A Perspective on Mortgage

A mortgage is probably the scariest loan of your life and hence needs extraordinary forethought before you take the leap. The lender can approve the mortgage based on a few factors such as your income, your personal assets, your debt, your student loans, etc.

Putting into perspective the mortgage rates of a decade ago, this may be perhaps the best time for you to buy a home. The home prices, for the time being, are slightly below their peak levels of 2007 and there are forewarning signs of an inflation surge which would have an unfavorable pressure on mortgage rates. It is almost certain that conditions are not going to get any better.

Supposing you’re ready to make a down payment, this is where your finances come into play, and it is certainly no cakewalk unless you’re filthy rich. Lenders will scrutinize your finances, and it’s in your best interests to be as forthcoming as possible.

The brokers will make an estimate of your income in the past two years by looking at your tax returns and your recent bank statements.

One of the things they look at is your Debt-to-Income ratio. This will decide whether you can afford to own the property. Most lenders set the limit at 43%. This is the maximum DTI ratio allowed to qualify. Paying down your credit card balance can help improve your DTI. Another thing Lenders look at is your FICO score which depends on factors such as Payment and Credit History.

As far as your credit card debt is concerned, Lenders look at your payment history. Any missed or delayed payments can adversely affect your chances of securing a mortgage.

Most importantly, it is crucial to have a cash reserve. After putting the down payment, there are closing costs, and then the monthly mortgage payments. Lenders need to know that you have enough.

Certain circumstances or situations that can have bearing on this case need to be fully disclosed such as Divorce proceedings because child support affects your finances.

During this period, it is wise to stay away from securing any additional loans. Your mortgage broker will not respond favorably to you taking a car loan for example. Avoid discrepancies at all costs.

When paying back your mortgage, there are several aspects to consider such as your payment schedule; It can be monthly, bi-monthly or weekly. Along with that, there is the interest rate which can either be fixed or variable. Fixed interest rates are higher because they do not vary for the entire term of the mortgage.