Mortgage Loans Categories

Mortgage loans are taken to purchase a house or any immovable property. These are usually secured loans and the property for which the loan is taken is usually used as security against that loan. Tenure of these loans are usually very long and may be for more than twenty five years to forty years.Mortgage Loans Categories

The major investment that you make in your life is the investment in your home. So you must have to be cautious in investing this money. Similarly the same caution is also needed in case of taking the loan. You have to pay extra attention on the credibility of the lender and his standing in the market. Usually these lenders falls in four categories or loan types.

Fully Documented Loan

The first and the most important type of mortgage loan is the fully documented loans. This is the fundamental product designed by the lender for their prime customers. Prime customers are those who enjoy high credit rating and stable income.

This loan is granted to those customers who have good jobs and bright future prospects. Their income and assets are fully documented. Their monthly cash flows are enough to cover the payment of their months. These are most attractive customer for whom the lender would like to give loans.

Income Stated Loans

Stated income loans are a bit expensive mortgage loans. Lenders demands higher interest rate and other  charges for granting these loans. In these loans the income is stated and written down on the documents but there is no proof present. It makes this loan more risky, charging risk premium and making it expensive.

Income Stated/Assets Stated

This is third type of loan and the mandatory condition for eligibility of this loan is high credit rating and asset documentation. Since it is more risky therefore the lender embeds extra risk premium in this loan, inflating its price and making it more expensive.

Non Documented Loans

Fourth type of mortgage loan is the loans with no documentation. Extremely risky in nature, these loans demands the lender to include more of risk premium in it, therefore its prices are much higher. Typically borrower moves from a W-2 category to self-employed status within a two year. Borrower can refinance these loans within two years.

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One Response to “Mortgage Loans Categories”

  1. Laura Morton says:

    The most common mortgage now is the fully documented mortgage. Lenders are cautious and are checking and confirming all the information on the application. Borrowers need to be prepared to wait 2 to 3 weeks to get an answer. However, borrowers can help themselves by getting all the documents ready to give to the underwriter. If an underwriter has to wait for information to complete a file, he simply sets the file aside and begins working on something else.

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