mortgage texas house poolMortgages are a method of buying a home, using the property as security or collateral. Arranging mortgages is seen as the standard method by which individuals or businesses can purchase residential or commercial real estate without the need to pay the full value immediately.

In the U.S., the Federal Housing Administration (FHA) administers the programs known as “Ginnie Mae”, Fannie Mae, and “Freddie Mac” to promote lending and to encourage home ownership and construction. These programs work by buying a large number of mortgages from banks and issuing (at a slightly lower interest rate) “bonds” to investors known as MBS or Mortgage Backed Securities.

This allows the banks to quickly relend the money to other borrowers and thereby create more home loans than the banks could with the amount they have on deposit. This in turn allows the more of the public to own their own homes, something the government wishes to encourage. The investors, meanwhile, gain low-risk income at a higher interest rate than they could gain from most other bonds.

Although your monthly payment may be higher, you can save tens of thousands of dollars in interest charges by shopping for the shortest-term loan you can afford. For each $100,000 you borrow at a 7% annual percentage rate (APR), for example, you will pay over $75,000 less in interest on a 15-year fixed rate than you would on a 30-year fixed rate.

Borrowers can save thousands of dollars in interest charges on their mortgages by shopping for the lowest-rate with the fewest points. Each point is 1 percent of the loan amount. Lenders charge points as a way to make a profit, and borrowers generally pay points in exchange for lower rates.

On a 15-year $100,000 fixed-rate, just lowering the APR from 7% to 6.5% can save you more than $5,000 in interest charges over the life of the loan, and paying two points instead of three would save you an additional $1,000.

Financial contracts can be very confusing. Before signing yourself to a major long term commitment have an attorney, familiar with mortgages, financing and taxes, examine and explain the details (where the Devil is). A good tax finance attorney can save you many times his fee over the years, not to mention possible legal problems.

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