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Mortgages seem simple enough, especially after the mortgage crisis winnowed the field of lenders, changed the standards for borrowers and gave everyone in the business a cold, hard reality check.
However, unbeknownst to many prospective homeowners are several key facts about mortgages that range from tangential to crucial. In short, there is far more to borrowing $200,000 to buy a house than you probably know. Here are three facts about a typical $200,000 mortgage that might shock and surprise:
1. That bank that lent you the money will probably back out of the agreement soon after your mortgage is processed.
Sure, you might still make your payments to Chase Bank or one of the other giants for a few months’ time, but in many cases your mortgage will be sold to an association of mortgage investors, such as Fannie Mae or Freddie Mac. In fact, your mortgage could be sold several times over the course of your agreement. That shouldn’t cause you any problems, but it could make re-financing a challenge as you have to start at zero every time you begin to interact with a new mortgage servicer. Fortunately, and many would say ‘unfortunately’, the federal government has enacted all sorts of safeguards, most notably the Dodd Frank Law to save you from getting into trouble. If you ask many in Washington they would claim the entire industry was cleaned up. The jury is still out on that! So, don’t go getting too sentimental about your mortgage. You might not have a very long relationship with your mortgage servicer if the mortgage contract is sold several times during its duration. Continue reading →
