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Home Loan Information
Are you thinking about buying a house? If so, in addition to finding a qualified and honest real estate agent and lender, you also need to educate yourself about home loans. The more you know the best deal you will ultimately secure. It used to be many years ago that when you wanted to buy a house, you simply went to your bank and got a loan. Today, the options for home loans are massive with three primary lenders - Freddie Mac, FHLMC, which stands for Federal Home Loan Mortgage Corporation, Fannie Mae, FNMA, Federal National Mortgage Association, and Ginnie Mae, GNMA, Government National Mortgage Association.

To buy a home, you have two options of getting ahead of your competitors. You can be pre-qualified, which means you go through some of the initial processes to determine the amount of money you can spend on a home based on your income and debts. The other option is to become pre-approved, which means you are actually approved for a home loan and the funds are waiting for you. Once you find a house, you simply sign the papers. Not only do sellers love this, but also, it saves a tremendous amount of time.

When you are ready to get started, you want to start out by talking to a lender. Together, they will determine your debt to income ratio and go through all the necessary verifications for employment, bank accounts, child support, and so on. Once that is done, you go house shopping - the best part - then make an offer. When the seller accepts your offer, the paperwork is signed in the house closing and then the home is yours.

Interestingly, the company you send your house payments to is usually not the company that owns your home loan. Instead, they are merely service providers for your mortgage in that they work as the intermediary between you and the lending institution. What you do not see or often know about is all that goes on behind the scenes. When you secure a home loan, your loan is packaged into a pool with many other loans. At that point, your specific loan is sold to one of the three lending institutions mentioned above.

The mortgage company or service provider receives a monthly fee from the lending institution for processing and handling your payments and managing your home loan. Generally, the fee is minimal, being less than 1%. However, when you think about all of the homes that the mortgage company is managing, you can see how quickly the money adds up. In fact, a good mortgage company can easily make millions, if not billions of dollars a year. Even though your home loan is being run through one of the three lending institutions, it is important that you maintain a good relationship with your mortgage company as they act as the mediator, so to speak.

Therefore, payments should always be made on time. If fact, if you make just one extra payment a year, either in one lump sum or in additional money broken out each month, paid directly to the principal of the loan, you can cut a 30-year mortgage down to just 18 years. If you pay more, the loan will be cut even more. The savings is huge. The reason is that you are lowering the principal amount that interest is being charged to and therefore, saving tons on interest. Additionally, if you do plan to pay your loan off earlier than scheduled, be sure that you will not be charged a prepay penalty.

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