Factors that Affect A Mortgage Loan

A mortgage loan is no small thing. It is a long period commitment that usually stays with you 15 to 30 years of your life. Because of this, so many important things have to be thought and planned about and so many factors will be decided whether you will get a mortgage loan or not.

These factors can be divided into two. The first one would be those that you need to think about before taking in a mortgage loan and the second would be the factors about you that lenders have to consider before approving your mortgage loan.

Let us first consider you.

Before you can choose the mortgage plan for you, you have to review your financial situation at present and project if your housing needs might change in the future wile you are still tied with your mortgage loan. You can ask yourself these questions to help you with this:

- How long do you think do you plan to stay in your house?

- Are there expectations for you financial income to increase over time which could allow you to pay more for your mortgage loan?

- What do you think are the significant expenses you might make in the future that could affect your capability of paying your monthly interest? College tuition fees, investing in small business plans, etc are examples of these.

The next step is to assess the level of risk you are ready and comfortable in taking. Remember that a mortgage loan takes a long time to close and you have obligations to pay for it seriously and constantly for that length of time. Decide on what mortgage rate you think you can work with. Adjustable rate is risky since interest rates change increasingly which is why it is best to project your income if it can increase over time should you take this. Fixed rate will always be safer because it is stable.

The third step is to determine the length of period you want to have the loan. Most terms are 15, 20 and 30 years. Usually, a shorter term means higher monthly payments. This is good for people whose incomes are higher than average and are stable. But, most average income people go for long term periods because aside from a smaller monthly bill that can fit their budgets, mortgage plans like this bring forth assurance to loaners.

The last step is to assess the closing costs of a mortgage loan and the lowest interest rate that you can get.

Now, let us consider the factors that might affect the approval of your mortgage loan from lenders. There are ten of these which are the following:

1. Credit report. The three major credit bureaus: Equifax, TransUnion and Experian provide your credit report. It is important to review these for errors because according to statistics, errors are present in 40 percent of credit reports. These errors can figure in your mortgage loan which would lead you to get higher interest rates or not get the mortgage loan at all.

2. Credit Cards. Lenders become suspicious when you apply for new credit cards or close current accounts when you are applying for loan mortgage.

3. Outstanding Credit. This figures much in the approval of your mortgage loan. Pay off all credits before applying for the loan.

4. Income. A steady income will give you plus points in securing a mortgage loan so it is recommended that you should avoid changing jobs or quitting your job before applying for a mortgage loan.

5. Available funds. Make sure that you do not make purchases that could consume your available funds before buying a home. Aside from a down payment, you have to consider other expenses such as closing costs.

6. Down payment A bigger down payment assures you of lower interest rates on the mortgage loan.

7. Interest rate. This determines how much you will have to pay each month. It is best to consider "lock-in" fees to guarantee yourself that you still get the advantage should interests rise in the market. Remember that interest rates continuously change.

8. Price Range. From your current financial assessment of your situation and by figuring out your debt-to-income ratio, determine the price of your home. A lender will not approve of a mortgage loan whose price you cannot meet.

9. Lender. Know your lender and inquire about the statistics concerning those mortgage loan applications they turned down and approved. According to financial experts, it is not a good sign if the lender denies 20 percent of those who applied for a mortgage loan.

10. Your honesty. Be honest when filling out all the information the lender requires from you to increase your loan approval. Beware that providing inaccurate information may backfire on you and no lender will be willing to work with you.

Mortgage Calculator: Lose that Stress from Doing the Math Yourself

When considering a Mortgage loan, knowing how much money you have and will have and how much you are willing to pay for the loan including the interest and principal is very, very important. To help you decide on projecting how much you will be paying bi-weekly or monthly, depending on the payment term you choose for the entire loan period of your Mortgage, various Mortgage Calculators are available.

These Mortgage Calculators are categorized into 15 classifications depending on the type of Mortgage you want and the terms in interests and principal you want to apply. These classifications for Mortgage Calculators are the following:

a. Mortgage Calculator to determine a borrowers ability to afford a house. This type of calculator can be classified into two. There is a Mortgage Calculator that determines if a borrower can afford a house and Mortgage Calculator to help the borrower determine if it is better for him to make a small down payment or no down payment at all or save up first, then make a bigger down payment later on.

b. Mortgage Calculator for consolidating non- Mortgage debt. There are three types of calculators under these. The first one is used for borrowers who want to consider merging non- Mortgage debt in their bought Mortgage. The second type of Mortgage Calculator is for those who want to consider refinancing their Mortgage by cash-out or by taking another Mortgage. The third kind is for borrowers who already have 2 Mortgages for a particular loan and are considering other options to help pay off the 1st Mortgage.

c. Mortgage Calculator to determine the monthly payments of their Mortgage. The types of Mortgage Calculator to be used will depend on the terms you choose. There is a Mortgage Calculator for fixed rate Mortgages, adjustable rate mortgages without negative amortizations, adjustable rate mortgages with negative amortizations, adjustable rate mortgages with flexible amortizations and Mortgage payments with temporary buy downs.

d. Mortgage Calculator to determine how much interest borrowers can save should he decide to pay an additional amount for the principal value during payment. The Mortgage Calculator varies depending on the number of payments a borrower is willing to give. These are extra monthly payments, bi-weekly payments applied monthly, bi-weekly payments applied bi-weekly and extra monthly payments to be paid in a specific period.

e. Mortgage Calculator to determine if refinancing a Mortgage will reduce its cost. This type of Mortgage Calculator can be applied to a borrower who wants to refinance a Mortgage or 2 Mortgages. Other calculators are used to determine if refinancing one Mortgage into two can reduce costs while others are used to determine if cash-out refinancing is better than deciding to take on a second Mortgage.

f. Mortgage Calculator for determining the length of time borrowers have to pay insurance premiums applied to their Mortgage.

g. Mortgage Calculator to determine amortizations. There are 2 kinds of these. One determines the savings a borrower can have on his tax on the interests and the second Mortgage Calculator determines the appreciation of property being Mortgaged.

h. Mortgage Calculator to compare two Mortgages. These are different types of calculators that compare the various mortgages that include amortizations and non-amortizations, government and non-government loans, fixed rate and adjustable interests.

i. Mortgage Calculator to compute points and fees in a Mortgage. The calculator is used to determine the rate of return of ARMs (Adjustable Rate Mortgages) and FRMs (Flexible Rate Mortgages) and the amount that can be saved or lost by using paying points for interest reduction on FRMs.

j. Mortgage Calculator for determining amounts to be paid for a Mortgage insurance and down payment and

k. Mortgage Calculator to determine the feasibility of having a Mortgage loan in a shorter term.

These Mortgage Calculators and other various Mortgage Calculators are available for use in the Internet. Companies such as Freddie Mac, Fannie May, Real-Time-Rates.Com and Mortgage -X have interactive pages in their websites where you can do your calculations online. Aside from these, other sites such as HSH Associates give free downloads of their loan calculators.

Your Mortgage Rate: What Influences It?

Most, if not all will agree that mortgage rate is the key factor mortgage borrowers look into before availing themselves of mortgages. Mortgage rate is defined as "the standard interest rate given by mortgage lenders" and "the rate of interest paid on the mortgage loan expressed as a percentage".

For Americans who want to get a mortgage, it is essential to know what are the mortgage rates that are applicable in a loan. This is very important because mortgage rate is the deciding factor that dictates the total amount of the mortgage plan and which makes a difference in various loans. Knowing the lowest and the best mortgage rate can help one save thousands of dollars in interests alone.

Aside from the various mortgage rates of lending companies in the US, the mortgage rate in the country varies depending also on the state where the borrower wants his house built.

Because of the key role mortgage rate can play with a loan, it is important for borrowers to find out the current mortgage rates before settling with a mortgage plan. Mortgage rates are seldom steady and it is difficult to determine if these will go down or up but there are certain economic indicators that can be used as point of references when the mortgage rate will be affected.

It has been noted that the rise and fall of bonds and Treasury notes has a direct relationship with interest rates that include mortgage rates. Knowing this relationship can help a borrower determine if getting a mortgage in a certain period of time is feasible for him financially. It will also help him get lower mortgage rate and help him save some costs.

Aside from all these, when one wants to obtain a mortgage, one must also understand that several factors affect the mortgage rate one will have from his loan. These factors that affect mortgage rate are:

a. Amount of loan. If the amount of loan exceeds the loan limits created by Freddie Mac and Fannie May for conforming loans, the mortgage rate increases.

b. The length of the loan. Shorter loans will mean a lower mortgage rate but higher monthly payments. Nevertheless, having shorter loans will assure you that you will be able to keep thousands of dollars later.

c. Down payment - A higher nonpayment greater than 20% - will give the borrower the best possible mortgage rate. Higher mortgage rate is applied to down payments of 5% or less

d. Closing costs. It is better if the borrower pays the closing cost than let the lender pay this. It is usually the case that borrowers, who don't want to pay all of the closing costs, get a higher mortgage rate applied to his loan.

e. Adjustable Rate. ARMs or Adjustable Rate Mortgages can give a borrower a lower mortgage rate on the start of the term but payments will also increase as mortgage rate increases over the next period of years.

f. Credit quality. If a borrower has a good credit standing, it usually follows that he gets approved for lower mortgage rate.

g. Income Level. Aside from good credit standing, borrowers who have monthly income that surpasses their monthly credit obligations are approved for lower mortgage rate. Borrowers with credit reports but have monthly incomes that barely cover their credit obligations will not be given the lowest available mortgage rate