Mortgage Loan

Development in housing sector in any economy depicts growth and this will directly increase GDP rate. That is why; promotion of housing sector becomes top priority of every State in US. There are many Govt. fund supported agencies like Freddie Mac (FHLMC), Fannie Mac (FNMA), Federal House Administration (FHA), VA loans, Farmer Home Administration (FmHA), Ginnie Mac (Govt. National Mortgage Association) and many other. those all trying their fullest to support housing sector. Their prime responsibility is to develop housing sector by providing Home Loan Mortgages credit to those who couldn’t buy with their own sources.

Home Loan Mortgages is basically secure loan against residential property which customer wants to buy. This is amortized loan and sometimes embedded with private insurance to further secure the risk of lender. These are term loans and available for a life of 03 years to up to 50 years. Customers can avail this loan for the purpose of Home Buyer, Home Construction, Home Renovation and Home Equity Finance. Each product has its own set of parameters and needed to fulfill before availing these products.

Home Buyer:

In Home Buyer mortgage loan, you can purchase your own home by injecting minimum equity. Remaining amount will paid by bank and that would be loan against the security of your new home. You will pay monthly installments to amortize it over its life. The mark up rate is the earning of bank and that will implant with your monthly installment. You just need to pay your monthly commitment and leave the rest on bank’s shoulder.

There are two ways in which you can avail this facility and both ways are very popular. In first way, you will enter into contract with seller of home and went straight to bank for a loan. Bank will evaluate your proposal and if found worthy then they will approve your home loan. You will pay your part of equity directly to seller and bank will pay the rest of amount as agreed by you in contract. You can even deposit your equity into bank and bank will pay the complete price of property. Now in second way, you first contact with your bank and obtain a promise letter that bank will approve your home loan up to a specific limit. This process is called pre approval process and through this way, you can purchase any house whose price is fall under that limit. It is an easy and recommendable way of choosing home loan mortgage. The agreed value of buyer and seller is not acceptable for banks and therefore, they send approved valuator who visit the house and calculate the value of property. Banks will go for that value whichever is less, suppose your agreed value is $120,000 and appraisal value is $110,000, bank will choose appraisal value as price of property.

Home Construction:

Like in home buyer finance, home construction finance facility is also meant for providing financial assistance to customers so that they can build their own home. Although it is true that mostly customer is not willing to construct his /her own home and gives preference to buy an already build house but even then there are no. of customers who believe in constructing their own house. There is slightly change in construction loan then in home buyer and that is you cannot avail whole limit in once. Bank will credit your sanction amount in tranches and that will subject to appraised valued. At first, you will have to submit an estimation of construction cost that is going to incur on that property. Bank will verify it through its valuator and valuator will endorse it. After approval bank will monitor construction stages through its valuator and before disbursement of every tranche, valuator will conduct a visit and submit construction summary report to bank showing addition in value of property. Through addition of value and stock at place, bank wills counter check the utilization of funds. At the end of construction, customer will hand over a certificate showing completion of construction at mortgaged property.

Home Renovate:

Home Renovation facility enable customer to renovate his/her home. There are is big difference in home construction and home renovation, home construction means structural changes in property and renovation means minor changes in flooring, marble, kitchen accessories, curtains, furniture, washrooms, sanitary work and glass work etc. It is very hard for banks to monitor renovation expenses and therefore, there is no check and balance in this product. But usually the sanction of home renovation loan is subject to deep analysis from mortgage underwriters. Base on structural value, banks evaluate the financing request of customer.

Home Equity:

In home equity, banks create a credit limit base on cushion in mortgaged property. Usually, home equity product is used as tool to management different personal needs. However, there are certain motives behind this facility. Banks usually conduct valuation and according to appraise value, sanction a limit. Customer can withdraw amount simultaneously and in parts which ever deem fit to him/her. The mark up amount charged base on per day utilization of credit limit. If customer utilize maximum amount then pays maximum profit to bank.