How To Compare Mortgages

A person can buy a property right away using a specialized kind of loan named mortgage. This bank loan is usually provided by banks and building societies. Since there are a lot of mortgages available, you should only make a sound decision just after evaluating his or her options. It would probably be attainable to take credit in some other way to fund the purchasing of a property, but mortgages are the easiest way to do so, and have become the recognized standard way.

When one wants to get a property, taking out a mortgage comes to his mind. At times, a person may find understanding the several offers confusing and difficult. With that in mind, it is vital to be mindful in comparing mortgages.

Getting a 100% mortgage is quite possible. Having this mortgage, there is no need to give an agreed downpayment amount of money just to acquire all the needed bucks. This kind of mortgage might appear eye-catching because of such concept, but it’s likely that it will come with higher fees and interest rates.

The mortgage rate of interest is probably the major factor to consider when you compare mortgage loans. The amount derived from the interest rate is another amount you will have to pay off apart from what you have borrowed. You will have two major selections, namely a principal and interest repayment mortgage and interest only repayment mortgage. In other words, you can choose among paying only the interest on the loaned amount, or paying the interest and also a portion of the capital. Of course, with an interest only mortgage you will still need to pay the capital at some time; you don’t get away with it altogether! When you compare mortgages, you should look at the mortgage rate of interest as the primary factor. Interest only mortgages allows you to pay the principal balance and also the interest in distinct time frames.

There are many mortgage kinds to contemplate. There are first time client mortgages, self certification mortgages, buy to let mortgages, capped mortgages, discount mortgages, fixed rate mortgages, and many more. Some of these are self-explanatory, but others may be puzzling for anyone who is not too familiar with the field of mortgage loans.

The first time buyer mortgage is certainly aimed at the 1st time buyer. Rather than make it more difficult for everyone in this position, several lenders make it easier to apply for and get them .

A mortgage is probably the biggest sum of money you’ll ever borrow. For this reason it’s imperative that you compare mortgage loans very carefully in order to discover which one is right for you and your demands, as well as your payment ability.

Major things to consider

It is very important to check your choices for home loan just before picking a choice considering that home loans are very abundant in the marketplace. For these reasons you should thoroughly do a comparison of mortgage loans.

The mortgage rate of interest being offered is without doubt the number 1 feature to think about when you compare and contrast mortgages. There are plenty of mortgage loan kinds available these days such as first time home buyer mortgages, low doc mortgages, rent to buy mortgages, discount mortgages, basic rate mortgages, honeymoon mortgages, fixed rate mortgages, and even more.

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Discover The DIY Borrowing Capacity Calculator

Are you wondering; How much Can I Borrow for a Mortgage? If so, then before going through the whole process of going to a Loan Officer, having your credit pulled and having to wait forever to find out how much you can borrow try using these 3 Steps.

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Step 1
Total Your Monthly Expenses/Payments

The first thing we need to do is come up with a Total of your Monthly Obligations. But, you only need to add up things that show up on your Credit Report such as Bank Loans (student, auto, business or personal), Credit Cards (but we only need to use the Minimum Payment for the Monthly Expense) and any other “Revolving” debts you may be paying monthly.

Now you will “not” include payments such as insurance payments (even for House Insurance), mobile phones, utilities (cable, gas, electric, etc.) or anything else that can be cancelled without future obligation.

Also, you will need to calculate your “Proposed Mortgage/Loan Payment” and add that into the Total of Monthly Payments/Expenses.

Quick Note: If you are “Refinancing” then you will not include your “current” mortgage payment because it will be included with the refinance that you are applying for now!

                               

Step 2
Calculating Your Monthly Income

Next we need to figure out what your Monthly Income you have and anyone else that will be an applicant on the Mortgage/Loan with you

Here are some guidelines…

  1. Overtime- income generated by working overtime can only be applied to your monthly income if and only if, you have worked overtime on a regular basis for a minimum of 6 months and with some lenders 2 years. There are exceptions in instances where the overtime is mandatory, like police, nurses, bus drivers, construction workers etc.
  2. Rental Income- to use “Rental Income” when calculating your Monthly Income, then you must have a “Lease” which is signed to show that you will be receiving rent for a “guaranteed” amount of time. If you do not have a lease then you can show a licensed real estate agents rental statement or “bank statements” clearly showing monthly deposits every month.

Now that we have your “Total Monthly Expenses & Income” we can move on to the 3rd and final step…

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Step 3

Calculating Your D.T.I (Debt To Income Ratio)

The “DTI” is what the banks use to see if you qualify for a Mortgage/Loan. It is the percentage that your total monthly expenses will be of your Total Monthly Income.

We calculate this by…

Taking your “Monthly Debt” and dividing it by your “Monthly Income”.

E.G. A family with $4,000/month in expenses and $10,000 in Monthly Income would have a DTI of .40 (which is a 40% DTI).

Depending on the “Loan Program” you are applying for, the DTI will differ from program to program. But a Safe Bet would be a 38% DTI. Now this, in the past few years, was as high as 50 or even 60 (which is one of the reasons for the recent “economic crisis”).

However, if you are a First Time Home Buyer with a good deposit and you apply for a Mortgage then I have seen DTI’s as high as 48% getting approved a great deal of the time if the Credit and other factors are good overall.

That’s it, now there is no need to wonder… “How Much Can I Borrow”? Because now you are equipped with the knowledge and understanding to find out how much you can borrow for yourself.

If you want to take the guesswork completely out of the equation check in with a professional mortgage broker who has great software tools that cover most lenders borrow capacities.

 

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