Are you looking into the possibility of buying a home in Joliet, Illinois? And is this the first time you have asked yourself, “What is a mortgage?” While most people get a mortgage at some point in their lives, many are unaware of the nuances of a home loan. Don’t worry — we have the interesting and pertinent mortgage facts right here.
According to the National Association of REALTORS® (NAR), 88% of homebuyers finance the purchase of their home with a mortgage. In fact, most buyers finance 90% of the home’s cost, which means they only put 10% down.
The Curious Etymology
Etymology aficionados may have spotted a macabre, sinister word peering out from the mortgage prefix. The word “mortgage” is derived from the old French word “Mort Gaige,” which means “death pledge.” Though it may sound grim, the idea is that when you pay off your mortgage, it dies.
Fannie & Freddie
According to Time Magazine, The Federal National Mortgage Association (FNMA), commonly known as Fannie Mae, was created in 1938 by President Franklin D. Roosevelt to free up capital for lending institutions. The Federal Home Loan Mortgage Corporation (FHLMC), commonly known as Freddie Mac, was created in 1970, shortly after Fannie Mae was listed on the New York Stock Exchange. Together, these two entities guarantee nearly half of all mortgages in the United States.
What Goes Up…
Fixed-rate mortgages were first introduced in 1971, at a rate of about 7.5%. In 1980, the average interest rate on a 30-year fixed-rate mortgage hit astronomical levels — nearly 20%. The recession, high unemployment rates, and the central bank’s efforts to stabilize the economy are key factors that contributed to these sudden and dramatic rises.
…Must Come Down
Fast forward to 2021, the average interest rate on a 30-year fixed-rate mortgage has plummeted to a historic low of about 3%. Even though they are expected to climb through the remainder of 2021, now is an excellent time to contact a mortgage company in Joliet, Illinois, and obtain a mortgage.
Something Is Better Than Nothing
While a low credit score is not in your best interests, having no credit score could be even worse. Many frugal-minded people prefer paying in cash for everything to avoid overspending — however, having no credit history makes it virtually impossible for your mortgage company to verify that you pay your bills on time. A credit report can be used to provide them with this payment history. A credit report helps prospective lenders determine whether you can take the mortgage seriously and work hard to repay it.
Income > Assets
You lived frugally in Joliet, Illinois and saved every penny to have a nice chunk of change in the bank, but these assets are not quite as important as your monthly income — more specifically, your debt-to-income ratio, which compares how much you pay in debt each month to how much you earn. That being said, having money in the bank is not a bad thing, particularly if it can be used to help with a down payment.
The Last Word
Who knew mortgages could be so interesting? We hope you enjoyed learning about mortgages and the etymology and are now better prepared to take advantage of homeownership possibilities in Joliet, Illinois with a great mortgage company.
If you are looking for a reputable and licensed mortgage company in Joliet, Illinois, you can count on Compass Mortgage. Call us at (833) 638-7836 or contact us online to learn more about how we can help you make wise and informed choices regarding your mortgage financing.