Following the financial crash of 2008 and the subsequent collapse of the housing bubble, many (but not all) real estate markets eventually recovered. Entered into in a prudent way, home ownership remains something you should consider in your long-term financial planning. Understanding how mortgages and their interest rates work is the best way to ensure that you're building that asset in the most financially beneficial way.
Typically, you'll need a minimum of a 620 FICO score to qualify for a conventional mortgage, and it can be difficult to qualify with a score that's near the minimum if your other qualifications aren't stellar. Another option is the FHA mortgage, which is designed for borrowers with qualifications that don't meet the standards of conventional lenders. The downside is that FHA loans can be significantly more expensive, but they can be great resources for people who otherwise wouldn't be able to qualify for a mortgage.
During dynamic economic periods, interest rate volatility can increase and move mortgage rates quickly. As a mortgage shopper or holder, these periods offer both risks and rewards. For example, you wouldn’t want to lock yourself into an interest rate that drops before the home closing, but you’d welcome a rate lock if rates were on the rise. Some mortgage lenders address this problem by offering rate locks that protect you from rising rates but allow you take advantage of a rate drop before closing.
We're here to offer our customers excellent fee free mortgage advice. Our expert advisers will help you secure the best mortgage deal whether you're a first time buyer, remortgaging your home, buying to let or moving up the property ladder. We'll help you throughout the mortgage process – no hidden costs or surprises, just straightforward, honest, mortgage advice.
If you have a hybrid ARM or an ARM and the payments will increase – and you have trouble making the increased payments – find out if you can refinance to a fixed-rate loan. Review your contract first, checking for prepayment penalties. Many ARMs carry prepayment penalties that force borrowers to come up with thousands of dollars if they decide to refinance within the first few years of the loan. If you’re planning to sell soon after your adjustment, refinancing may not be worth the cost. But if you’re planning to stay in your home for a while, a fixed-rate mortgage might be the way to go. Online calculators can help you determine your costs and payments.
In the simplest terms, a mortgage is a loan from a bank or other financial institution that enables you to cover the cost of your home. It's a legal agreement with the bank saying you will pay the loan back (plus interest) over the course of years—decades, usually. Unless you have the money to pay cash for your property, you’re going to need a mortgage.
In some cases, you may not be required to provide all of that information. Some loans are referred to as low doc or no doc because they don't require you to prove any of the statements that you make to your underwriter. These loans are normally more expensive, but can be easier to obtain. Additionally, you can obtain a preauthorization before you submit an offer on a home you would like to buy. That can speed up the process, and also shows the seller that you are serious about the purchase.
I find it interesting that many people now a days fail to pay their mortgage. I wish we could balance out this world by pulling very strict regulations on corporations, have a representative democracy, and free schooling [even on college]. That way, any country maintaining life like this would reduce poverty by a huge margin and the wealth distribution would be fair. Life would be very peaceful in a place like this.
You don’t need a zero balance on your credit cards to qualify for a mortgage loan. However, the less you owe your creditors, the better. Your debts determine if you can get a mortgage, as well as how much you can acquire from a lender. Lenders evaluate your debt-to-income ratio before approving the mortgage. If you have a high debt ratio because you’re carrying a lot of credit card debt , the lender can turn down your request or offer a lower mortgage. This is because your entire monthly debt payments — including the mortgage – shouldn’t exceed 36% of your gross monthly income. However, paying down your consumer debt before completing an application lowers your debt-to-income ratio and can help you acquire a better mortgage rate.
I doubt it, people seem to live in countries and mostly not care how it is run. As a bonus, most don’t understand the clockwork behind. I have a mortgage and am doing very well since I got a college degree and am progressing more in my career. I like the article on how straight – forward it is on it’s description of what a mortgage really is. I hope people will read it, that way if they are not so lucky with money they will choose an apartment over the painful situation a mortgage can bring on low-income people.
NOTE: These programs are only available to homeowners whose mortgage servicing company agrees to the terms and conditions governing the use of these funds. If your servicer is not currently participating in Keep Your Home California, you may want to call them and encourage them to do so. A homeowner cannot receive assistance if their servicer has not signed an agreement with CalHFA MAC. See a list of participating servicers and which programs they are currently offering.
As an example, when I was buying my first home, my lender called me three days before closing to let me know that my credit score had fallen to one point below the threshold for my interest rate, so I would either have to take an action that would improve my credit score immediately or accept a significantly higher interest rate. The solution required me to pay off one of my credit cards and fax proof of it to the lender -- not an impossible situation, but certainly a hassle when I was told it had to be done right away and I was at work.
“Get pre-approved early, and know your numbers. Make sure you understand the monthly payment that goes along with your price point. Your expectations and your reality need to sync up. Also, rely on your professionals like loan officers and real estate agents. Never feel like you’re bugging them with questions, they should want you to bug them with questions. They’d certainly rather you get the correct info from them than the incorrect info from Google. Also, I think it’s ok to overpay a little for a house you love. If the market isn’t giving you many options to buy and you find a house you love, don’t get hung up on a couple thousand bucks, especially if you’re going to stay in the house long-term. If you can afford it, make it happen.”–Tyler Baker, Branch Manager, Olathe, KS
If you do not shop multiple lenders, you’re doing yourself a disservice. Even if you are sure this is the lender you want to use, getting quotes from other lenders can help you negotiate a better deal. Not every lender will give you the same mortgage rate, or closing costs. This is why shopping multiple lenders is very important. Getting at least 3 or 4 loan offers is recommended.
Your debt to income, or DTI. Is the amount of monthly debt payments you have compared to your monthly income. Most mortgages will allow a maximum DTI of 41%, ideally you will want a DTI ratio of no higher that 36%. See how much house you can afford using our calculator. Try not to stretch yourself too thin, if you have a high DTI you will be more likely to miss mortgage payments if an emergency comes up.
If you’re behind on your mortgage, or having a hard time making payments, we want to get you in touch with a HUD-approved housing counselor—they’ve been sponsored by the U.S. Department of Housing and Urban Development. Your counselor can develop a tailored plan of action for your situation and help you work with your mortgage company. They’re experienced in all of the available programs and a variety of financial situations. They can help you organize your finances, understand your mortgage options, and find a solution that works for you.