Interest Only Mortgage Companies
John Williams
Interest only mortgage companies are a very different breed than
the banking industry. These businesses are in the business for
the sole purpose of making mortgages. They aren't bound by the
same laws as your bank, but some of the regulations are
consistent with those of a bank. The mortgage company isn't a
federal deposit location; they're only responsible for making
mortgage loans. They greatest concern they have, is that the
property they make a loan for is worth the loan amount,
excluding the closing costs and appraisal, if that is not part
of the closing costs. Quite often, a mortgage company will
require you to pay for the appraisal up front, or directly to
the appraising company. You would think that the mortgage
companies would be reluctant to make loans that are interest
only loans, but that's just the opposite of the truth. Mortgage
companies were some of the first guys on the band wagon of
support for the interest only loans. Why would this be? I
believe I can tell you why. The mortgage company pays their loan
originators as they are called, not loan officers mind you, a
commission on the loans they originate. They are not paid a
straight salary or hourly rate. They're paid according to the
number of loans they originate. What does this spell for the
originators? Big money if they can produce on their end. So,
mortgage companies have worked with every consumer in every way
possible to provide them with a loan product that they can be
approved for, because this is a paycheck for the originator.
The closing costs, or loan origination fees, as they're called
by the mortgage company, are often quite high because the
originator is making somewhere around 3 to 5% of the loan amount
as a fee for his or her services. You won't be told this
upfront, but when you receive your paperwork, if you'll read
carefully it will be itemized. The interest only loan allows
the originator to fund larger loans, get approvals for larger
loans, and receive larger commissions. Everybody wins, in the
beginning. The consumer loses on the back end, when he needs to
have equity established, and there is none, thanks to the
mortgage company and the interest only loan.
About the author:
John Williams writes about
interest only loans
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