What is a Home Mortgage?
Although this is a pretty straightforward question, how many
individuals do you know that ever take the time to ask, and
receive an answer? Not very many. More often than not, the
question of a home mortgage isn't pondered until there is a
desire to purchase a home. For the purpose of this article,
we're simply going to examine the home mortgage, and the
variations that exist in the mortgage market today.
A home mortgage is a loan furnished by lending institution to a
buyer for the purpose of procuring residential property, are a
home of which to live. It's that simple, the definition is that
simple; the actual process is anything but simple. How do you
approach mortgage lenders and what information what you need to
furnish?
Mortgage lenders today, thanks to all the federal regulation,
default rates, and identity theft in existence require more
information than ever before. The mortgage application is
sometimes a 10 to 15 page application that will ask questions
pertaining to your life years prior. Why does the mortgage
company want history? The lender simply needs previous
addresses, previous jobs, and previous education to gain greater
insight and opportunity to know the borrower. It is not entirely
impossible to steal someone's identity, gain access to their
current information, even from three to five years prior. What
is impossible is to enter the mind of the individual and gain
access to relevant work history or education history. Generally,
when you complete a mortgage application there's also a mortgage
application fee charged at the time you submit the application;
why do the mortgage lending institutions charge an application
fee? Mortgage companies charge a fee because it cost money to
process application, and only serious applicant's warrant the
time and expense.
What other information will be necessary to furnish when
completing the mortgage application? Generally a personal
financial statement, the proposed mortgage amount, and any legal
judgments against you such as bankruptcies, tax liens, or
federal student loans will be requested at the time of
application submission.
Now, what have the mortgage products are available to the
mortgage borrower? The most often used mortgage product is the
fixed rate mortgage; the next in line would be the adjustable
rate mortgage, and the newest member of mortgage products would
be the interest only loan. The interest only loan is gaining in
popularity at an ever increasing and phenomenal rate of growth.
The fixed rate mortgage provides the borrower with a fixed
interest rate for a specified number of years, generally 10, 15,
or 20 years as a set monthly payment. The adjustable rate
mortgage is exactly as it sounds; the interest rate for this
type of mortgage is adjusted at set intervals generally no less
than six months no more than 12 and the amount of the monthly
payment will vary according to the adjusted interest rate. The
interest only loan is quite frankly, the least consumer friendly
of the three and today the most popular of the three. When you
take at an interest only loan, you may payment of only interest
for a specified number of months or years on a loan that has
been amortized for a greater number of years, usually 20, and at
the end of the interest only term, your payments will reflect
interest and principal payment. It's at this juncture that many
homeowners cannot afford the interest and principal payment.
That's why this mortgage product is the least consumer friendly;
it does however make the most profitable lending institution.
I believe you should now have a much clearer picture as to what
a mortgage is, why you complete a mortgage application, and the
basic mortgage products available. If you are considering the
purchase of a home, please take a moment to visit a local
lending institution, a local realtor, and the web site of the
Housing and Urban Development Department. You, as a potential
homeowner can never obtain too much information.
What are other resources that can be accessed to learn about the
mortgage process and your available options? Get online, check
out the advertised lending companies there; look at the
information they ask for, the products they offer, and then do
some comparison shopping. Often, you will learn as much about
what you don't want, as what you do want.