Get the basic idea before taking out a mortgage loan
Purchasing a home is the manifestation of American dream. However, this was not the case always. Prior to the Great Depression of 1930s, 40% of the American families owned homes. The main reason for that was that only a handful people in the country had enough cash to buy a home by making just one lump sum payment. Moreover, before 1930, bank loan was not prevalent in the country – there was no concept such as home mortgages to purchase a home.
In recent times, however, home mortgages loans have become very popular. In case of a home mortgage loan, the underlying home is kept as the collateral. Here, the mortgage lender or the bank loans you out a lump sum of money as the mortgage loan. You have to repay that amount over a specified period of time. In case, you default in paying the amount, you have to go through a legal process which is termed as the foreclosure. Here, it is to be noted that the impact of foreclosure is indeed very deep rooted and the negative impact of foreclosure remains in your credit report for a long time.
Only one type of mortgage loan prevalent in the country was fixed rate mortgages which were repaid over a period of 30 years. The most important feature of a fixed rate mortgage was that the monthly repayment amount was fixed. Adjustable rate mortgages (ARMs) were introduced in the country in the 1980s. Mortgage rate associated with an ARM varies with the change in the market rate of interest. The initial rate on a mortgage loan is very low and thereafter it changes with the market rate of interest.
A mortgage is a loan. For majority of you, it is the biggest loan in your life. In case of regular loan, you are not required to keep any collateral. Your eligibility to get approved for a loan is determined on the basis of your credit score, income and assets. In case of a home mortgage loan, the home that
you are planning to purchase is kept as the collateral. In case you fail to pay back the loan, your house is taken by your lender.
Presently, a wide variety of mortgage loan sources are available at the market place. You can take out a mortgage loan from a bank, mortgage lender, custom union or else you can take out the mortgage loan through a mortgage broker. Mortgage rates offered by different lenders vary. So, in order to get the mortgage loan at the best possible rate, you need to conduct a thorough research. Otherwise, you can also take the help of a mortgage
broker. A genuine mortgage broker can help you find the best mortgage rate.
Again, before taking out a mortgage loan, you need to know about the different costs associated with a mortgage loan. Like all other loan, mortgage loans also carry interest and the term of a mortgage loan may vary from 5 to 30 years. Apart from these, a mortgage loan carries a lot of associated fees and costs. You should have fair knowledge associated with a mortgage loan before taking out one such loan.
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