By Jay Nichols
The purchasing of a house is often the largest purchase that people will make in their lifetime and while there are those few who may have the cash on hand to purchase a home the majority of us will need to obtain a loan. A loan for a home is referred to as a mortgage loan and it is secured by a mortgage or a security interest on the real estate.
A mortgage is a security interest on real property; therefore a mortgage loan is secured by the home you are purchasing. The mortgage note certifies the existence of the underlying loan along with the encumbrance on the real estate. The mortgage note and the deed to the property will both be recorded at the country recorders office in the county where you live.
Characteristics of mortgages can vary significantly like the down payment required, the size and maturity of the loan, the interest rate and the method of payoff. Mortgage loans typically fall into the three categories of FHA, VA, or Conventional. These categories refer to whether the loan is backed by the government or the private sector. The categories also affect the amount of down payment needed by the buyer.
Mortgage loans are much harder to obtain than they were just two or three years ago because of the subprime mortgage crisis and the economic downturn. However, houses are still selling and folks are still getting mortgages every day now that home prices are going down it may possibly be a great time to buy a house.
Prior to going out looking for a home you should pre-qualify for your mortgage. It can be very disheartening to locate a great home you want to purchase only to discover that you cannot get a mortgage for it. A well-prepared homebuyer will always have a pre-approved mortgage in place before they start looking for a home.
You’ll need steady and dependable income, a clean credit report and high credit score and possibly a down payment that ranges between 3% and 20% of the purchase price, depending upon the kind of loan that you’re trying to get. You will have to be able to qualify for the mortgage and the house you are buying must also qualify. The house must have an appraisal for the purchase price or above in order to be financed.
The mortgage lender will consider your income and your debts together with your credit history. There are specific guidelines that they must follow but a general guideline is that your monthly house payment should not exceed 29% or your gross monthly income and your house payment along with your recurring bills, such as credit cards and car payments, should not exceed more than 41% of your total monthly gross income.
If you have any glitches on your credit you need to address them prior to applying for your new mortgage loan. For those who have outstanding debts you will have to pay them off and you will have to pay off anything that could put a lien on your new home, such as judgments, taxes or any mechanics bills. Before you make your first appointment with the mortgage lender you have to get your credit report and begin repairing and improving what you can.
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MLA Style Citation:
Nichols, Jay "Mortgage Facts To Understand Before Picking Out A House." Mortgage Facts To Understand Before Picking Out A House. 21 Jun. 2010. uberarticles.com. 14 May 2015 <http://uberarticles.com/business/blogging/mortgage-information-to-know-prior-to-picking-out-a-home/>.
APA Style Citation:
Nichols, J (2010, June 21). Mortgage Facts To Understand Before Picking Out A House. Retrieved May 14, 2015, from http://uberarticles.com/business/blogging/mortgage-information-to-know-prior-to-picking-out-a-home/
Chicago Style Citation:
Nichols, Jay "Mortgage Facts To Understand Before Picking Out A House" uberarticles.com. http://uberarticles.com/business/blogging/mortgage-information-to-know-prior-to-picking-out-a-home/
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