Help With Getting a Mortgage
Applying for a mortgage loan and receiving an approval are two different things. Applicants unfamiliar with the home loan process may submit an application, only to have it rejected due to credit problems or insufficient income. Several resources are available to help borrowers prepare for the home process, and knowing the ins and outs of home loans helps guarantee an approval.
Other People Are Reading
-
Types
-
Homebuyers can choose between a mixture of home loan products. Fixed-rate mortgages are safe choices because they feature a fixed interest rate and fixed payment for the life of the loan. Borrowers hoping to score a lower interest rate may take a risk with adjustable-rate mortgages, which feature rate changes every few years. Rate changes can increase or decrease payments. Other options include the traditional 30-year term, or shorter terms (20 or 15 years) to pay off the balance more quickly.
Considerations
-
Credit ratings have a major bearing on the mortgage qualification process. Mortgage loans create a huge debt, and lenders need to know that a borrower is able and willing to pay off the debt. Assessing a borrower's credit rating and reviewing his payment history with existing creditors helps lenders determine a borrower's eligibility. Credit scores for mortgages vary depending on the type of loan. However, a score of 680 or higher generally guarantees an approval.
-
Benefits of Comparing Products
-
There are loan programs to benefit every type of borrower, and knowing your options helps you get the best rate and terms. For example, borrowers with a 20 percent down payment may qualify for a convention loan, whereas borrowers with past credit problems or little funds for a down payment can take advantage of an FHA government loan. There are also loans for active and retired military personnel, as well as programs to help first-time buyers.
Warning
-
Too much consumer debt can halt efforts to buy a home. Maintaining a good credit rating involves paying bills on time. Unfortunately, timely payments don't compensate for high credit-card balances. Lenders use a debt ratio to determine if a borrower can manage a mortgage. They figure in the cost of the new mortgage and then divide the total debt payments by monthly income. A debt ratio higher than 36 percent decreases a borrower's chances of getting a mortgage. Paying off debt and avoiding new lines of credit help lower a debt ratio.
Considerations
-
Don't forget settlement or closing fees when looking for a mortgage or house. There's no way to avoid this extra expense paid to the lender or broker. Borrowers can tap into personal savings or retirement accounts, or ask the seller of the property to front the cost. As a last resort, lenders can roll the costs into the mortgage.
-
