A mortgage company is a business whose principal activity is to provide and service mortgage loans. Mortgage companies exist in different forms, and this includes chartered banks, credit union, or other types of financial institutions that give out mortgage loans. Also, a mortgage company can buy mortgages from original mortgage lenders, and service the mortgage loan. As mentioned earlier, there a lot of mortgage companies, so it usually gets confusing for a lot of people deciding on which one is best for them. The best mortgage company depends on the potential homeowner. Some people prefer to go through the mortgage process in person, while others do this over the internet. Other popular methods are getting referrals from friends and relatives. The best thing to do is by starting from somewhere you already have some sort of relationship. An example of this is your bank. The bank official knows how much you earn, and how you spend money. It’d make it easy for them get you a mortgage plan that suits your finances.
There are different types of mortgage. This is why you need to have some knowledge about the different types, before deciding on which one you want to go for. Fixed rate mortgages: This is the type of mortgage system in which the mortgage company charges a fixed interest throughout the entire life of the loan. The fixed rate mortgage is the most common type. According to statistics, the fixed rate mortgage represents about 75% of the total home loans. This type of mortgage exists in different terms, and they include 30, 15, and 10 years. Statistics have shown that the majority of people go for the 30-year term loan. Some of the benefits of the fixed term mortgage include the following: • Homeowners know precisely what they’d have to pay, including the principal and the interest. • Helps the homeowner budget easier, considering that interest rate on loan would not change.
Fixed mortgages are predictable. A homeowner can plan his/her finances around the monthly payment he has to make. There is also a plan for people that buy property when the rates are low. Mortgage companies allow homeowners to pay a premium for locking in the certainty. This means that the total amount they’d have to pay back would not change, even if the rate rises later. Adjustable rate mortgages: This is the type of mortgage in which the interest rate changes. This occurs on a specific schedule, after a fixed period at the beginning of the loan. Not many people go for this type of loan because it’s risky. This is because the payment of the loan can change abruptly and significantly. However, one of the benefits of this type of mortgage is that homeowners are offered a low-interest rate on loan, as compared to that of the 30 years fixed mortgage system. Below are some of the benefits of the adjustable rate mortgage
First home buyers should make a lot of enquires before deciding on which to go for. There are different types of mortgages. There are many factors to be considered when considering buying homes, especially when it’s your first time. Below are some tips for first home buyers: • Ensure you have a good credit score • Fully understand the mortgage lending landscape • Try to get a pre-approval for your mortgage. This increases the chances of getting accepted • Compare the rates of different mortgage lenders • Understand every detail and ask questions when confused
References Nakajima, M., & Telyukova, I. (2014). Reverse Mortgage Loans: A Quantitative Analysis. SSRN Electronic Journal. doi: 10.2139/ssrn.2494405 U.S. Bank FHA mortgage. (2019). Retrieved from https://www.usbank.com/home-loans/mortgage/fha-mortgages.html