10 Things You Need to Know About Your Mortgage Before Closing

10 Things You Need to Know About Your Mortgage Before Closing

Buying a home is one of the most exciting — and confusing — transactions most of us will ever encounter. It can be confusing because of all the documents involved that you have likely never seen before. Here are 10 things you need to know about your mortgage before closing:

1. The parties to a mortgage.

The parties to a mortgage include you, the buyer, also known as the mortgagor, as well as the lender, which is known as the mortgagee. You are likely to see these terms throughout the closing documents.

2. A mortgage is secured with a promissory note.

In exchange for the money lent to you to buy the home, a mortgage is provided to the lender as collateral (security) for the repayment of the debt, known as the promissory note.

3. How a mortgage protects the lender.

Under Florida law, a mortgage is used to create a lien on the property that secures the repayment of the debt. Typically, you will find that a buyer grants a lender a mortgage lien on the home itself and all other buildings on the property, the land, easements and all existing fixtures and equipment (air conditioning system, water heater, etc.).

4. Other protections for the lender.

In addition to the lien, you will also be promising to make monthly mortgage payments as agreed to in the promissory note, that you will occupy the home as your principal residence, that you will pay all property taxes and association dues, and that you will maintain insurance coverage on the home.

5. Defining default.

Your mortgage documents will include definitions of default under the mortgage. These typically include not making timely mortgage payments, not paying property taxes, not maintaining insurance on the property, or failing to fulfill any other obligations under the mortgage or promissory note.

6. Default remedies.

Default remedies define what can happen if you default on the mortgage. In Florida, these typically include:

• Acceleration of the mortgage loan, making the unpaid balance of the loan and any interest due immediately;
• Having a receiver appointed for the property;
• The right to institute foreclosure proceedings;
• Allowing the lender to recover costs for collection and enforcement of the promissory note.

7. Grace periods.

The mortgage will typically include grace periods that the lender will extend to the buyer before default remedies kick in.

8. Mortgage terms.

There will be mortgage terms and provisions that cover any changes made to the promissory note, escrow payments, any changes to the condition of the property and what happens if the property is sold before the debt is paid in full.

9. FHA loans.

Most people are familiar with the term FHA Loan, but that doesn’t mean the government is lending you the money if you have one. The FHA helps buyers insure their loan by providing insurance to the lender, which gives the lender more security in loaning you the money for your mortgage.

10. Second mortgages.

Many home buyers are not aware that they can get a second mortgage when they buy a home (this is different than a home equity loan or line of credit). Like a primary mortgage, the second mortgage is secured by the property with monthly payments that last for the life of the mortgage.

Jurado & Farshchian, P.L. assists buyers and sellers for all types of real estate transactions. Contact one of the experienced Florida real estate attorneys at Jurado & Farshchian, P.L., at(305) 921-0440, or email us at info@jflawfirm.com.

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