Category Archives: Mortgage Loans

Common Mistakes in Mortgage Loans

If you think that getting a mortgage loan is going to be quick and easy, then think again. Buying a house and getting a mortgage loan is not like buying a sofa or a TV, which you can do in a day. It would take some time and would mean a lot of trouble and many documents to be taken care of. It can be a complicated process.

Because of the complicated process, a first time home buyer is likely to commit mistakes when applying for a loan. To help you out here are some of the top mistakes made by those applying for mortgage loans.

Not Making Comparisons

One of the most common mistakes made when it comes to mortgage loans is not comparing the lenders and the services that they are providing. When you fail to do this you are missing out on a great deal. Different lenders would have different offers and you have to be aware of that difference.

Keep in mind that mortgage loans are not products that are standardized. Lenders can vary what they offer and those differences can mean a great deal to someone like you.

Not Checking Your Credit Standing

Like most other financial products, mortgage loans are dependent on your credit standing. If you have bad credit, the lenders would probably not give you approval. If you do get the loan then you can bet that the term isn’t that good or at least it leaves a lot to be desired.

Deciding to buy a house isn’t an instant decision that you would be making. The moment that you decide that you want to purchase a house you should see also spend some time in checking your credit standing as well. That would allow you to make any corrections to it if you find that your credit standing isn’t that good.

Forgetting Other Costs

Many home buyers tem to focus too much on the monthly payment for their mortgage. They tend to forget that there are other expenses involved when it comes to buying a house. That would include the taxes and home insurance. There are more expenses that you should know about. Forgetting about those expenses can be an expensive mistake on your part because that might result in you running short of cash for your monthly expenses.

Getting Adjustable Rate Loans

Some people opt for an adjustable rate mortgage because they sound like a great idea. In reality they might cause you a problem once the interest starts to be adjusted. The interest would surely rise and never go down. You can count on that so it is better to opt for a fixed rate mortgage and just refinance your loan when the right time comes.

No Getting Pre Approved

These days getting the pre-approval is now a must when you want to get a mortgage and buy a house. Sellers and agents would be looking for it as the main sign that you are really serious about the purchase.

Prepare Yourself Before Negotiating A Mortgage Loan

Buying a property in cash is the most ideal approach as you would be relieved of having to pay a debt regularly as a mortgage loan. But even moneyed individuals resort to mortgage financing as they find it attractive to buy on installment and invest their excess funds in other ventures. These types of loans are more applicable to average wage earners who aspire to have their new home through mortgage contracts. The market is swamped with many home mortgage loan offers. Your eligibility for a mortgage loan depends on two major points. One is your credit score and second, your ability to pay. If you have decided to apply for a mortgage loan, be sure you have made ample preparations beforehand.

What Is A Mortgage Loan?

A mortgage loan requires collateral before a loan is approved. The collateral is the property, usually a house, to guarantee the payment of the loan. The lender or mortgagee is given a lien by the borrower or mortgagor or the right to repossess the collateral in case the latter fails to pay the account. The borrower continues to use and possess the property as long as he or she regularly meets the monthly obligations. If he/she defaults and fails to settle the loan, the lender will foreclose the property and sell it to recoup the money. Normally, mortgage loans are offered by banks. However, there are also credit unions, pension funds and various government agencies that serve this kind of loans. The interest rate is considerably lower because of the collateral. There are two types of interest rates applied; the fixed interest rate and the adjustable rate mortgage or ARM. It is usually payable in five to thirty years. The payments are generally made as an equal monthly amortization.

How Can You Qualify?

There are two things that you must fully satisfy before you can borrow using a mortgage loan. You must have a good credit score and the capacity to pay. If you are planning to negotiate a mortgage loan, you should first secure your credit report. Review it and if you find some errors, coordinate with your credit bureau to have it corrected. This is very important since this will be used by the lender in the evaluation of your mortgage loan application. Be sure that what you are presenting to your mortgage lender is the true or corrected version of your credit score. The next step is the proof of your capacity to pay. Normally, the mortgage lender or broker if you are not dealing directly with the lender will require you to present various documents. The first question you’ll be asked is about your employment. The name and address of your employer, your position, salary and other emoluments that you are entitled are required. You will also accomplish a VOE or verification of employment form. You will need to produce your two years tax papers like W2s and copies of pay stubs to support your income declaration. If you are a self-employed individual, you need to support it by showing your income tax returns with financial statements for the past two years.

In applying for a mortgage loan, you must make the right preparations and have the understanding of how it works, or else, it would be a stressful experience on your part because of several documents required. Besides, you must have a idea about the kind of house you want and the amount of budget that you have. If you are not prepared for this, it would take time before you can start the process for a mortgage loan.

The Basics Of Mortgage Loans

Everybody needs to have that sense of security by having their own property. This could be the time where you will no longer have to pay for rent in an apartment or a complex. This is the time when you have decided to upgrade the way of life, and settle down in a certain property that belongs to you; a property where you have authority and rights to keep the area to your liking. This is the time where you will take out a mortgage loan. Basically this type of loan will be the biggest one you will ever take out in your life. Mortgage loans are very expensive and can only be taken out by those who already have a secure job or a good credit score. Take a few minutes or moments of your time to learn about the many things you need to be aware about mortgage loans.

The Principal

This is the money that you will be borrowing for your home. It is basically treated as a raw sum. Before the company or the moneylender finances you with the principal, you can be required to make a downpayment to them. Payments can be very helpful in obtaining mortgage loans as they help reduce the interest.

Interest

Interest is the price for the use of assets that you are paying for your mortgage loan. It is usually expressed in the form of percentage sometimes known as interest rates. The interest is what the money lender will charge you for borrowing money with them. Usually the interest increases by the same percentage every month or year. The principal and the interest are basically what comprise your mortgage payments.

Amortization

This is the process in which you pay a portion of the principal plus interest. It will reduce the money you owe the lender every time you make a payment. The bulk of amortization is usually comprised of the interest, but if you are able to pay more of the principal then the better.

Taxes

Taxes will always be there when it comes to mortgage loans. They usually are comprised of the property tax, and are based on the value of your home. The tax is basically used to help finance the community . These finances include roads, bridges and other types of infrastructure. You are the one who will be paying taxes the moment your loan starts. You will also need to pay taxes even after you have paid all the principal.

Insurance

Mortgage usually almost never gets approved if you do not have any kind of insurance for your home. It should cover your home, the personal properties, from theft, fire, calamities and many more. Think of insurance as more like a plan B, in case things go wrong due to natural causes. If you are mortgaging a house built close to flood risk areas you may want to get your own flood insurance. Insurance is usually one of the main reasons why people who are low on cash cannot afford mortgage loans.