Quiet down, class. Quit throwing paper airplanes. Are we good now? Open your textbooks to page 72. Today we’ll be going over the history of a mortgage.
No need to take notes. They’ll be provided.
American mortgages got their start in the early 1930s, but they weren’t the mortgages we know today. When the first mortgages were set up, you had to make a down payment of at least 50%. They were also set up with five- or seven-year terms with a large balloon payment due at the end of the loan term to pay off the principal. Foreclosures were common.
It’s at this point that the Federal Housing Administration (FHA) was created. In order to stimulate the economy during the Great Depression, the government created the FHA to offer aspiring homeowners lower down payments on mortgages. It had now become possible to get a home loan with as little as 10% down. Qualifying standards were also established based on someone’s ability to repay the loan, and houses had to meet quality standards.
One of the most important changes the FHA made was to set up amortization schedules for loans. Interest-only balloon payments were replaced with a plan that included paying off a little bit of the principal with each interest payment. Loan terms were extended to 15-year and eventually 30-year options.
After that, not much happened. New programs and different down payment options were introduced, but the process of getting a home loan didn’t change much over the next several decades. You got dressed up and took all your documentation into the bank, and if you were missing anything, you’d have to go back multiple times to take care of things.
Loans at Home
In the late 1990s, things started to change. Mortgage lenders, including Quicken Loans predecessor Rock Financial, started to take the lending process digital. For the last 15-plus years, lenders have taken applications online and over the phone. You no longer have to go to the bank to get a mortgage. You could get a loan in your pajamas. (Isn’t that living the dream?)
Things still weren’t perfect. You had to gather all your documentation together from a variety of sources and upload it or fax it in. It’s definitely more convenient, but still, there had to be a better way, right?
Rocket Mortgage: The Future Is Now
Fast forward to November 2015. At Quicken Loans, we’re always obsessed with finding a better way. It’s in that spirit that we brought you Rocket Mortgage.
Rocket Mortgage is revolutionizing the process we’ve gotten accustomed to by providing an approval to refinance or buy a home or generate a preapproval letter in minutes. The importance of this cannot be understated. The same standards required by the industry are working overtime in the background while data you normally had to scrounge around for is validated, thanks to authenticated information from trusted partners. You can get your preapproval while standing at the open house or be approved to take cash out to redo your son’s bedroom while sitting at a soccer game. That’s an empowering feeling.
You no longer have to spend days gathering documentation. You just create an account, import your income and asset information from one of our trusted partners and pull your own credit. It takes the pain out of the process, removes the tedious documentation search and gives you a real, custom mortgage solution based on your unique financial situation.
That’s about it. Don’t worry. There won’t be a test. In fact, if you have any questions, just leave them in the comments section below. Good class!
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