Mortgage Loans

Mortgage loans are long term loans that can be obtained for purchasing property, Mortgage loans can be availed from mortgage brokers, banks, and online creditors and at times from property owners. These loans are approved for a period of 15 to 30 years. In case the borrower is unable to make payments, the lender is entitled to take away the property through foreclosure.

Your monthly mortgage payments A debtor has to make payments for the principal as well as the interest rate. However, there are few lenders who charge borrowers for additional costs. The borrower also pays insurance coverage for property insurance and real estate taxes. Generally, the amount which is collected for property insurance as well as real estate taxes every month are put in an escrow account. It is finally paid annually when it is due. The payment made for the mortgage loans takes the form of PITI, where P is the principal, I is the interest rate, T denotes taxes and the last I is for insurance.

You may be required to pay for PMI or private mortgage insurance. A PMI is decided upon depending on the type of mortgage you avail and equity you have in your property.

How do you qualify for mortgage loans? Mortgage lenders will evaluate whether you have the ability to repay the mortgage loan or not. There are many factors that are taken into consideration before approving your mortgage loan application. Some of the factors that will determine your eligibility for a mortgage loan include the following-

1. Your credit history

2. Monthly income

3. Amount you can pay as down payment. In majority of the cases, mortgage lenders will urge you to pay 5% to 20% of the purchasing cost of your home.

4. Your debt to income ratio is also calculated before your application is approved. There are 2 ways to determine whether your debt to income ratio will allow you to take a mortgage loan or not. The mortgage payment that you are making on a monthly basis should not be more than 28% of the gross monthly income. This includes PITI, insurance and real estate taxes. Alternatively, your debt accounts, which may include child support, alimony, student loans, car loans, credit card loan etc., should not be more than 36% of the gross income.

Finally, even if you have availed mortgage loans, it is very essential to maintain a regular payment pattern. The failure to do so may compel you to lose the house of your dreams.