Mortgage Loan - Some Basic Information You Must Know
You may want to know more about the home mortgage loan if buying a home in future is part of your planning for future
. There are generally two categories of mortgage loans namely fixed-rate loan and adjustable-rate loan. While some people prefer fixed-rate mortgage because it makes your future financial planning more predictable, some people opt for adjustable-rate mortgage because in the event where the interest rate drops, they can save some money for mortgage payment. Before applying for mortgage finance, there are some important things that you should take into consideration so as to avoid future harassment. Read on to find out more.- Credit score status
There is a certain requirement for borrower's credit score in order to avail mortgage finance. In general, the credit score limit is set around 600 points and above. For example, one of the mortgage security intermediary giants in secondary mortgage market, Fannie Mae has recently raised their credit score requirement from 580 to 620. Similarly, the lenders and banks who are selling their mortgage loans to Fannie Mae have to fulfill 620 cutoff points too.
- Debt level
The amount of money you can secure from mortgage loans is dependent on your debt level. When reviewing your application, lenders usually take your debt-to-income ratio into consideration. If your ratio is way too high, you may have to consider lowering your current debt amount or increasing your income. While some lenders do not take high debt-to-income ratio seriously, it is advisable to keep it below 30%.
- Down payments
The amount of money that you can pay as down payments determines how long is your mortgage bond and the interest rate that you have to bear. Of course there is always a lower limit for down payment and it varies with different lenders and banks.
by: Kamal Kannan