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Home mortgages, structured as fixed or adjustable interest rate loans, are available from thrift institutions, commercial banks, mortgage companies and credit unions. Different mortgage rates may be available from various lenders, so you should shop around and get quotes from several lenders to ensure that you're getting a competitive rate. You can also obtain a loan through a mortgage broker who has access to multiple lenders offering a wide selection of loan products and terms. Mortgage brokers usually charge a fee for their services. Some financial institutions function as both lenders and brokers; be sure you understand what fees and closing costs are involved with each mortgage quote you receive.
So, how do the various mortgage loan types differ? Fixed rate mortgages have higher interest rates, but both the interest rate and the monthly payment remain the same for the life of the loan. Interest rates on adjustable rate mortgages change according to a standardized index. With graduated payment loans, loan payments start small and then increase over the life of the loan.
Some older Americans are turning to a product called "reverse" mortgages in order to help them pay for medical care, supplement their income, or contribute to long-term health funds. These mortgages allow homeowners to take out the equity in their home but still retain ownership of their home until they sell their home, move, or die.
In most cases, home mortgage loans can be refinanced without prepayment penalties, to take advantage of lower interest rates. If your home's market value has increased, you may be able to utilize additional equity in your home when you refinance.
How do you choose a lender that works well for you? Essentially, if you already have a good relationship with a bank, you might want to apply for a loan from that lending institution. In many cases, friends or family members might recommend a lender they had a good experience with. In some cases, your real estate agent or contractor may know of someone with an excellent reputation. Consider applying to more than one lender, because the more loan approvals you get, the more loan choices you'll have.
Your potential lender will require certain information from you, including current employer information and bank and credit card statements. You should also be prepared to provide lenders with your investment and pension plan information, social security numbers, tax returns for the last two years, and a balance sheet listing your assets and liabilities.
How do lenders decide whether to lend you money? Basically, the less risk you present, the better chance you have of having a long-term relationship with your lender. A lender determines your risk level using a number of different factors and guidelines. The most commonly used factors are the mortgage-payment-to-income ratio, the total-debt-to-income ratio, and the loan-to-value ratio.
On HomeMortgageLoans.us, you will find several home mortgage lenders plus mortgage calculators, consumer information for potential borrowers, and mortgage refinancing resources.
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Home Mortgage Loan Guide - Financing a Home Purchase