| Mortgage loans are loans taken from banks, online | | | | This is a mortgage scheme directed towards those |
| brokers or independent mortgage brokers by pledging | | | | who have a less than satisfactory credit score. Credit |
| property owned for purchasing a residential or | | | | score ranges between 300-900 and a score below |
| commercial property or to refinance a loan. | | | | 620 qualify for a sub-prime mortgage. Considering that |
| Mortgage loans are usually for a 15 or 30 year period. | | | | the risk is higher in lending a loan to a sub-prime |
| Mortgage payments are evened out according to the | | | | borrower the monthly payments and interest rates can |
| number of years, rate of interest and the type of | | | | be high. Such loans are a profitable venture for lenders |
| mortgage. The property purchased is used as security | | | | on account of earnings from pre payment penalty, |
| or collateral to obtain the debt. If the borrower of the | | | | interest charges or foreclosures. Prepayment penalty |
| loan defaults on the mortgage payments the lender | | | | is a charge levied on the lender on account of paying |
| has the right to sell the property by employing the | | | | the loan before due by either selling the property or |
| foreclosure process.To be eligible for a particular loan | | | | refinancing the loan. |
| the lender examines the employment and income | | | | Jumbo Mortgage |
| generation of an individual or family to assess that | | | | There are specified limits to loans sanctioned to: single |
| monthly payment can be paid regularly by the | | | | family, two families, three families, or four families. If |
| borrower. The three important aspects that are taken | | | | your loan requirements exceed this limit you need a |
| into consideration to qualify for a loan are: | | | | jumbo mortgage which charges a higher rate of |
| - Credit Score | | | | interest. They are also known as non conforming loans |
| - Monthly Income and | | | | as they exceed the limit set by Fannie Mae and |
| - Down Payment | | | | Freddie Mac. |
| Credit scores indicate the risk of offering a loan to a | | | | Balloon Mortgage |
| borrower. Higher the score lower the risk. Good credit | | | | This type of mortgage allows borrowers a lower rate |
| scores also ensure reasonable terms of loan and | | | | and monthly payments for a particular period. Such a |
| lower rate of interest. Monthly income is evaluated to | | | | period lasts for three to ten years. After the |
| ensure expenses are not more than income. The | | | | completion of the term the borrower is required to pay |
| amount paid as down payment reduces the risk of the | | | | the principal balance as a lump sum amount. If |
| lender to cover the full expense of the loan incase of | | | | applicable and possible the balloon mortgage can also |
| default in payments. | | | | be converted to a fixed rate or adjustable rate loan. |
| There are different types of mortgage loans available | | | | Home Equity Line of Credit |
| to suit the requirements of different borrowers. Some | | | | Popularly known as HELOCs they are variable rate |
| common and popular types of mortgage loans are: | | | | mortgages in line with the prime rate. You are allowed |
| Fixed Rate Mortgages | | | | to take credit up to your credit limit which is the |
| As the name suggests such loans carry a fixed rate | | | | maximum amount one can borrow under any plan. |
| over the period of the loan. They are among the most | | | | The interest payments are tax deductible and one can |
| popular mortgage products which are not influenced | | | | also pay previous mortgage by taking a percentage of |
| by interest rate rise or falls. The interest rates are | | | | the appraised value of the home such that the loan |
| locked and payments remain same despite rise or fall | | | | amount covers your previous loan balance and your |
| in interest rates. Fixed rate mortgages are most | | | | current fund requirements. |
| popular when interest rates decline. | | | | The Interest-Only Mortgage |
| Adjustable Rate Mortgages | | | | This type of mortgage requires only interest payments |
| Adjustable rate mortgages provide a fixed rate of | | | | to be paid for a specific period of time following which |
| interest for a specific period and thereafter resorts to | | | | the terms of the loan change and a new mortgage |
| an adjustable rate of interest. ARM fluctuate according | | | | amount is derived. This new mortgage will be paid with |
| to market interest rate changes after the fixed rate | | | | principal plus interest payments for the remaining |
| period is complete. | | | | number of years. |
| Sub-prime Mortgages | | | | |