Do you have mortgage questions? You are not alone. Thousands of people purchase new homes every year in the United States. Finding a home and going through the mortgage process can be a bit intimidating and sometimes very confusing. Understanding the mortgage process is crucial to your success. Many people do not understand the different mortgage terms and mortgage options when purchasing a new home. There are many types of mortgage options to fit many situations. Taking the time to learn and ask the right mortgage questions can save you thousands of dollars in the long run. Our mission is to provide you with helpful mortgage information and the latest in mortgage news. We want to wish you the very best in your home buying process and we hope we can help you answer any mortgage question you are looking for.
Basic Mortgage Terms
Below are some basic mortgage term questions. These basic mortgage terms are what make up a mortgage loan. By understanding the terms below and there function you are on your way to negotiating the best mortgage loan.
• Down Payment
• Dept to Income Ratio
• Principal
• Interest Rate
• Mortgage Points
• Term of Loan
• Mortgage Insurance
• Closing Costs
If you have mortgage questions you are not alone. Let’s start off with the basic question first. What is a mortgage?
What is a Mortgage, and why do you need it? A mortgage is simply an agreement between a borrower and a bank for a piece of property. When you purchase a new property a mortgage uses the property itself as a security for the loan.
The term mortgage comes from a French law term that means “death contract” YIKES! Don’t let that scare you. The term refers to a contract that ends or dies out when the payments are made in full. If the payments are not fulfilled then the property will be foreclosed on and taken back by the lender. There are many types of mortgage loans. Originally the majority of mortgage home loans were simple 30 year fixed rate mortgage loans. But over the years banks and mortgage companies have become more creative on the types of mortgage products offered to borrowers. Each mortgage option has its own advantages and disadvantages of course.
For many Americans mortgages are a very necessary means of purchasing a home. Mortgages make it possible for people to live the American dream. Mortgage loans are a very serious transaction and qualifying for a mortgage can be difficult. If you are looking to purchase a new home make sure to consult with a mortgage lender or mortgage broker. Getting pre-approved before shopping for a new home will let you know what you can afford and give you more confidence when negotiating.
What is the Mortgage Loan Types?
Mortgage loan types range from your average 30 year fixed rate conventional loan all the way to a Reverse mortgage loan this is designed only for seniors 62 and older. Depending on your situation you will always want to make sure you consult with a trusted mortgage lender or broker. This is very important; getting the right mortgage loan for your situation can save you a lot of money. Below are some of the common mortgage types. Click on the link to learn more about each one.
• Adjustable Rate Mortgage, also known as the ARM loan.
• Conventional Mortgage Loan
• FHA Mortgage Loan
• Reverse Mortgage Loan
• USDA Mortgage Loan
• VA Mortgage Loan
What is a Mortgage Made Up Of?
After you qualify for a mortgage you will be granted a loan from a lending institution or bank. Of course, things are not that easy and there are other factors that go into qualifying for a mortgage. A typical mortgage has many different parts. The following is a list of the basic things that make up a mortgage loan.
• Down Payment
• Principal
• Interest Rate
• Points
• Mortgage Term of the Loan
• Mortgage Insurance
• Closing Costs
Here are some basic guidelines most banks require to be pre-approved for a mortgage. That being said every situation is different and the below content is just a rule of thumb. Make sure to consult with a mortgage Professional for your situation.
Basic mortgage guidelines
• A credit score of around 660 and above.
• Proof of employment for 2 years.
• A dept to income ratio of around 33/38
This is the basic anatomy of just about all mortgage loans. There are a few exceptions but the majority will have all of these components.