The Bare Bones of a Mortgage Loan

With the numerous mortgage options being offered by mortgage lenders today, newcomers to the arena may find the scenery just plain confusing. If you’re planning to get a mortgage loan, and you don’t know where to start, here is a list of the basics that you need to know about.

Mortgage Defined

A lot of people tend to use mortgage to mean a mortgage loan. A mortgage refers to the document that you, as a borrower, sign and entrust to a mortgage lender in return for a mortgage loan. If you default on your mortgage payments, the mortgage lender, through the document called mortgage, has the right to take possession of your property. The borrower, the one who applies for a mortgage loan, is referred to as the mortgagor since it is the borrower who hands the mortgage over to the mortgage lender.

Mortgage Loan

The basic premise of a mortgage loan is that it is a type of loan used to pay the difference between the purchase price and the cash available for a down payment. When mortgage lenders let you use their money, they will charge you a fee for it. The biggest fee is called the interest, which is expressed as an annual percentage of the loan. Usually, it is in the range of a low 5% and a high 12%. When you apply for a mortgage loan at one of these financial institutions, they will also charge you with an origination fee, which may include application fees, credit report fees and appraisal fees. The annual percentage rate (APR) consists of the base interest rate with points and other fees.

Mortgage Loan Rates

The mortgage loan comes in a fixed rate and adjustable rate. A fixed rate mortgage loan refers to a loan that features a fixed interest rate and fixed monthly payments for the entire life of a loan. Mortgage lenders typically offer 15- and 30-year fixed rate mortgage loans. An adjustable rate mortgage loan features lower initial rates, which may change as frequently as every six months. Borrowers who prefer going the least expensive way can opt for the 15-year mortgage loan. However, this type of loan is suitable for those who can afford the higher monthly mortgage payments. For people who plan on moving to another home in less than eight years, may find it more appropriate to settle for a 30-year mortgage loan, with its lower monthly mortgage payments.

Mortgage Loan and Down Payment

The down payment made on a house is usually in the range of five to 20 percent. The down payment precedes the mortgage loan, or the amount borrowed on the residual cost of the house. Thus a house that’s worth $450,000, you will require a down payment of $90,000 and a mortgage of $360,000.

Basic Mortgage Interest

Interest rates are prone to fluctuations, which make them highly unpredictable. There are two popular indices of short-term interest rates. The first one is the rate banks offer for six-month certificates of deposits (CDs). The second one is the interest on Treasury Bills, or T-bills. Mortgage lenders operate by charging around 2.5% over the publicly quoted interest rate. Compared to short-term rates, long-term rates are higher since they expose lenders to greater risk when lending money for a long time.

Bad Credit Florida Mortgage Loans

Mortgage loans are the loans taken while purchasing a house or property. There are various kinds of mortgage loans namely, FHA (Federal Housing Administration) loans, consolidation loans, land loans, conventional loans, balloon loans and refinance mortgage loans.

Mortgage loan rates in Florida have seen a decreasing trend lately. The real estate market is booming with lower interest rates and presence of a wide range of loans offered competitively by several mortgage loan companies. Even people with bad credit records are being offered mortgage loans, albeit at a slightly higher interest rate. These kinds of loans are known as bad credit mortgage loans. They are also known as sub prime mortgages. Florida bad credit mortgage loans are for Florida citizens who have an unfavorable credit record. There are mortgage loan companies in Florida that specially offer mortgage loans for such kind of customers. They can help customers who have been denied loans from other companies as well. Now, even this has become a competitive market with several bad credit mortgage loan companies vying with each other for customers. Hence, even bad credit mortgage loans are also being offered at competitive rates. Even bad credit loans, if repaid on time, would help to improve the credit rating and clear the way for future loans at good rates. Moreover, bad credit loans can be secured or unsecured.

Bad credit mortgage loans also come with several options. The loans can be customized to suit the individual customer’s preferences. Companies are also offering mortgage loans in the form of packages. A bad credit mortgage loan company also offers assistance in repairing the past credit history by providing refinance loans or consolidation loans for previous mortgages in order to improve the credit rating. Bad credit loans are also offered to clients who have declared bankruptcy, repossession, foreclosure or divorce.

There are some basic guidelines considered while approving a candidate for a bad credit mortgage loan. They are: a FICO score of 620 or lower, two (or more) 30 day delinquencies in the past 12 months, one 60 day delinquency in the past 24 months, a foreclosure or charge-off in the past 24 months, any bankruptcy in the last 60 months, qualifying debt-to-income ratios of 50% or higher and limited ability to cover family living expenses each month.

There are several bad credit mortgage loan companies in Florida. Information about these companies can be found through websites on the Internet. Since there are so many companies, look for the company’s past history and its specialization and compare it with those of the other companies. Provide good documentation relating to past credit and income statement. A letter from the employer ensuring good conduct and job security would also be useful. Other things considered are the collateral (loan amount relative to the home value), other debts and cash reserves.

Buy Your First Home by Qualifying for a Cheap Mortgage Loan

Do you want to buy your first home?

There is probably no person in the planet who does not want to have his own home. The desire to have a home can be a very strong motivating force for someone to work really hard and save up enough money.

Is it difficult to buy a home? It will be if you do not have the means to pay for it. But if you make the necessary preparations, you should be able to find and buy a home that you like.

Having a real estate broker or a lender should be helpful especially since you do not know much about purchasing a house. They can help you take out a mortgage that will help you purchase your very first home.

What is a mortgage and how does it work?

A mortgage is a loan that you take out to buy a home. Your house then functions as the collateral for the loan.

The reason people take out loans is not everyone has enough money to pay for a house in one go. By having a loan, anyone will be able to spread out the payment for the home. Instead of paying for the house right then and there, you get to pay for it in a span of several years.

It works this way:

When you plan to buy a house, you approach a bank or mortgage lender and apply for a loan. Based on your qualifications or your ability to pay off the loan, you will be awarded with a mortgage.

This loan, where 80% is the amount of the home and the rest is interest, will have to be paid over a set period. Loans can be paid within 30 years. Typically, the lender and the borrower will get to determine how long the loan has to be paid.

Failure to pay back the mortgage loan can lead to foreclosure, a procedure where the lender can take away your home.

What are the different types of mortgages?

Typically, there are 2 types of mortgages: fixed-rate and adjustable-rate mortgage loans.

Fixed-rate mortgages are those whose mortgage interest rate remains the same throughout the term of the loan. 30-year fixed rates are among the most common types of mortgages homebuyers apply for. There are other options like 15-year fixed rates and convertible mortgages.

This offers homeowners predictability. Since they know how much they are going to pay, they will be able to prepare for it no matter how much their financial circumstance changes.

One downside to this kind of mortgage is that it can be more expensive than adjustable-rate mortgage.

Adjustable-rate (or variable rate) mortgages are mortgages that adjust depending on the current rate. This means the mortgage rate can fluctuate depending on how the market does. It can go up or it can go down.

These mortgages became popular when fixed-rate loans were hard to qualify for. This is advantageous to certain types of borrowers who may have a little difficulty qualifying for conventional mortgage.

The downside to this is that you may end up paying more when the rates increase. And if you are looking for a cheap mortgage loan, this may not be the safest choice for you.

How can you find the best mortgage loan for you?

The simplest answer to finding a cheap mortgage loan is to work with a really good mortgage broker. A broker is someone who has the knowledge, skills, and experience in helping you get a mortgage loan application approved.

Mortgage brokers know a lot of lenders. That means they can bring you to different lenders who can offer you a good mortgage deal. It’s up to you, with your broker’s guidance, to choose which among the deals is suited for you.

Can you get approved for a cheap mortgage loan?

Of course you can get approved for a cheap mortgage loan. You just have to make sure you are working with a good mortgage broker.

Aside from that, you have to ensure you meet most, if not all, of the requirements that lenders impose. You must prove your employment and your credit score must be favorable.

Don’t worry if you have some problems with any of the requirements because your mortgage broker will help you smoothen out any problems.

Once you have done all these, you will be able to buy your first home.