Home Morgage Loan

When getting a home mortgage loan for the very first time, the adventure can be quite rocky and even disappointing especially during these times of tightening credit and tougher scrutiny of the borrower. Easy credit for home borrowing was as plentiful as rain in Seattle and people bought houses often times way beyond their means, but the prospect of instant high profits were too much for lenders to ignore. Now subprime loans have caught up with many lending entities and the door has been slammed in the faces of many wishing to have a piece of the American dream, home ownership. Knowing what is facing a person before leaving their apartment or parent’s home and buying that first house is very important in the battle against discouragement or even disillusionment.

So it’s assumed that a house has been found that meets all of the reader’s needs. What will the monthly payment be? A person can go online and look for a mortgage calculator to figure out the type of home mortgage loan or loans are available. How long will the stay in that house be? If it’s more than ten years, consider a thirty year fixed rate. It offers the security of knowing the payment will never go up, even in hard times, and it can payoff much more quickly than thirty years by paying more on the principle each month above the regular mortgage payment. If less than ten years is expected, look at an ARM loan. But remember, that depending on where the house is located, there will be property taxes and perhaps city taxes also placed on the monthly payment and so talking to a local realtor about this is important. In addition, if less than twenty percent down is put on the property, private mortgage insurance (PMI) will be added to the monthly payment which can add up to thousands of dollars over the life of the home mortgage loan.

So after looking to see how much the real monthly payment will be, how much will the loan cost other than the interest rate, over the life of the lending agreement? The real estate section of the paper that comes out every Sunday will probably have a page just devoted to the cost of securing a home mortgage loan. That’s right; a person has to pay big money for the privilege of borrowing money! The ads will mention how much down the borrower will have to put on the lending agreement as well as the current percentage rate and the points the lending agreement will cost. Each point is equal to one percent of the loan, so three points on a hundred thousand dollar lending agreement will be three thousand dollars. That money will be due at the convenience of the lender, often at closing. Depending on the home mortgage loan agreement, these points may be rolled into the mortgage of the house.

After knowing how much the monthly payment and closing costs will be, is that house still a viable option? If so, the next thing to look at is the viability of the borrower. There are two important factors going in to deciding whether a lending entity, either a banking institution or a mortgage company will loan a person the needed funds for a home mortgage loan. First is the credit score of the person or persons seeking the mortgage. This score is the result of the three main credit reporting companies putting mathematical algorithms to all late payments, the amount of days of payments past due and defaults over many years go into a person’s credit score and the average American score is 620. Banks usually want to see at least 640 before speaking seriously with a borrower about a home mortgage loan, but this is not a hard and fast rule for all banking institutions. In addition, lenders are very interested in the debt to income ratio which is divided by adding all the monthly debt payments which are made by the potential borrower and the total income of the household. In most cases, the ratio must be less than forty percent so be honest when figuring the ratio out because the loan officer certainly will.

If a borrower cannot get a home mortgage loan at a bank, go to a credit union and then to a mortgage company. In each situation the interest rates and closing costs typically climb, but the disdain shown for spots on a person’s credit history decline. A borrower must not give up in the quest to find money, if the house is really something someone wants or needs. Look for upfront lenders because all fees are stated at the beginning of lending discussions. “Hear me when I call O God of my righteousness; thou hast enlarged me when I was in distress; have mercy upon me and hear my prayer.” (Psalm 4:1)

It is extremely important that the potential borrower do a lot of research on the different types of loans and the cost each one will be to the borrower over time. Get quotes from various lenders and play them off against each other. Encourage or even challenge them to beat one another so that the best lending opportunity for the borrower is obtained. At the same time, don’t fall in love with a house. Don’t believe that life won’t be the same without that one pile of brick and concrete because poor money decisions can easily occur from such infatuations. Remember that after about a year of living in any house, it’s just another house that needs dusted and vacuumed and its flaws will be known.