What is Mortgage Loan?
Generally through the word mortgage we understand a long term home loan or mortgage loans. It is actually the biggest debt that we can have. We use the property as the collateral of the mortgage loan.
You can avail mortgage loans from a Government guaranteed Institute or any other Private mortgage loan institute but it is better to chose a government insurance mortgage institute to buy your dream home.
Different types of mortgage loan:
There are different types of mortgage loan available in the market. for example….
1. Fixed Rate Mortgage
2. Adjustable Rate Mortgage
3. Balloon Mortgage
4. Interest Only Mortgage
5. Bi-weekly Mortgages
6. Bi-monthly Mortgages
So if you want to buy your dream home and you think you can really afford it then just go for a detailed market research. Talk to different lenders and different lending institute. Choose the lender who is willing to educate you regarding your home buying and offer you the best rates and terms in the market.
After consulting to a few lenders you will understand which type of mortgage suites you the best and choose a mortgage loan which you can really afford. Please don’t try beyond your limits. Have a Happy Home buying. Feel free to ask any questions and share your suggestions.
The Major Types of Mortgage Loans
It has been quiet confusing scenario these days when you go for a mortgage loan. Lenders give you a variety of options regarding your mortgage loan and you are not very sure where to start and what to choose. Mortgage loans also vary from State to State. Different States have their own rules for the mortgage loan applied. In this article I have discussed the 3 types of mortgage loans that are generally offered by most lenders in America today.
Fixed Mortgage Loan:
These type of loans are the most common and popular type of mortgage loans. In this you take a loan from a lender and pay him a certain repayment over a fixed time period. People generally go for long term of 30 year fixed mortgage loans as the monthly repayment are low enough and also the interest rates events out in this long period. But the disadvantage is that, in the long run of 30 years you have to make more repayment than the others who take it for a short period.
Convertible loans have become popular as it gives the mortgage loan borrower more flexibility over their loans. At any time if it seems to you that the interest rates are high then you can get converted into fixed mortgage loan. If interests are low then you can get converted to ARM based mortgage loans.
The most common example of convertible loan is Balloon Loan. It is basically a fixed rate convertible loan where you repay small monthly amounts over a period of 5 – 7 years. After this period you need to repay the loan amount in one go. The advantage is for the real estate investors who want to sell the house in a short period of time to make money.
Special Mortgage Loans:
These mortgage loans are categorized according to different groups of people, such as FHA mortgage loans are to those who go for first time home buying or for people with bad credit history. Another is veteran affairs mortgage loan which are offered to widows of the US armed forces.
A Second mortgage is a secured mortgage loan against your property but it is subordinate to the first mortgage. A second mortgage has second priority. Suppose you have a mortgage loan against your property and you are getting another mortgage against the same property then it will be called the second mortgage. As there is already a mortgage against your property,
second mortgage has less priority then the First mortgage. If you default on your second mortgage payments then you will have to pay off your First Mortgage and then you will have to pay the second mortgage.
The lenders consider the 2nd mortgage as more risky. So the interest rates of the second mortgage are higher than the first mortgage. But even if you default in your second mortgage then also you are liable to pay it off.
The second mortgage lender can also foreclose if you default in your monthly payments of the second mortgage. After selling your house the first mortgage will be paid with the sail proceeds and with the remaining sale proceeds the second mortgage will be paid.
You can opt Fixed Rate mortgage or Adjustable Rate Mortgage as second mortgage. The process of getting a second mortgage is similar to First mortgage. You will have to pay the closing cast similar to the first mortgage.
So it is better to talk to your lender to find out whether he can provide you better rates and terms. It will be easier for you too to deal with your present lender. You can get a Second mortgage more than the amount of your home equity.
Don’t Wait Too Long to Lock in an Interest Rate:
While it is definitely important to watch the market closely, you don’t want to be stuck with a higher interest rate on your home loan just because you waited too long. If you have been looking to buy or refinance your home, now is definitely a good time to do so as mortgage rates are approaching all time lows.
With the upcoming expiration of the first-time home buyer tax credit program and the predicted increase in rates and inflation as the economy recovers, don’t expect rates to stay below 5.0% for much longer. We are very likely to see some volatility in rates during the rest of October as investors wait to see what direction the 10 year treasury yield will.
The Fed is planning to stop buying back US Treasuries at the end of this month so there will likely be an increase in treasury yields which would subsequently increase mortgage rates.
So if you have been thinking about either refinancing or buying a new home, you might want to consider doing in sooner rather than later.
Some Helpful Tips for the New Mortgage Loan Buyers.
The day of buying a new home have come everyone’s life once or more but the first buying home is different thing from the other time buying. There are some crucial steps which you need to take carefully. The success of new mortgage loan is depends on the real estate law of the state where the buyer live.
There are lots of steps to follow to reach at your new home. The financial market is so tricky and unreliable so you need to gather information about this market to survive with good credit report.
Before you steps into the mortgage market you need to manage well your credit report to show clear credit history before you apply for the new mortgage loan. To make the mortgage deal with the lender you have to be more familiar with these mortgage industries.
It is most important to find a right lender and a loan for you to successful your home buying. You must check your possibilities for getting a right mortgage loan by using the online mortgage calculator.
After that you have to start building relationship with the real estate agents and lenders which will help you to continue the process even if you fall short in cash but don’t get so close to the agent that they able to move you to the home beyond your limits. Here you have to clarify your needs to match one best home for you. Now you decide that which home you will buy but the pre-offer should be kept in your mind.
The all online steps of the buying new mortgage loan are the main home buying guide for everyone like to get put their every steps with full concuss of what is going to happen. It is important to aware about process of getting the ownership of the home.
How to Choose A Good Lender for First Time Buyers:
Everybody needs to have at least a one own address anywhere in this world. You may rent a house but it is not yours instead of paying for it every month and the payments are gone forever.
So when you own your home it is completely only yours and your money with you as your home. Your mortgage loan payments are like an investment which may go up over the year with the value of your home.
The payments for your Mortgage loan are deductible from your income tax according to states income tax law and also it gives you a great saving every year. So it is more important to find a good mortgage lender when you buy home first time. Finding a good lender is not a complicated mammoth tusk but you need to do some homework.
There are so many traditional and new mortgage lenders. All banker or lender offer more or less same type of loan program. So there you need a help of a broker because they are associated with several lenders and they are the linker and match maker in between lenders needs and borrower needs.
A bank or a financial entities may disapprove you loan but a lending broker will place your file of loan application to whom it will match as per lender’s norms.
Finding a good mortgage broker is better to finding a lender or banker for mortgage. There are so many online mortgage brokers with good websites and service in where so easily you can apply by filling a quotation and after that you will get so many good offers from several lenders.
The other way you can find a good lender is to ask anybody like your family members, friends, co-workers and people who recently take mortgage loan.
You have to do so much homework and you have to gather so many information as you can to get better decision to choose the better lender for your first time mortgage loan.
How Do You Prepare to Apply For a Mortgage Loan?
A first time mortgage loan buyer is one who is going to take a big step of applying mortgage loan. Before filling this application of the mortgage loan you need to have complete knowledge of all steps of the application process of the mortgage loan which will help you to make the application faster and successful.
So you must prepare yourself for first time application for the mortgage loan. You make a checklist of documents that you need to prepare and collect for faster mortgage loan application. The steps of the application for the mortgage loan have discussed bellow.
Before you apply follow the first step of the application which is evaluation of current credit standing to understand your credit worthiness according to the major credit bureaus’ credit report.
As you need to get good, error-less and clean credit score on your current credit reports for getting approval of a mortgage loan, you have to resolve the errors and all bad debts from your credit reports to make approval easier.
After evaluation of credit standing you must evaluate your financial condition. You make a calculation of your monthly income and expenditure to determine what amount of monthly payment to the loan you can afford.
You prepare a budget for all the opening cost of loan and down payment on your new house. With good analysis on traditional and new mortgage loan you can gather knowledge to apply to the most comfortable mortgage loan. Variable rate mortgage is also a very good option to choose.
If after following all necessary steps of preparation before you apply for a mortgage you have a good low debt level, you can enjoy to get a low interest mortgage loan. On the other way you miss to make a low debt to income ratio you have to pay high interest rate for mortgage loan.
How Mortgage Loans Can Help You in Financial Crunch?
Today due to financial recession many people are losing their jobs and this is making them face the financial crunch in their life. This is making them skip the basic necessity of life and their family members are unable to live the happy life that they used to be before the recession.
To solve all the financial problems they are now opting the means of taking the mortgage loans to pay the basic necessaries of life. To apply for the loan some financial institutions or the banks or the associations might require you to have a good credit score.
There is lot of risk attached to it but in spite of the risk, people apply for the mortgage loans because there are many lenders who dedicate themselves to such financial issues and ideas that will compensate the risks that these loans are associated with.
You must be thinking of what is the Significance of the Debt–Income Ratio?
Whenever you make an application for having a mortgage loans it is not important that you cannot have the loan since you are having a bad credit score, but the mortgage loans is necessarily based on the income the consumer is earning since the payment you need to make is from the earning you are having.
The debt income ratio is the key factor for having the mortgage approved in your favor. Persons not having the ability to fulfill the financial responsibility will not be able to apply for the mortgage loans.
These loans have a lot of advantages together with the higher interest rate factor and other terms. One advantage is that the borrower have an option to improve their financial status and the credit score till the time they will be able to make the mortgage loan repayments and that also on due time.