For novices looking for a first time home loan, the terminology used within the mortgage industry can make shopping for a mortgage an intimidating process. Despite the confusion on the surface, courtesy of loan terms, most financial experts believe that 30-year fixed rate mortgages are the best type of home loan.
Experts Favor 30-Year Fixed Rate Mortgage
While some consumers may prefer other types of loan, the general rule is if applicants do not qualify for a 30-year fixed rate mortgage, chances are not in their favor that they can handle any type of home loan. The theory is that necessary resources and ability needed to minimize any type of loan risk and only those who meet the criteria with passing the 30-year fixed rate application process should take on the financial burden. Even if an individual prefers another type of loan, applying and qualifying for a 30-year is an excellent gauge of their home buying ability.
The economy was recently negatively impacted by the toxic subprime mortgage industry fed by the ignorance of consumers and the greed of investment bankers. Mortgage Marvel defines a subprime loan as "A specific category of loans where the borrowers are categorized as being high risk because of attributes such as their credit history and limited financial means." Lenders charge higher interest rates for these types of loans to mitigate the chances of potential loss as the borrowers are deemed to be the riskiest out there, thus increasing the chances of mortgage default. Until recently lenders liberally approved these loans, and that in turn has made the traditional 30-year fixed chic again.
Traditional 30-year fixed rate mortgages are some of the most difficult to get and those who cannot pass this loan application process are probably not in the position to buy a home in a first place. The underwriting rules for a fixed loan variety are stringent and require borrowers to have credit scores above the 720 mark, proof of income in the form of tax records and pay stubs and stellar credit histories with no indication of missed or late payments. Because of the strict rules involved, borrowers opting for this loan variety are thought to be the lowest risk and will be handsomely rewarded with the best mortgage rates available in the market place.
History of 30-Year Fixed Mortgages
Translated from Latin, the word mortgage means "dead pledge." Immigrants to America in the 1900s first introduced the mortgage concept to the national landscape. Based on the original incarnation of the home loan, until the 1940s homebuyers were required to place a 50% down payment in order to get a five-year term home loan. The loan holder was legally required to pay back the principal balance in that time period, if not, refinancing or mortgage default sealed the final fate of the home purchase.
Until the Great Depression, that mortgage structure was the only game in town. However once the Federal Housing Authority (FHA) was created from the National Housing Act of 1934 as part of the "New Deal" implemented to stabilize the economy, things changed. At this time Fannie Mae and Federal Savings and Loan Insurance Corporation (FDIC) were also formed. Combining the triad allowed the government to restructure loan opportunities and create the 30-year fixed rate mortgage. Prior to the creation of the different government branches only four out of every 10 households where composed of home owners. Now the organizations have allowed 34 million home mortgages and 47,205 multifamily projects to come to fruition.
Benefits of 30-Year Fixed Mortgage
Simplicity is the reason for the popularity of traditional 30-year fixed rate mortgages. During the loan life monthly payment amounts are fixed, consumers will build home equity and after making all payments, borrowers will own their home without having to make a balloon-payment. Additionally, the mortgage interest paid will earn qualified consumers a hefty tax deduction.
Consumers who know that the time to buy a home is now can find current mortgage rates at Mortgage Marvel. Mortgage Marvel is the industry's leading mortgage rate origination tool responsible for providing accurate mortgage rates to over 900 trusted lenders. If Mortgage Marvel is good enough for them, just imagine how the tool can benefit consumers interested in finding 30-year fixed rate mortgages without dealing with the mortgage broker, middleman.
