Mortgage loan types
A mortgage, currently, is a device used to create a lien on real estate by a contract. The mortgage is an instrument that the borrower called the mortgagor uses to pledge real property to the lender called the mortgagee as a security for a debt, also called hypothecation.
The mortgage instrument contains the mortgage, which is the pledge, and the note, which is the actual evidence of the debt and promise to repay and is sometimes called a promissory note. To protect the lender, a mortgage is recorded in the public records creating a lien. The order of recording determines the priority of liens.
As common law, a mortgage was a conveyance that on its face was absolute and conveyed a fee simple estate, but which was in fact conditional, and would be of no effect if certain conditions were met --- usually, but not necessarily, the payment of a debt by the original landowner.
Hence the word "mortgage," Law French for "dead pledge;" that is, it was absolute in form and in theory required no further steps to be taken by the creditor.
There are many types of mortgage loans. The two basic types of amortized loans are the fixed rate mortgage (FRM) and adjustable rate mortgage (ARM).
In a FRM, the interest rate, and hence monthly payment, remains fixed for the life (or term) of the loan. The term is usually for 15 or 30 years.
In an ARM, the interest rate will periodically (annually or even monthly) adjust up or down to some market index.
Adjustable rates transfer part of the interest rate risk from the lender to the borrower, and thus are widely used where unpredictable interest rates make fixed rate loans difficult to obtain.
A partial amortization or balloon loan is similar to a FRM, but the balance is due at some point short of the full term.
How to apply for a home loan
To find bargain loan deals you'll want to know how to take full advantage of the loan application process. To apply for a home loan the user should first consider how much loan he or she can afford. A number of online calculation tools can assist in ascertaining ones income, overall debt, monthly payments including insurance and taxes. Once the calculation form is complete you are able to see the affordability of a loan given the amount, rates, points and fees.
A number of Online lending marketplaces feature the loan application at the top of it's homepage for easy access. But before applying take into consideration the type of information you will need to supply. Some of the more common loan application forms require the following information:
To save time when applying for a home loan, be sure to bring or have the following:
- Copy of accepted earnest money contract;
- Copy of Social Security Cards and picture ID such as a driver's license or
- Military ID;
- Residence addresses for past two years with landlord address, if applicable;
- Name and addresses for past two years with W-2's, 1099's, etc.;
- Last 30 days' pay stubs showing gross monthly salary and all deductions;
- Names, addresses, account numbers and balances of all checking and savings accounts;
- Last three statements on all checking and savings, investments, IRAs, etc.;
- Names, addresses, account numbers, balances and monthly payments on all open charge accounts;
- Addresses, loan information and lease agreements on all other real estate owned;
- Estimated value of all furniture, clothing, jewelry and other personal property;
- Face value and cash value of life insurance, retirement accounts, profit sharing accounts;
- Certificate of eligibility and/or DD 214 and/or statement of service for VA loans;
- Money for appraisal and credit report.
- If self-employed: two years tax returns with all schedules, YTD P&L statement with balance sheet by CPA.
Understanding Your Credit Score
Your credit score can be used to justify a rate a lender chooses to offer. Understand that every lender will not offer the same rates. Keep in mind that brokers and sub-brokers may be involved in the deal and this can impact the rates offered. Before getting a loan be certain your credit report accurately reflects your true credit status.
Don't Just Settle
Regardless of credit you should not be taken advantage of. While some home loan lenders and brokers may steer you toward high rate using the expression "high risk", other lenders may choose to work with you by improving your credit standing and offering a lower rate.
Closing The Deal
Once you've settled on a rate get all agreements in writing. Hold the parties to the deal. Lock in rates and enjoy pleasure smart borrowing can bring.
Apply For Your Home Loan Now
Choose among the following loan marketplaces to begin applying for your loan. Request the best deal and lock in the best rates available.