Top Questions About Mortgage Loans

check markUpdated for March 2019

Mortgage rates fluctuate with time and are impossible to predict. Over the past 45 years, interest rates on fixed mortgage loans have ranged between 18.63% in 1981 to as low as 3.31% in 2012. Many factors can affect mortgage rates including financial markets, home prices, and more.

The first step to getting a mortgage is making sure your credit is in check. Secondly, you will need to get preapproved for a mortgage. After that, you can browse mortgage options to choose the right loan for you. You will then need to apply for a mortgage by submitting an application to a lender.

After applying, you will need to begin the underwriting process in which the lender determines whether you are qualified for the loan. This process involves evaluating credit and employment history, debt-to-income ratio, and current obligations. Once approved, the closing process begins before finally purchasing the home.

Researching how to qualify for a mortgage before applying can save time and money in the long run. Lenders may require pre-approval or pre-qualification. Pre-qualification allows you to compare loan details without a credit assessment. Meanwhile, pre-approval means the lender evaluates your credit and finances which requires a hard credit inquiry.

Lenders will also need to know the total monthly debt for other loans such as car loans, credit card bills, and student loans. Typically, lenders limit the total debt to below 36% of your gross monthly income. Credit score also plays a major factor in qualifying for a mortgage.

Eligibility for a mortgage will require the person to put down a percentage upfront. The higher the amount, the more ownership you will have. This will also reduce the amount paid in financing for the duration of the loan.

A mortgage refers to a loan secured by property or real estate. With a mortgage, a home buyer receives funds to buy a home. The borrower repays the loan over time through monthly payments including additional amounts for taxes and insurance. Repaying the loan reduces the amount owed while also building equity.

Typically with a fixed-rate mortgage, the combined payments toward principal and interest do not change over time, but the mount of money that goes toward principal versus interest does change. At first, the borrower owes more interest and more money goes toward interest than repaying the loan. Over time the borrower owes less interest, and more money goes toward repaying the principal.

Mortgage refinancing is the act of starting a new mortgage to replace the original. Refinancing is a great option for borrowers looking for better mortgage rates if they become available. The original mortgage loan is paid off and the second loan takes its place.

The mortgage you can afford depends on a few different factors including annual income, available funds for a down payment, and desired monthly payment amount. You should also budget for property taxes, interest rate, homeowners insurance, mortgage insurance, and HOA fees. An online mortgage calculator can help gauge how much you can afford prior to applying

Refinancing gives borrowers the opportunity to obtain better loan terms and interest rates. Many borrowers choose to refinance if interest rates have gone down or if they unexpectedly receive a large sum of money. This makes a great option for homeowners with good credit, but can get risky for borrowers with low credit scores.