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How To Choose A Mortgage Lender

Mortgage Lender provides financing to an individual for the purchase of property, or refinances a mortgage. There are many mortgage lenders. It is a jungle out there. It is hard to choose the best mortgage lender. This article teaches how to choose a mortgage lender.

Mortgage Lender analyses your current financial situation that is the needs, assets, liabilities, and income. Taking all the necessary information, the mortgage lender determines mortgage affordability. Then, the mortgage lender creates the best deal for the match the borrower needs.

Talk to friends and family about their favorite mortgage lender. From their experience, they will be able to rate the mortgage lender. At the same time, the borrower learns the pros and cons of each mortgage lender.

After you create a list of possible choices, you must compare rates for identical mortgage loans. There may be a catch on the lowest interest rate. You should also take note of the Annual Percentage Rate (APR). With the knowledge of APR, you will see the different fees, and cost associated with the mortgage loans.

Check for certification of the mortgage lender or broker. Certified mortgage broker has vast knowledge of many mortgage, and current regulations. Dealing a certified mortgage broker, you are in safer hands.

Ask for the terms, fees, discount points, penalties, and costs involve on the mortgage deal. The life of the mortgage is broken into several mortgage terms. For example, three, four, or five year term are common. Mortgage Lenders charges fees for a specific mortgage. Each mortgage lender may charge differently. Discount points are paid upfront to bring down the mortgage. Each point equals one percent of the principal which is total amount owing. And, the costs on mortgage could be appraisal fee and more.

The internet is a good source of information about mortgage lenders. In the internet, you can surf for customer reviews, and testimonials. Also, most stable, and reputable mortgage lender have a website. In the website, you can see what they offer.

To choose a mortgage lender is a daunting task. When you are in doubt, you can always avail for the most financially stable and highly reputable mortgage lender.

Subprime Mortgage Lenders

The Subprime Mortgage Lenders provide loans to someone with less than perfect credit. Any late payments, bankruptcies, liens, judgments, or other defaults blemish the credit history. Consequently, the borrower with blemished credit history does not qualify for the Prime Mortgage Loans.

During the 1990s, the Subprime Mortgage Loans grew in popularity. Mortgage Lenders may offer Prime Mortgage Loans, Subprime Mortgage Loans, or both. Usually, the borrower pays more on Subprime Mortgage Loans. So, the qualified borrower for Prime Mortgage Loans must try to avoid Subprime Mortgage Loans at any costs.

The credit history measures the ability for the borrower to pay up. A less than perfect credit history is more risk to mortgage lenders. That is why the borrower pays more on Subprime Mortgage Loans. The borrower without a credit history falls to the Subprime Mortgage Loans as well.

Inaccurate information on credit history also blemishes the credit history. To repair bad credit rating, the borrower can request to amend the inaccurate information to credit bureaus. First, the borrower requests a copy of credit report or history from credit bureaus. Next, the borrower pays any outstanding record on credit history. It is better to pay any outstanding with highest interest rate at first. Then, the borrower looks for inaccurate information. For example, a loan was taken by another person. Obviously, the information was misplaced. Finally, the borrower tells the credit bureaus to amend the inaccurate information.

The borrower with good credit history can qualify for a more affordable Prime Mortgage Loans. In some cases, a qualified borrower accepts Subprime Mortgage Loans without knowing. Therefore, it is important to distinguish between Prime, and Subprime Mortgage Loans. A dead giveaway is a higher than usual fees, and interest rate. If the borrowers have a less than perfect credit history, the borrower can still get a mortgage loan from Subprime Mortgage Lenders. So, it is not the end of the world for unqualified borrower.

Subprime Mortgage Loans

The borrowers with poor or non-existent credit history can rely on the Subprime Mortgage Loans for mortgage refinancing. The borrower on this mortgage loan has higher rate to default. Eventually, these mortgage loans cost more than Prime Mortgage Loans.

The Subprime Mortgage Lenders primarily focus to provide mortgage refinancing for anyone who can not qualify for Prime Mortgage Loans. The financial status of the borrower changes over time. Only time can tell. In a few years, the borrower might have lower income. Additionally, the health of the borrower could decline. Unfortunately, the borrower spends more money on medical expenses.

The Credit Bureaus and Fair Isaac Corporation uses the credit history to calculate the credit score. The credit score is a closely guarded secret. Nobody really knows how to arrive on the credit score unless you work for the credit bureaus and Fair Isaac Corporation (FICO). Anyways, the calculation involves complicated formulas that nobody can easily understand.

The credit score indicates the ability for the borrower to settle the mortgage loans. Naturally, a higher score looks better for mortgage lenders. Any late payments or defaults lower the credit score. The borrower may get the copy of credit history to the credit bureaus once a year. If the borrower found a misinformation on the credit history, the borrower can contest the misinformation to amend the credit history.

To get the best deal on Subprime Mortgage Loans, the borrower must shop around for the best deal, ask for pre-approval, deal with licensed mortgage broker, and keep the deal in writing. Newspaper, internet, radio, TV, or referrals are familiar place to shop for the best deal.

Balloon Payment Mortgage

A balloon payment mortgage is a fixed-rate non amortized mortgage with a large final payment. Typically, the mortgage matures from five to seven year term. At the end of the term, the borrower pays final payment which is much larger than the regular mortgage payment. Hence, the final payment represents the balloon.

Most balloon payment mortgages are interest only mortgage. The borrower only pays the interest on periodically. So, the principal remains the same. At the end, the borrower pays the substantial principal.

For example, the monthly mortgage payment comes to $3,333.333 on a $200,000 mortgage with 20% annual percentage rate. First, you calculate the total interest which comes to $40,000 ($200,000 x 20%). Then, you divide the total interest with the number of payments on a year. Thus, the monthly mortgage payment comes to $3,333.33 ($40,000 / 12 monthly payments).

The mortgage payments on balloon payment mortgage are commonly based on a thirty year mortgage with a term of five to seven years. It is also easier to qualify for this mortgage. And, the interest rates are much lower than traditional mortgage.

The borrower usually sells the property before the mortgage matures to avoid the final payment. At the end of the term, the borrower needs to pay the final payment. The borrower must sell the property, refinance the mortgage, or convert the mortgage before the end of term.

The borrower can convert balloon payment mortgage into traditional amortized mortgage. In an amortized mortgage, the mortgage payment pays off the principal on each periodic payment.


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Information and calculation provided on this mortgage calculators website is for general purposes only. It is not intended to take the place of advice from your mortgage brokers.