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Mortgage Loans

Mortgage lending is a major category of the business of finance in the United States and loan rates are still very low, making it a good time to buy a home. Mortgage loans are those loans that are secured against your personal property such as the home you're looking to purchase. Mortgage loan is the generic term for a loan secured by a mortgage on real property; the "mortgage" refers to the legal security, but the terms are often used interchangeably to refer to the mortgage loan. Upon making a mortgage loan for purchase of a property, lenders usually require that the borrower make a down payment, that is, contribute a portion of the cost of the property. In the past, the required amount, or percentage, of a down payment has been directly related to a person's credit history. However, 100% or more financing options abound in the the mortgage lending space, even for those with negative credit history.

In determining your loan amount, interest rate and down payment percentage, lenders will take into account many factors. These factors, in turn, help lenders calculate their perceived risk of the mortgage loan, that is, the likelihood that the funds will be repaid. None of us will fully understand the inner workings of a mortgage lender but the reality is that mortgage loans are available for all types of homebuyers with all types of credit.

It's been said that everything has its price and mortgage lending is no different. Just about anyone can get a mortgage with the price tradeoff typically being a higher interest rate. Lenders want to lend as much money as possible, but also want to accept as little risk as possible. In approving mortgage loans, lenders in many markets rely on credit reports and credit scores derived from them. The higher the score, the more creditworthy the borrower is assumed to be. For borrowers who have excellent credit and very acceptable debt positions, there may be virtually no documentation of income or assets required at all. Other borrowers may fall into the category of subprime lending. Whatever your credit situation, however little you have saved for a down payment, it's easier today than ever to

Subprime lending, also called near-prime, or second chance lending, is a general term that refers to the practice of making loans to borrowers who do not qualify for the best market interest rates because of their deficient credit history. Subprime lending is risky for both lenders and borrowers due to the combination of high interest rates, poor credit history, and murky financial situations often associated with subprime applicants. The term "subprime" refers to the credit status of the borrower, not the interest rate on the loan itself. Statistically, approximately 25% of the population of the United States falls into this category and while there is no official credit profile that describes a subprime borrower, most in the United States have a credit score below 620.

From loan perspective there are generally three types, a fixed rate mortgage, an adjustable rate mortgage (ARM) or an interest-only loan. In a fixed rate mortgage, the interest rate, and hence periodic payment, remains fixed for the life (or term) of the loan. For a fixed rate mortgage, payments for principal and interest should not change over the life of the loan, although ancillary costs (such as property taxes and insurance) can and do change. In an adjustable rate mortgage, the interest rate is generally fixed for a period of time, after which it will periodically (for example, annually or monthly) adjust up or down to some market index. For the interest only loan, you are only paying the interest portion of your loan. Your monthly cash flow, amount of time you anticipate staying in the house and your general credit history will all factor in to the type and length of loan you should choose. Mortgage loan rates are still very low, making it a good time to buy a home. Financing your home is a necessary evil but the thought of buying a new home should excite you, not intimidate you. There is a web presence of very reputable lenders who are looking to help you obtain a mortgage loan. Do a little research, get a few ideas from these lenders as to what you can qualify for, and then go out and buy your dream home!