Mortgages are loans used to purchase homes or commercial property. Usually, the loan amount is secured by the borrower’s asset – known as a collateral asset – and must be repaid over time with interest.
Your credit and income can help you qualify for a mortgage. Lenders usually look for two years of steady employment with reliable income. Your debt-to-income ratio (DTI) is another important factor that could influence your mortgage application and monthly payments.
Your mortgage choice will be dictated by how much money you can afford to spend on a house and the length of the loan term. These factors also determine what interest rate you qualify for.
Most home buyers contribute some of their own funds toward the purchase, known as a down payment. The remainder of the sale price is covered with a mortgage loan which must be repaid over an agreed-upon period – typically 30 years – through regular installments.
Your down payment, loan amount and interest rate determine how big your mortgage will be, what monthly payments you’ll have to make each month and how much interest you’ll owe by the time your home is paid off. Therefore, it is critical that you know what to expect when applying for a mortgage.
Pre-Approval
Receiving pre-approval for a mortgage is the initial step to discovering how much you can afford to put down on your home. This requires having a lender evaluate your credit and finances, which can be done quickly and conveniently online at no cost.
Your lender’s decision on whether or not they will approve you for a mortgage will be based on several factors, including your credit score, debt-to-income ratio (DTI) and other details. Lower DTI and better credit scores indicate that you pose less of a risk than other applicants which can result in an improved interest rate.
Consider finding a co-signer for your mortgage. A co-signer is someone who agrees to assume the loan in case you cannot. Their credit history and income will be checked to guarantee they can cover payments if needed.
Purchasing a home is one of the largest purchases you’ll ever make. It is essential to find a lender who can guide you through every step of the way, from getting your mortgage approved and closing on your new property.
Your mortgage should include an escrow account to hold funds for property taxes and homeowners insurance. Some lenders even give you the option to set up a separate account that can be used for other bills like cable TV or internet service.
An escrow account can save you a lot of hassle in the future by guaranteeing that your mortgage payment goes towards covering all costs associated with owning and maintaining your home.
