- What is a mortgage?
- Repayment of the loan
- How mortgage loan process works?
- Tips for a first time home buyer
- Type of home
- Amount of mortgage loan
- Your affordability
- Costs of a mortgage
What is a mortgage?
Anyways, if you take out a mortgage loan, you have to repay it. Mortgage lenders are concerned with your financial ability to repay the loan. In order to judge your creditworthiness, they take into consideration the following things -
- Credit score
- Your monthly gross income
- The down payment amount
Repayment of the loan
- The loan principal is the amount that you borrow in order to purchase a property.
- The interest that you pay for taking the loan. The interest payment depends on the mortgage rate which fluctuates with changes in the economy.
- Escrow payments including property taxes and insurances to prevent losses against fire, theft, and disasters.
- PMI (Private mortgage insurance) premiums which you require to pay along with monthly instalments in case you have made a down payment of less than 20% of the sale price or home value, whichever is less.
This amount is determined on the basis of the mortgage rate of interest. The interest rate charged on your loan depends upon your credit score, discount points and down payment. Getting a lower rate is also possible if you can pay a part of the loan amount as prepaid interest or points. You may get a loan at fixed rates, variable or adjustable rates or a combination of both the rates. Have a look at fixed rate mortgages (FRMs) and adjustable rate mortgages (ARMs).
How mortgage loan process works?
At closing, the lender requires you to pay the costs of originating and processing the loan. You will also have to deposit property taxes and insurance premiums into an escrow account which ensures that these payments will be paid on time. The remaining part of the taxes and insurances are paid along with the monthly mortgage payments in order to protect the lender from tax liens and uninsured losses.
To sum up, mortgage loan helps you in fulfilling your dream of owning a home. The loan however has to be paid off within a specified time period known as the loan term that varies from 10 to 50 years. Again, while you are repaying the mortgage, the title of ownership of the property still remains with you. But if you fail to pay off the outstanding balance, the lien created in the mortgage allows the lender to take away your home. He or she gets the right to sell off the property in order to get back the loan balance. You may apply for a mortgage with a bank, a credit union or a broker, depending upon your requirements. But you should have detailed information about mortgages and you need to shop around for the best loan package, that is, which offers a reasonable rate and does not require extra charges in the form of hidden fees.
Tips for a first time home buyer
Type of home
Amount of mortgage loan
Costs of a mortgage
All these considerations will surely help you a lot to make the right mortgage purchase.