If you're looking to purchase a home, then it's important to understand that the first step in the home buying process is to choose and meet with a lender. Before obtaining a home loan mortgage, it's in your best interest to understand the different lender options available so that you can make the best decisions possible and ensure that the home buying process is a rewarding experience.Types of Lenders There are several different types of financial institutions that offer mortgage loans. These include mortgage banks and credit unions, among others. Smart homebuyers realize that comparing lenders may save them thousands of dollars. If using a broker, you do not have to contact each individual mortgage lender. Rather, the mortgage broker will do this for you. Moreover, brokers manage much of the paperwork, which makes the process easier.Now let us try and understand what is a second mortgage loan and what are the conditions in which the lender will sanction it. Second mortgage is, like the name suggests, a loan taken where the asset/property is mortgaged for the second time. Simply, it is a second loan taken on the mortgaged property. It is also a secondary mortgage in the sense that, in case there is a default on the loan, the property will be sold and the proceeds will be used to pay off the first loan. The remaining proceeds from the foreclosure, if any, will be used to pay off the second mortgage. So the second mortgage lender runs a risk that he may not recover the money he lent. So as this is a risky proposition for the lender, a second mortgage rate is understandably higher.
Banks and Credit Unions
National banks and credit unions raise money to fund mortgage loans through their customers' checking and savings accounts and certificates of deposit. They provide loans to individual consumers or businesses with the money they have on deposit. Larger institutions may also sell mortgage-backed securities in the financial market to obtain funding to sell mortgage loans to customers. When banks and credit unions make a mortgage loan, they will either hold it in portfolio or sell it to large secondary mortgage market investors such as Fannie Mae or Freddie Mac.It is important to choose a mortgage broker with a good reputation. Although some brokerage companies advertise heavily, this does not necessarily guarantee good service. Instead, get referrals from family, friends, acquaintances, etc.
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