A mortgage home loan is pretty self-explanatory however a lot of people still don’t know too much about them and the timing of when to try to obtain one. We’re going to talk about them and see if we can give you some explanations about how they work and what it takes to get one.
A mortgage home loan, as it sounds, is a loan that you get to buy your home. It is based on the fact that should you default on your loan there is sufficient collateral for the bank to get its money back through taking the home from you and selling it on the open market. There are many different types of loans and you need to gain some understanding of them before you go signing any paperwork pertaining to acquiring a loan of this sort.
For example there are fixed mortgages and ARM’s (Adjustable Rate Mortgages). A fixed rate mortgage locks you into your interest rate for the entire life of your loan. It’s good to note here that typical mortgage lengths are 30 years although there is some variation to this. With a fixed mortgage, you never have to worry about your rate going up even if your mortgage is sold on the secondary market.
An ARM is different and can often times be termed as predatory lending because some of them can be quite questionable in the way they present themselves in comparison to the reality of how they work. In an adjustable rate mortgage, the borrower will have what is commonly known as a teaser rate for a period of one to five years. These rates are sometimes often much lower than what is the industry standard. After the time frame for the teaser rate is expired, then the financial institution is free to do whatever they like with your interest rate, often times raising them quickly and drastically.
For this reason it’s preferable to get a fixed rate mortgage whenever you can. Even though the adjustable rate mortgage may have better interest rates in the beginning, it’s not always the best way to go.
Something else to look for when deciding who to go with in acquiring your mortgage home loan is the points that the financial institution charges as an origination fee at the closing of the loan. Basically the way points work is that financial institutions will charge you a point for certain things in your loan, and each financial institution has different rules and formulas for how they figure the points to charge you. One point equals a fee of one percent of the total amount of the loan. So one point on $100,000 would be $1000. This would be due at and part of your closing costs.
Taking the points into consideration and the interest rate that you’re going to get and stick with are some of the biggest to think about when pursuing getting a mortgage. Do some more research and find everything that you can about this process and you’ll have a much easier time going through it all.
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