What Is A Mortgage?
What Is Involved In The Mortgage Process?
You are a step closer to the answer to the question: what is a mortgage, if you understand that lenders screen you and your mortgage appliction BEFORE allowing you to borrow money through mortgage loans. Lenders do not allow home buyers to borrow money for free.
In order to qualify for a mortgage loan, the lender asks for and reviews your income and debt information. The mortgage lender will also want to know if you have a down payment and what percentage of the purchase price your down payment will be.
What Is A Mortgage - PMI?
If you have less than a 20% (of the purchase price) as a down payment, you will most likely be required to pay private mortgage insurance, often referred to as PMI. This insurance protects the mortgage lender in the event you default on your mortgage payments.
What Is A Mortgage - Mortgage Process & Mortgage Applications?
Many 1st time homebuyers panic at the thought of taking out a mortgage. You can ease the anxiety a little if you become familiar with the mortgage process.
Before applying for a mortgage, make sure your credit worthiness is in order because lenders want to be sure you can handle the mortgage payments. Get copies of your credit scores from the various credit reporting agencies. Review your reports for any inaccurate information. The credit reports will provide information for disputing any inaccuracies.
Mortgage applications usually require you to provide certain documents to determine your eligibility for the mortgage. They require proof of employment and income so, pay stubs, W-2 withholding forms, etc. should be attached. If you are self-employed, balance sheets and tax returns will be required.
Lenders also want to know all of your debt information, so have the details of each bill at hand.
NOTE: Do NOT change jobs six months before applying for a mortgage.
What Is A Mortgage: Income vs. Debt
To determine how much a mortgage applicant can borrow for a mortgage, lenders compare your income to the amount of debt you have.
NOTE: Avoid increasing your debt. DO NOT MAKE large credit purchases before applying for a mortgage.
You don't have to be intimidated by the mortgage process or the mortgage application just because you are a first time mortgage user.
With a fixed rate mortgage, the interest rate for the loan will never change. An adjustable rate mortgage (ARM) usually has a lower interest rate than a fixed rate mortgage but remember that the rate fluctuates periodically based on among other factors, the rates on 1-year constant-maturity Treasury (CMT) securities and the Cost of Funds Index (COFI).
What Is A Mortgage: Canadian Mortgage Interest Rates
In Canada, ARM mortgages are generally tied to the Bank of Canada's prime lending rate and typically will fluctuate with prime.
Visit our online calculator page and use the Home Mortgage Calculator that suits your financial circumstance.
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~ Baron M.A. Rothschild (1744 - 1812)
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