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Mortgages for home purchases

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Mortgage Lending

Secured Loan

A mortgage loan is a common type of debt instrument, used by many individuals to purchase a home or other real estate. In exchange for money lent to buy or refinance a property, the lender is given as security for repayment, a lien on the title to the property purchased or refinanced, until the mortgage loan is paid in full. If the borrower were to default on the loan, the bank would have the legal right to repossess the property and sell it to recover the amount owed.

Unsecured Loan

Unsecured loans may be available from financial institutions under many different names or marketing packages: credit card debt, personal loans, bank overdrafts credit facilities or lines of credit, or corporate bonds.  The interest rates applicable to these different forms may vary depending on the lender and the borrower. Unsecured loans may or may not be regulated by law.

Types of Loans

  • Adjustable Rate Conforming

    • Loan where the interest rate on the note is periodically adjusted based on an index. This is done to ensure a steady margin for the lender, whose own cost of funding will usually be related to the index. Consequently, payments made by the borrower may change over time with the changing interest rate.

  • Alt-A (Alternative Documentation Loans)

    • Mortgage loans where the borrower possesses a strong credit history but is in need of non-traditional underwriting and processing guidelines.  Examples of these non-traditional guidelines include limited documentation, both asset and income, and expanded debt-to-income ratios.

     

  • Conforming Fixed Period Adjustable Rate Mortgage

    • Loan that has a fixed rate for 3, 5, 7, or 10 years and then adjusts annually based on a financial index.

  • Expanded Criteria: Levels I, II, and III

    • Expanded Criteria loans are for borrowers who don’t have the greatest credit history and don’t qualify for the best rate.  Instead of denying the loan altogether, the approval criteria is expanded, which causes the rate to be slightly higher.  In other words, the rates are adjusted but the lending program stays the same.