurance is just another cost you’re stuck with as the result of buying a home. But it doesn’t have to be. In order to avoid paying it altogether, try splitting your mortgage into two separate mortgages in order to make it easier to put down a 20% downpayment on each of the two mortgage loans. It’ll save you money and allow you to put down a larger downpayment as well.

Don’t pay your mortgage broker too much: When you obtain a mortgage in order to buy a home, you need to be aware of what is known as a yield spread premium. The yield spread premium, also known as the YSL, is the money paid to a mortgage broker that works between yourself and the lender. A YSL is usually used when a person cannot pay a broker at first for their services. At the end of the buying process, the broker will collect payment from the lender, who will then roll the broker’s fee into your loan. You need to be aware of this though, because you could be subject to pay more for your mortgage than initially projected. So ask plenty of questions about the YSL and also be sure to shop around for a broker who will handle your needs and do it at a cost-friendly price.

Another potential mortgage scam

Mortgage scams are everywhere today. With the American economy sinking, expect more to be on the rise. Watch this clip to see how you could be a potential victim—and then take the proper steps to inform yourself about your mortgage immediately.

Video: Protect Yourself from Mortgage Fraud

Why learning more about your mortgage could help save your home

No matter how you choose to go about getting your mortgage, it’s important for you to understand what you’re getting yourself into before you buy a home. So many people have defaulted on their mortgage and seen foreclosure signs go up outside their homes. In some cases, they could have helped prevent it. They could have asked more questions or taken more time to think about whether or not they could really afford their home. Buying a home is one of the most important things you will ever do. It’s an investment that will literally make or break you. So avoid doing anything that could potentially harm your investment and steer clear of scams that could put your mortgage into jeopardy.