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Mortgage Lenders A confusing part throughout the mortgage process is confronting the many different types of lenders that deal with home loans and refinances. Here are the main types of mortgage lenders to help you get started. Wholesale Lenders Wholesale lenders are banks or other institutions who do not deal directly with consumers. Instead, they will offer their loans through third-party companies. This includes companies such as mortgage brokers, credit unions, or other banks. A wholesale lender is the one making the loan, and their name will appear on loan documents. The third-party acts as an agent. Retail Lenders Retail...
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Alt-A Mortgage An alt-A mortgage lands somewhere in between a prime and subprime mortgage. Borrowers who have higher credit scores and have lower interest rates get prime mortgages. Subprime mortgages are offered to borrowers with lower credit scores and have higher interest rates. Alt-A mortgages fall in between in prime and subprime mortgages in terms of risk and interest rates. What are the characteristics of an alt-A mortgage? Alt-A mortgages are typically low-documentation or no-documentation loans. This means that the borrower doesn’t have to fully document their income, assets, and expenses. Instead of the documentation, alt-A loans are processed based...
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The Acceleration Clause An acceleration clause allows a lender to demand that a borrower pay back the entire loan at once, should certain conditions be met. This is typically included in the mortgage notes. This includes any interest that has accumulated since the clause was invoked. However, the borrower will not have to pay the interest that has accumulated over the life of the loan. Invoking an acceleration clause When a mortgage agreement is written, a client agrees to pay the loan off after a specified time period, most commonly 30 years. During those 30 years, the client pays off...
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Graduated Payment Mortgage A graduated payment mortgage (GPM) is meant for people who aren’t able to afford large monthly payments right away, but will be able to in the future. The mortgage loan starts out with low initial payments. Gradually, they increase by a percentage each year until it levels out to a fixed percentage. GPMs are available in 15- and 30-year loans and any Federal Housing Administration (FHA) lenders can offer them. What is negative amortization? A graduated payment mortgage operated under the assumption that borrowers know they will have to make larger payments in the future due to...
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Mortgage Reinstatement Mortgage reinstatement is the restoral of a mortgage to its original condition after a borrower defaults. This means that if you are X amount of months delinquent on your mortgage payments, you can catch them up (and pay late fees) in order to avoid foreclosure. What is included in a mortgage reinstatement quote? A reinstatement quote is what is given to a borrower that outlines what they owe. This will typically include: Back and current payments Any late fees Cost of property inspections Any attorney or trustee fees and costs for the foreclosure process Expenses related to preserving...
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Selling a Home with More Than One Mortgage Selling a home with two mortgages is very similar to selling a house with one. However, to make your sure you make your home sale a regular sale, as opposed to a short sale, your home must be worth more than the total of the mortgages. To do this, you need to create a strategy with your agent that will generate enough income to cover both liens (with hopefully enough left over that you turn a profit on the sale). While most second mortgages may be designed differently than a first mortgage,...
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Balloon Mortgages A balloon mortgage is a type of mortgage in which you make normal monthly payments for a set period, usually five to seven year, and then have to make a large payment to pay off the remaining balance. The large payment is the “balloon” part of your loan. Depending on the size of the mortgage, that payment can be thousands of dollars. Advantages of a Balloon Loan Balloon mortgages come with lower interest rates than adjustable-rate and fixed-rate mortgages, which can make them a cheaper loan for certain customers. This option works well for people who expect to...
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Underwater Mortgage Unfortunately, you never know what the housing market is going to do. Whatever the housing market is doing can affect you and your mortgage. One of the things that can happen to you is an underwater mortgage. An underwater mortgage occurs when the balance of your mortgage is higher than the fair market value of the property. Underwater mortgages were very common after the housing market crash in the late 2000s. During this time, many homeowners found that their homes lost a considerable portion of their value. Problems caused by Underwater Mortgages Difficulties in selling your home An...
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Refinancing with a VA Loan The Veteran’s Administration loans, or, VA loans, are a home-mortgage option available to veterans, current or former members of the national guard, an active reserve member, or a surviving spouse in the United States. Those who have a VA loan can also refinance with it. With a VA loan, you can do a standard VA cash-out refinance or a streamlined refinance. Different Refinance Options Standard Cash-Out Refinance A VA cash-out refinance allows qualified veterans to either open a loan that is larger than their current loan or pay off a loan that is not currently a...
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Residential Mortgage-Backed Security A residential mortgage-backed security, or RMBS, is a type of mortgage-backed debt obligation. The cash flows come from residential debt, through things such as a mortgage, home-equity loans, and subprime mortgages. In other words, a residential mortgage-backed security is a fixed income security collateralized by a residential mortgage loan and used to finance the purchase or the refinance of a home on another piece of real estate. What can mortgage loans be used for a residential mortgage-backed security? A residential mortgage-backed security can use many different forms of mortgages. The securities can contain one type of mortgage...
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