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A Mortgage Explained
A mortgage is a loan which uses the property to guarantee repayment of the debt.
If the borrower does not make regular payments the lender can take possession of the house to
recover the debt. Finding the best mortgage for you involves finding a lender providing the product
which best suits your circumstances, and at low mortgage rates.
It is a little known fact that most money used to fund a mortgage home purchase comes from one of the
following three sources:
- FNMA - Federal National Mortgage Association, or Fannie Mae
- FHLMC - Federal Home Loan Mortgage Corporation, or Freddie Mac
- GNMA - Government National Mortgage Association, or Ginnie Mae
When you apply for a mortgage loan with a lender, they process and verify your application.
Once the house is yours you may make payments to the lender you approached, but in most cases
the company you make your payments to very rarely owns your loan. They are the "servicer" of
your mortgage, in effect an intermediary who manage the process, however the institution which
own the loan is normally one of the above three.
This occurs because your loan is packaged with a group of other loans which are then sold
to one of the three institutions above. The company which setup and manages the loan receives
a monthly fee from the institution for managing the payments and the loan. These relatively
low fees obtained for every mortgage loan the company sets up and manages constitute a large
percentage of their income and profit.
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