A Simple Guide To Home Mortgages
Today, happily, more people than ever can afford to purchase
their own homes. However, unless you are a recent lottery winner,
there’s every chance you are going to need to purchase your home
in the same way the rest of us do – via home mortgages.
However, the issue of home mortgages is really a minefield. There
are simply so may people willing to lend these days. In order to
try and best prepare you for the likely questions you may have,
the following is a simple guide to home mortgages.
• Bank Loan Officer vs. Mortgage Broker
Once you have found your dream home, the first thing you need to
do is find out which type of home mortgage is going to best suit
your needs. In order to be able to determine this, you basically
have a choice of visiting your local bank loan officer, or a
mortgage broker.
Essentially, the difference between visiting a bank loan officer
and a mortgage broker is that the bank loan officer usually works
for one bank (your local bank), whereas a mortgage broker usually
works as an agent to several home mortgage lenders. Consequently,
whilst the local bank loan officer may offer you several
different products relating to home mortgages, they’ll all be for
the same bank (lender). On the other hand, as the mortgage broker
doesn’t represent any particular lender, but several, he’ll be
able to offer you home mortgages products from several different
lenders.
In short, whether you use your local bank loan officer or a
mortgage broker to find your home mortgage will depend on whether
or not you think it is likely that your local bank loan officer
will lend you a home mortgage loan. Here, if you’ve had a bank
account with your local bank for some time, with a good history
of savings, there is every chance that your local bank loan
officer will agree to provide you with a home mortgage.
However, if you have, either not had an account with your local
bank for long, or don’t have a good track record of savings with
your local bank, then a mortgage broker could well provide you
with a better chance of obtaining a home mortgage..
• Amount You Can Borrow With Home Mortgages
Whether you visit your local bank loan officer or mortgage
broker, you’re going to need to have some idea of how much you
want, and can, borrow on your home mortgage. Here, basically,
most home mortgage lenders will allow a borrower to borrow up to
three times their annual income – although the amount of lending
with home mortgages does vary, with some home mortgage lenders
only willing to lend two times a borrower’s annual salary.
In addition, your home mortgage lender will ask you to make a
full declaration of your income and expenses. So, although you
can include items such as dividends and royalties as part of your
income, you will also need to declare how much you’re paying in
auto loan repayments and credit card payments. Should your
outgoings exceed forty percent of your income, it is likely that
your bank loan officer will not lend you the home mortgage (this
is subject to the amount of down payment your willing to make –
see below).
However, a mortgage broker may still be able to arrange the
funding of your home mortgage, even where these sums are tight.
• The Down Payment On Your Home Mortgage
All lenders will expect you to put some money down as down
payment on your home mortgage. However, the amount of your
deposit on your home mortgage will vary, from between five
percent of the value of the home to twenty percent of the value
of the home. Overall though, you should keep in mind that the
more you are willing to put down as a down payment on your home
mortgage, the more likely your are to obtain the home mortgage
financing, and the better the conditions (such as interest rate)
are likely to be on you home mortgage. Nevertheless, keep in mind
that you’re likely going to have initial expenses when you move
to your new home, so don’t use up all of your saving as a down
payment on your home mortgage.
• Interest On Your Home Mortgage
Most home mortgage lenders will offer you either a fixed-rate
home mortgage or an adjustable rate home mortgage.
A fixed rate home mortgage is where the lender agrees to finance
the purchase of your home, in return for which you agree to pay
the lender a fixed rate of interest over the entire length of the
repayment period.
An adjustable rate mortgage is where you agree that the interest
rate on the home mortgage can vary – usually in-line with federal
interest rates.
Due to the length of home mortgages, which can last for up to
thirty years, both fixed rate home mortgages and adjustable rate
home mortgages are not overly popular and most borrowers prefer
to have a fixed rate home mortgage for the period of their home
mortgage loan, with an adjustable rate home mortgage thereafter.
These types of home mortgages are known as called 7/1s and 5/1s,
as they allow you to fix the home mortgage rate for the first
seven or five years, respectfully, and then move over to an
adjustable home mortgage rate.
• Which Home Mortgage Lender To Chose?
If you are lucky enough to be in a position where several home
mortgage lenders are willing to lend to you, check out what each
lender’s annual percent rate (APR) is and the chose the one
offering the lowest APR on your home mortgage loan. - just so you
know, the APR is the declared total cost of funding your home
mortgage loan per annum.
You should also try to make sure that your home mortgage lender
is a registered member of the Mortgage Bankers Association (or
its equivalent). If your home mortgage lender is not a member of
the Mortgage Bankers Association, there’s a good chance that they
may not be entirely above board.
• And Finally
Finally, good luck with the hunt for your home mortgage loan –
keep in mind that whilst most physiologists say that purchasing a
house is one of the most stressful periods of our lives, it can
also be one of the most rewarding!
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