What is a Mortgage Loan?
When you want to buy new clothes, you simply go to the store,
make your selection and pay – cash or credit. Buying a new
home, because of the price tag, is a lot different. Few people
have the ability to go shopping, choose a house and pay cash.
Rather, most people pay a cash down payment on their new home
and finance the remainder of the purchase price with a mortgage
loan. A mortgage requires you to pledge your home as the
lender’s security for repayment of your loan.
Since financing is a key issue in most sales contracts, one
of the first things you should do is to figure out how much
house you can afford – how large of a mortgage loan you
qualify for. Lenders use certain guidelines to determine the
mortgage amount they will lend you. The two guidelines used are
housing expenses and long-term debt.
Lenders generally say that housing expenses (including
mortgage payments, insurance, taxes and special assessments)
should not exceed 25 percent to 28 percent of your gross monthly
income. Long-term debt is usually defined as monthly expenses
extending more than 10 months into the future and should not
exceed 33 percent to 36 percent of your gross monthly income.
These numbers may vary according to loan type, credit and
downpayment. Many loans today allow up to 33 percent for the
housing to income ratio and 38% for the total debt to income
ratio.
A wide selection of mortgages is available to you in the
marketplace. Your challenge is to select the loan terms that are
most favorable to you.
Mortgage Calculators
Previous Page
Next Page
|
