What is Mortgage Loan

A mortgage loan is a loan secured by real property through the use of a mortgage note which evidences the existence of the loan and the encumbrance of that realty through the granting of a mortgage which securesmortgagemortgage loan. the loan. However, the word alone, in everyday usage, is most often used to mean

A home buyer or builder can obtain financing (a loan) either to purchase or secure against the property from a financial institution, such as a bank, either directly or indirectly through intermediaries. Features of mortgage loans such as the size of the loan, maturity of the loan, interest rate, method of paying off the loan, and other characteristics can vary considerably.

Mortgage loan types

There are many types of mortgages used worldwide, but several factors broadly define the characteristics of the mortgage. All of these may be subject to local regulation and legal requirements.

• Interest: interest may be fixed for the life of the loan or variable, and change at certain pre-defined periods; the interest rate can also, of course, be higher or lower.
• Term: mortgage loans generally have a maximum term, that is, the number of years after which an amortizing loan will be repaid. Some mortgage loans may have no amortization, or require full repayment of any remaining balance at a certain date, or even negative amortization.
• Payment amount and frequency: the amount paid per period and the frequency of payments; in some cases, the amount paid per period may change or the borrower may have the option to increase or decrease the amount paid.
• Prepayment: some types of mortgages may limit or restrict prepayment of all or a portion of the loan, or require payment of a penalty to the lender for prepayment.

The two basic types of amortized loans are the fixed rate mortgage (FRM) and adjustable-rate mortgage (ARM) (also known as a floating rate or variable rate mortgage). In many countries (such as the United States), floating rate mortgages are the norm and will simply be referred to as mortgages. Combinations of fixed and floating rate are also common, whereby a mortgage loan will have a fixed rate for some period, and vary after the end of that period.

• In a fixed rate mortgage, the interest rate, and hence periodic payment, remains fixed for the life (or term) of the loan. Therefore the payment is fixed, although ancillary costs (such as property taxes and insurance) can and do change. For a fixed rate mortgage, payments for principal and interest should not change over the life of the loan,
• In an adjustable rate mortgage, the interest rate is generally fixed for a period of time, after which it will periodically (for example, annually or monthly) adjust up or down to some market index. Adjustable rates transfer part of the interest rate risk from the lender to the borrower, and thus are widely used where fixed rate funding is difficult to obtain or prohibitively expensive. Since the risk is transferred to the borrower, the initial interest rate may be from 0.5% to 2% lower than the average 30-year fixed rate; the size of the price differential will be related to debt market conditions, including the yield curve.

The charge to the borrower depends upon the credit risk in addition to the interest rate risk. The mortgage origination and underwriting process involves checking credit scores, debt-to-income, downpayments, and assets. Jumbo mortgagessubprime lending are not supported by government guarantees and face higher interest rates. Other innovations described below can affect the rates as well.

Mortgage underwriting

Loan to value and downpayments

Upon making a mortgage loan for the purchase of a property, lenders usually require that the borrower make a downpayment; that is, contribute a portion of the cost of the property. This downpayment may be expressed as a portion of the value of the property 

The loan to value ratio is considered an important indicator of the riskiness of a mortgage loan: the higher the LTV, the higher the risk that the value of the property (in case of foreclosure) will be insufficient to cover the remaining principal of the loan.

Capital and interest

The most common way to repay a loan is to make regular payments of the capital (also called the principal) and interest over a set term. This is commonly referred to as (self) amortization in the U.S. and as a repayment mortgage in the UK.

Interest only

The main alternative to a capital and interest mortgage is an interest-only mortgage, where the capital is not repaid throughout the term. This type of mortgage is common in the UK, especially when associated with a regular investment plan. With this arrangement regular contributions are made to a separate investment plan designed to build up a lump sum to repay the mortgage at maturity.

No capital or interest

For older borrowers (typically in retirement), it may be possible to arrange a mortgage where neither the capital nor interest is repaid. The interest is rolled up with the capital, increasing the debt each year.
These arrangements are variously called reverse mortgages, lifetime mortgages or equity release mortgages (referring to home equity), depending on the country. The loans are typically not repaid until the borrowers die, hence the age restriction.

Top 10 mortgage companies for bad credit

Mortgage companies for bad credit that are leading the line provide the best customer service, a large network of support and maintain the reputation throughout. The top ten mortgage companies for bad credit according to the Forbes list are all corporate giants, serving people and organizations throughout the globe. Looking at the best mortgage companies, we have Citigroup shining out the Forbes list. 

Citigroup, established in America, outshines most of the mortgage companies, spreading its roots throughout the world. This mortgage company is now operating in 54 countries outside the US, having current assets of about $1.3 trillion and $108 billion in revenues in year 2006. Citigroup is widely known for providing excellent bad credit mortgage loans.

The next in line is The Bank of America, the third largest bank in the US. This leading bank offers mortgage services and small loans, and has now become a leader in credit card dealing. The Bank of America has been ranked at the second place in the Forbes list of the best mortgage companies.

Wells Fargo is another important American mortgage company, with 1000 branches across the US and all around the world. It has been rated third in the Forbes list of the best mortgage companies. The estimated revenue of the company was $33 million, and this huge amount of revenue was generated from mortgage lending.

Wachovia, lands at the forth place in the Forbes list of the best mortgage companies, whereas BB&T, Golden West Financial, Marshall and Ilsley, M&T, AmSouth Bancorp, Popular, Synovus Financial, Zions Bancorp, Compass Bancshares and Commerce Bancorp follow the list down the line of the best mortgage companies. These are the best mortgage companies providing mortgage assistance for bad credit to their clients, helping them out with their problems.