Texas Real EstateThough you may have gotten your home loan from someone local at your town’s bank branch, the loan may actually be owned and collected by a completely different company somewhere else.

Richland Hills TX – Cash House Buyers: If you have a mortgage on your home, have you ever wondered why you make the payments to a company that’s got a different name than the bank you applied to? Mortgage loans are big business and are bought and sold, traded almost like stocks among investors, and you simply make your payments every month on time. Who gets the money and the inner workings of the process isn’t necessarily something you would be aware of.

If you have a mortgage on your home, have you ever wondered why you make the payments to a company that’s got a different name than the bank you applied to? Mortgage loans are big business and are bought and sold, traded almost like stocks among investors, and you simply make your payments every month on time.

In the good old days, a person went to the local banker and asked for a loan to buy a house somewhere in the town. If the banker, who often knew the applicants personally, agreed that you were likely to pay your bills and knew you had a decent income coming in, he or she would grant the loan. A promissory note was drawn up, which you both signed, and acted as the contract between you. The note included a simple interest that served as the bank’s profit. The bank would then give the money to the seller for the house and you would make your payments to the banker every month.

The modern system is far different and much more complicated, at least internally. You still make your payments every month. That remains the same. Who you make the payments to is the difference. Few banks hold the loans that they grant. They sell their loans to other entities and by the time you have been paying on it for 5 years it might have changed hands 3 or 4 times already. If the grantor of the loan was a broker, that banker was acting as a middle man.

  • In the good old days, a person went to the local banker and asked for a loan to buy a house somewhere in the town. 
  • Home loans are good investments when the borrower has good credit and a decent FICO score.
  • It’s good to know this, especially if you reach a point where it becomes difficult to pay your payments on time. 

One place that loans are bought and sold is Wall Street. Home loans are good investments when the borrower has good credit and a decent FICO score. A 10% or higher down payment makes the borrower even steadier and it’s likely someone will buy your loan. This means that even if you personally know your banker, whose child attends school in the same class as your daughter, the actual money may have come from an investment company a thousand miles away.

It’s good to know this, especially if you reach a point where it becomes difficult to pay your payments on time. Understand that the personal acquaintance that gave you the loan isn’t the same person or local bank that you must deal with, but that they answer to bigger corporate interests and must act according to the law if you default.

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John Pribble

Real estate Investor, Broker, and private money expert. Adventurer that lives life to the fullest.
John is also the author of Attracting Private Money Lenders & 17 Vital Keys To Creating Wealth While Building A Profitable Real Estate Investment Business.