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Loans and mortgages

With the help of loans and mortgages the borrower of the loan pledges a real estate property, as a collateral to get money in return to fund his big budget needs. Usually people do not have enough money to fund a house and would need some credit.

But getting a credit is not so easy the borrower would need guarantors so that the lender would have trust on the borrower. In such cases the person is required to keep the house that he wants to buy as security as this is the best guarantee that the creditor can have.

When taking a mortgage the borrower is supposed to write a promissory note so that it can serve as evidence for the debt and for the repayment of the amount with the decided interest. Once the debt is returned then the creditor returns the promissory note to the borrower. But in case the debtor is unable to repay the amount then the lender has the right to put the house on foreclosure and obtain the amount.

There are a number of loans and mortgages that exist like fixed rate mortgage, adjustable rate mortgage, capped rate mortgage, reverse mortgage, discounted rate mortgage etc. Let us have a look at these mortgage options.

* Fixed rate mortgage: these mortgages have a fixed rate of interest and hence the monthly payment towards the mortgage is fixed.

* Adjustable rate mortgage: this mortgage option has an adjustable rate and the rates keep changing with the market rates. With these mortgages the monthly payments are not fixed and the borrower has to pay more amount if the market rates rise. But even with the adjustable mortgage rates the interest rate cannot rise beyond a ceiling amount.

* Capped mortgage rate: with this type of mortgage the borrower pays an accrued interest at a constant rate but if the interest rates fall then the borrower pays an amount lower than the capped rate.

* Reverse mortgage: old people can obtain these loans and mortgages when they want to get money while living in their house. In case the borrower dies before paying back the loan then the house is sold and the money is recovered.

* Discounted rate mortgage: with these mortgages the borrower pays the loan at a discounted rates for a limited period of time.

When applying for a mortgage the borrower is supposed to provide the lender with some documents and the basic information about him. The lender would require documents like verification of assets,

income verification, information about debts and purchases, and some personal information. For income verification you are required to provide the income statements for the past two years, in case you are self-employed then you should provide a statement of profit and loss of the past three years. Besides this if you have any additional income like interest or social security number then you would have to provide that also. For verification of assets you would have to provide a list of bank account numbers, saving bonds and evidence of other assets. If you have purchased anything that is important then you would have to provide the purchase agreement as well as the sale agreement. The lender would also want to have information about the debts, as the lender would want to assure how much debt you have.

Once all the documents are ready you should fill out the application and submit it with the lender. According to the law the lender is required to return the disclosures to the borrower within three days. Once the documents are with the lender he would analyze the financial condition and determine the amount of loan that should be given to the borrower. The amount of loan given would also depend on the ability of the borrower to pay back the loan. Once the amount is decided then the borrower can negotiate on the terms and the interest rate on the loan. Once the loan is approved then the borrower is required to sign all the documents and give it to the lender.

When taking a loans and mortgages it would have various additional fees. These additional fees depend on the negotiations between the lender and the borrower. Among these additional fees are included the discount fees, application fees, origination fees, appraisal fees etc. Besides providing the documents you are also required to give a down payment for the mortgage. The down payment varies from 3-30% of the principle amount.

When you look for mortgage loans you can consider comparing the interest rates, closing costs, prepayment penalties etc. you should also be sure to verify the rates at which you are being given the loan. Remember that always you compare the rates of the lender you should be sure to compare the fees and the Annual Percentage Rate. The APR gives a better view of the total cost that would be involved in the payment of the loan. The lender is supposed to declare the APR at the time when the person starts dealing with the lender. If the lender fails to declare the APR then you should beware of the lender.

Besides the conventional lenders you can also consider online options of getting mortgage loans. With online mortgage loans your time is saved and besides you get some of the best quotes. With the online applications the process of applying for a loan has quickened and now it does not require you to wait for the weeklong appointments and meeting the lender to fill out the numerous forms. You just have to provide the basic genuine information about yourself, which includes name, the amount that you want and your contact address. The lenders contact the applicants within one working day to verify the information and the application is all set to move ahead.

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