Mortgage and it's ABC's

A little trivia first.

Did you know that the word "mortgage" is derived from the French word "mort," which basically means "dead," and "gage," from Old English which means "pledge"?

Put the two together and you get something like a pledge to death right? Not really. According to Sir Edward Coke (1552-1634) this refers to the uncertainty whether a person will be able to pay his debts. If not paid, the land that was deposited for security will be seized and is hence "dead" to the owner.

Today though, mortgage is usually a loan acquired for the purchase of a property. The most common type of these properties are houses or home mortgages. Very few people are able to afford to buy a house on a full payment cash basis.

Home mortgages are renegotiated before it is paid off. The life of a home mortgage is usually 20, 25 or 30 years. "Life" is the time in which potential buyers will pay for the house with the specified amount on a regular basis.

Buyers will also have a term over which they will have to pay the addtional conditions stipulated on their contract like payment of interest, a percentage of the original home mortgage and penalties if they express a desire to renegotiate the terms of the mortgage before the contract ends.

After knowing these things, the would-be owners will have to pick a mortgage lender. They will provide for the initial payment of the property and to whom the mortgage will be paid.

There are numerous companies that are considered as mortgage lenders. Included are banks, fianance companies and vendors themselves. Step one is to obtain a pre-approval with the mortgage lender. The company will look into the client's credit history, income and payment history and then decide on how big a mortgage they will approve. Add this to the available downpayment on hand and tada! Price range is set.

Now, bank mortgages usually go for clients with a good credit history and of course, a reliable income. Banks have the most precise requirements for credit history and is the most stable instuitution with which to start.

Finance companies, on the other hand, also approve mortgages, but may be offering them at a higher interest rate. Fact is, some of these companies are none too stable or of lesser security as a bank. Therefore, before going with a finance company, take time to find out their credit stability. Fortunately, finding out a company's credibility is made easy through the use of the ever reliable internet.

Lastly, there are vendor take-back mortgages. They can be favorable to clients but the talk may get just a tad complicated. Before tackling them, be sure to have a lawyer to guide you through the ins and outs of vendor take back mortgages. They will also help to plan ahead for all sorts of situations, pleasant or unpleasant, that might arise. The advantage of going with this type of lender is that may offer a lower rate than a bank. They are also more relaxed about their credit requirements and more flexible on matters of payment.

Remember that a little know how will go a long way. And the most important thing to remember is to always, always read the fine print before signing.