Austin Real Estate Blog

The mortgage industry is full of confusing terms and jargon. Many of the terms apply directly to the forms of loans. The Loans are often referred to by shortened acronyms, but not all. Some are simply put, but not clarified by eligibility. Two most common terms are Government Loans and Conventional Loans.

Government Loans - any mortgage insured by the FHA, or VA, or RHS constitutes a government mortgage. This includes loans to veterans, and home loans available through the rural housing service.

Conventional Loans - any mortgage financing that comes from the traditional lending institutions. This would include any loan made by a bank, mortgage company, or nontraditional owner financing.

So that sounds simple enough right? It should be, unfortunately many of the large mortgage brokerages and companies fail to explain this very simple point, which will lead to some confusion down the road. To further elaborate on some additional options and terms related to loans we have included the following terms:

Assumable Mortgage - A mortgage can be assumed by a buyer once they have qualified for all requirements made by the seller’s mortgage company. This is completed at the time of sale.

Balloon Mortgage - This is when a mortgage is written so the payments are steady for a specified period of time, and at a future date requires the remainder of the total paid in full. An example of this would be a 30 year amortization of a loan that comes due in 15 years. Payment until the 15^th year may be around 500 a month, however on the date determined the remainder of a 100 thousand dollar loan becomes due in full.

VA mortgage aka VA Loan - a mortgage insured by the Veterans Administration. This applies to qualified veterans only, and encourages private mortgage lenders to write loans for military and former military personal.

There are so many options with regard to mortgage loans, that the opportunity to review some basic terms is the best approach before obtaining a loan. Often heard during the mortgage and home buyer experience are several references to federal mortgage corporations. Rarely are they explained in a simple clear manner. We will begin by explaining what Fannie Mae, Freddie Mac and Ginnie Mae actually are and how they apply in the industry.

Fannie Mae is Federal National Mortgage Association or FNMA - The Company was chartered by the congress, however it is share-holder owned. Currently they are the principal supplier of residential mortgage funds.

Ginnie Mae or the Government National Mortgage Association or GNMA - The Company is a part of the United States Department of Housing and Urban Development (HUD). This Government agency was created by Congress to provide mortgage funding for lenders who are purchasing with a VA or other Government owned / backed Loans.

Freddie Mac is the Federal Home Loan Mortgage Corporation or FHLMC - This Company is a shareholder run company who creates a secondary mortgage market by purchasing all forms of loans from the primary market for mortgage lenders.

Generally speaking the two share holder based companies do not have much if any federal involvement. Recently due to the Real Estate Mortgage Crisis, and the subsequent repercussions, the federal government has altered their position. They now hold influential positions with in both companies to attempt to circumvent further problems. Time will tell if this was the correct choice for the country and the real estate market place.

Getting a divorce is a trying time for all involved. Of course you, the spouses, suffer enormously as living and financial arrangements undergo an earthquake of changes all geared toward that final split of the legal marriage bond and all that it entails. But remember that family and friends suffer too. And often mistrust and increasing hostility pervades the relationship to its Court Ordered end.

I know it is a hard thing to accomplish, but if there is any way possible, you should make every effort ( and I mean every self effacing, deprecating, conciliatory effort known to mankind) to part as friends. Why??? The reasons are numerous.

One: for your own well being. Hate, revenge, retribution, disgust, despair and general enmity are as destructive to your physical and mental state as fast growing brain cancer cells. Whatever caused the divorce, whoever is at fault, whether you wanted it to happen or not, once the decision is made, even if it is not a joint decision, try to accept that this is an unexpected and unpleasant curve in the roadway of your life, but that your life will go on. And going down life’s path happy and reconciled with the past is way better than being sad, bitter, remorseful and angry. Also life is just easier when you’ve chosen dignity and respect over negativity.

Two: for your family (and I include friends in the definition of family here). While a marriage between two people can be dissolved and the finances and property split, a family created by the birth of children can never be split. The blood tie and usually the emotional connection are forever. So, remain friends with your ex because it is the best thing you can do for the betterment of the lives of your family - children, parents, grandparents, friends, pets, etc. Since a family unit cannot be split, don’t make people choose. And remember, you two can be an extraordinary example to your children of how to manage difficulties in life, if you remain strong, co-responsible, cooperating, loving parents to your children.

Three: for your business and financial aspects of life. Bank accounts, pension funds, investments, stocks, bonds, 401Ks, insurance, taxes, title to personal and real property. Rarely are all of these things effectively split or paid for and all paperwork resolved before the divorce is finalized. Therefore, some ongoing contact between former spouses is inevitable and cooperation between them absolutely necessary to tie up loose ends and protect the best interests of the finances of each.

Let’s focus on real estate. That is usually the largest investment people have in life, generally in the context of home ownership. A well handled divorce in Texas will result in a clear Divorce Decree or Property Settlement Agreement appended to the Decree that sets forth the legal description of the real estate and precise wording of awarding and vesting the title in one party and divesting the other of the title. Or the Decree or Agreement may leave them both in title, require a deed between the parties, or it may make requirements of sale with division of proceeds etc.

Unfortunately many divorces are not “well handled” when it comes to real estate. Some are incomplete and don’t cover all the property or make requirements for the future that are soon unrealistic because of change in market conditions or the health and circumstances of family members, etc. So having the cooperation of a former spouse to obtain a deed, or their signature on transaction documents, even many years after a divorce is a great benefit to facilitating real estate transactions.

Also the more acrimonious a divorce is, the more likely that mistakes will be made in proper submission of all necessary property or investments to the attorneys and/or the court, which of course won’t come up until one of the spouses is trying to sell or borrow money on the property in the future. Keeping it friendly during and after the divorce process is completed will result in a better outcome for everyone.