Myths About Mortgage Lenders Online

by Anita Johnston   *

Mortgage lenders are financial institutions that lend money directly to borrowers on the security of houses, land or other real estate. Those institutions include diverse organizations, such as credit unions, banks, trust companies, life insurance companies, and even private individuals and firms engaged in the mortgage market, extending funds directly to the borrowers.

In the United States, mortgages are considered as "liens of property". This term is applied to any sort of encumbrance or charge against an item of property, securing the payment of a debt and the performance of diverse related obligations, consensual; imposed by a contract between the debtor and the creditor, or non-consensual.

Mortgage lenders online will always assist you in any mortgage process, recommending the best solution based on your own needs, However, it is important to recall some myths around mortgage lenders online to delimit boundaries between what they can and cannot do for you.

Before anything else, you need to understand that mortgage lenders have access to massive quantities of money generated by their own investments in stocks and shares. This way they accumulate more money through maturity of stock value and dividends so they can lend money to consumers who want to buy a property that they will be able to afford by the end of a mortgage term.

One of those myths about online lenders focuses precisely on the mortgage term. A 30-year fixed mortgage is not always the best as the myth claims because of the adjustable-rate mortgages (ARM) constituting one-third of home loans nowadays. ARM rates are even lower in comparison to 15 or 30-year fixed rate mortgages, considered very low by historical standards.

In fact, people are moving more often today that they did in the past. Advocators of fixed rates stick to ARMs, while some experts agree that a 30-year fixed mortgage is okay if you are planning a lifelong residence in the house you are paying for, although research has shown that homeowners stay in a house for about 9 years on average.

Mortgage lenders online are on the Internet where time seems to be frozen while they explain to you the advantages or disadvantages of their different financial plans, and make money with mortgages or charging interest on their loans are their priority. For you the priority is getting the mortgage to buy the property, but keep in mind this myth.

Once you are granted with a mortgage, another myth can come across insinuating that you should pay off such mortgage as soon as possible. This seems to be a psychological threat to make you pay an extra principal on your mortgage, instead of pay down higher-interest debt on your credit cards or auto loan.

You can pay your mortgage as early as you want if that meets your criteria or long-term financial goals, rather than investing the money. Many other people prefer to do this in order to earn a return even greater than all the mortgage interest rate after taxes, which makes more sense that paying in the consensual term, pre-established.

On the other hand, there is a generalized belief that you will not be able to apply for a mortgage online if you have poor credit, bad credit or damaged credit. This misconception is due to mortgage lenders online being “virtual entities”, contrary to the land-based financial institutions where you can go with a bunch of paperwork and review credit reports and try to convince them in person.

A financial expert once said, "This is a country that believes in redemption" and he was probably not wrong. In America, more lenders are willing lo lend whether you need a mortgage or a personal loan even if your credit is poor. Although online lenders and regular lenders ask for higher rates to compensate the higher risk, people with flawed credit ratings can apply successfully for a mortgage.

There are several other myths that you should consider as inaccurate as those that we have discussed. Some of them mention that you need a down payment of at least 10% or 20%, which is totally incorrect, as it is with the other remark that your have to pay a mortgage insurance in case you cannot make a 20% down payment.

Refinancing your mortgages does not mean a new 30-year countdown either. Many consumers are reluctant about refinancing because they do not want to start all over again with a new loan, when they can simply ask the online lenders to set up a shorter payment schedule instead of a due date to be paid off in 15 or 30 years.

Useful Resources:

Reverse Mortgages:
http://www.hud.gov/offices/hsg/sfh/hecm/rmtopten.cfm