Information About Mortgage Loans
The day of purchasing a new home or car comes to almost everyone’s life once or more. However, few people can buy it in one lump sum. Unless you can get a huge loan from any of your family members, you may not have other options but to apply for a mortgage loan. For most of us who can not or would rather not obtain private loans, getting a mortgage is simply a fact of life.
Actually, it is mortgage loan that helps us get closer to our dream home, car or other items that we do not have enough cash to buy.
Definition and Meaning
What is a mortgage loan? Well, it’s a type of loan secured by real estate, usually with specified interest rate and payment period. Until the loan is paid off in full, the lender/mortgagee has a lien on borrower’s/mortgagor’s real property that is used as collateral for the loan. Today, the word mortgage alone is also used to mean mortgage loan.
Mostly, people tend to use their houses as collateral. Therefore, once they fail to pay back the loan in full (with interest) within a certain period of time, the mortgage lender will take their homes through a legal process known as foreclosure.
What types of loans are available?
Just a couple of years ago when the real estate boomed, a dizzying array of mortgage loan types was available. However, times have changed greatly. Now people have fewer options.
Major types of mortgage loans available in today’s market include:
- Fixed Rate Mortgage
- Adjustable Rate Mortgage (ARM)
- Balloon Mortgage
- Interest Only Mortgage
- Biweekly Mortgages
- Bimonthly Mortgages
Besides these basic mortgage categories, there are actually a few more options designed to fit your special needs. Generally, these mortgage loans, including government guaranteed mortgage loans, seller assisted mortgage loans and flexible payment ARMs, are only available to certain qualifying people.
Why to Get a Mortgage Loan
You might hesitate when it comes to getting your first mortgage loan. But you should know that no matter you want a home or car, it’s much better to take a mortgage than rent.
Mortgage loan can not only allow you to finance the purchase of items you desire, but also bring you several benefits:
Establish good credit
You know, it’s really difficult for people have no credit history to get a loan or credit card. A mortgage loan will help you a lot in this regard, since you will establish good credit through making consistent and on-time mortgage payments.
Build equity in your home
When you rent a home or auto, all the money you pay out of your pocket goes no where. However, if you have a mortgage loan, you are building the equity in the home when repaying the loan. Every payment you’ve made will lead you closer and closer to 100 percent ownership.
Pay cheaper “rent”
Purchasing a home the same as the one you currently rent with a mortgage loan might result in cheaper “rent”, since lots of banks or mortgage lenders often provide loans with very low monthly payments so as to attract more customers.
Guideline for Getting Mortgage Loans
These days, mortgage loans are great ways for people to purchase new home, buy their dream cars or pay for desirable education. If you have no idea how to get a mortgage loan, don’t worry. It’s not difficult, as long as you have good credit history. All you have to do is try arming yourself with a few savvy tips to make sure you can make a wise decision.
• Figure out which loans you can qualify.As mortgage loans come in various forms, you might feel overwhelmed with all the options. Having a clear view of which types of mortgage loans you are eligible for will be very helpful. Fixed-rate mortgage loans are ideal for people opting for predictable monthly payment. But if you look to lock the rate in when it drops to the lowest level, choose adjustable-rate loan.For moderate or low income families expecting to take a mortgage loan to purchase a new home, loans guaranteed by the Federal Housing Administration sound to be perfect options. Elder citizens who need funds to live a better retirement can consider reverse mortgage, while active military service members and veterans can give a thought to VA loans.
• Negotiate for the best rate.It’s vital to shop around and compare mortgage loan rates to get the best deal. Use your good credit score to persuade your potential lender that you can manage your money responsibly and will never default on your payment. If you happen to have poor or bad credit, maybe it’s a good idea to improve your credit score before submitting an application form.
• Know how mortgage loan process work.To speed up the application process, you are recommended to get a full understanding of how mortgage loan process work. Knowing what kind of documents will be needed on each stage and get them prepared in advance can surely help you a lot. If possible, send your credit report and other required materials to the lender to apply for pre-approval. Therefore, you can get the fund immediately after submitting your application form.
Introducing Mortgage Loan Payment, Modification, Application & Originator
Mortgage loans are a popular approach to obtain a house. By taking out such a loan, you can get you and your family a place to stay.
Besides the basic ideas and legal regulation, there are a lot of things involved in mortgage loans, for example
• Repaying your mortgage
Mortgage loan payment comes out almost the same time you sign the mortgage contract. You are going to repay it in the live time of the loan. So what’s in the mortgage payment? How can you pay your loans faster?
• Re-structuring your mortgage
Also called mortgage restructure, mortgage loan modification is the process of altering your mortgage terms to make it affordable. It is rather an exhausting process, but there are programs and tips that can makes things easier.
• Finding a mortgage originator
How can you dismiss the role a mortgage originator plays in getting a mortgage loan? He helps you collect info, gives advice and works with you through the whole process. Want to become a successful originator? It is not that difficult if you know the inside info.
• Applying for a mortgage
Now you find an originator. What to do next? It is time for the mortgage loan application! Likewise, you get to prepare documents, select a lender, do a little math to understand your financial conditions and so on. Luckily, your originator will help you out.
A Deep Understanding of Mortgage Loan Types
Your property is always considered as your biggest investment in your life. When you map out the life of what you are paying for, various types of mortgage loans are showing its own features for different groups of people.
Here is a short conclusion:
For Seniors Loan Borrowers
For senior home owners who are 62 years of age or older, they can select reverse mortgage loan in case they are intended to borrow money for emergency use, which means, the reverse mortgage loan can be converted a portion of the property into cash. It allows eligible senior borrowers to choose either single lump sum or monthly payment.
For Home Owners with First Mortgage
If you are an eligible homeowner with first mortgage already and need an amount of money urgently, the second mortgage loan can be the great option which is based on the same assets as the first mortgage. The second mortgage can make the payment if the loan goes into default.
For People Who Need a New Loan
In fact, some mortgage loans are used to pay the existed mortgage and allow people to take advantage of the remaining money. For instance, refinance mortgage loan can replace your old mortgage with a new one which brings you lower interest rates and more loan terms.
For Loan Borrowers who Need Flexible Payment Terms
Generally, the government loans feature low costs and interest rates relatively. But in some cases, people need a mortgage loan with less strict requirements. These loans are called non-government loan. Conventional mortgage loan is one representative with flexible payment and creative financing options for cash-short borrowers.
It’s time to venture into the world of mortgage loans if you are looking to purchase a house, refinance your current loan or just wish to get cash out of your home equity. As a kind of loan taken wherein a property is used as a collateral, mortgage loans allow you to borrow money against the market value of your home or other property you wish to buy.