Mortgage Definition

When you purchase a home probably that will be the largest purchases you’ll make in your life. It will cost a lot and, and other things will affect your financial.

home mortgage loan - what is the meaning of home mortgage
What is home mortgage?  – photo credit: loans.usnews.com

A Home mortgage might help you to have your dream home. Same as other kinds of loans, in Mortgage there are some amount borrowed, rate of interest, and certain period of time the loan must be repaid.

What is a Mortgage?

A mortgage is a loan that is used to buy your home. Something that makes it different from other loan is that a home mortgage is used for the purchase of real estate.

Mortgages can be customized depends on period of the loan, down payment, monthly payments, and interest rates.

Mortgage Process

home mortgage process should you know
Infographic source: keepingcurrentmatters.com

Type of Home Mortgage

1. Conventional loans

Conventional loans got its popularity because of the low rates and increasingly flexible guide.

This loan is not formally supported by any government entity. Also, the guidelines are set by two agencies that have contributed to standardize mortgage loans in the U.S.

2. VA Loans

VA loans are specially a home mortgage designed to help some certain groups become homeowners with affordable cost. Like the groups of military personnel or veterans.

They will get benefits like no down payment, mortgage insurance, and allows flexible guidelines.

3. FHA Home Loans

FHA loans have lower rates than conventional loans. The lenders will accept lower credit value. Also, FHA loans down payments just 3.5%.

4. USDA Mortgages

Home buyers can finance 100% of home purchase price if getting access to better than average mortgage rates.

This is based on comparison of rates with other low down payment loans, USDA Mortgages are discounted.

5. FHA 203k Loans

By use FHA 203k loan you can finance not only one. You will get two primary items those are the house itself, and it repairs if needed. Those will be just in one transaction.

6. Jumbo Loans

You will need an extra or jumbo loan. This is happen while you decide to buy an expensive property. You will face different loans rule.

Interest rates of Jumbo loans are higher than conventional loans but the rates are Adjustable. Jumbo loans are popular among high loan borrowers.

How About Mortgage Rate?

There is a set of a certain interest rate under specific terms in the mortgage agreements. And same monthly payment based on period of loan.

Every loan requires closing costs. Certainly people wants lower mortgage rate. In this case you can pay additional closing costs.

But if you want lower closing costs, you have to accept a higher mortgage rate.

Fixed Rate Loan

Looking for a loan that the interest rate never changes? That is Fixed Rate Loan. The payment stays constant while homeowners pay decreasing amounts of interest and increasing amounts of principal every month. Probably you ever heard, this process is called as amortization.

Adjustable Rate Mortgage (ARM)

It’s a mortgage for which the interest rate adjusts based on periods of the loan. But the rate is not adjustable. At the beginning group of years, the rate is fixed.

But don’t worry the rate will be adjustable after the first group of years. This is happened because the rate is carefully controlled on this mortgage loan.

Fixed rates vs adjustable rates mortgage (arm)
Infographic Source: www.jefferson-bank.com

Mortgage Calculators

Buying a home is probably the largest financial decision. It shouldn’t be a carelessly decision.

Setting a realistic budget before can help you avoid falling in love with a home you can’t afford. That’s why a mortgage calculator can help to predict monthly mortgage payment.

1. Mortgage Payment Calculator with Private Mortgage Insurance (PMI)

This is a mortgage calculator Based on recent PMI rates. MGIC is a mortgage insurance company. MGIC require you to pay a fee on top of your mortgage payment.

This insurance make the loss of lenders can be avoided. When you put less than 20% down on a conventional loan, this PMI required certainly.

2. FHA Loan Calculator

FHA loans are typically available to those who just require 3.5% down. Compared to other loan, FHA Loans re super-lenient.

The comparison is based on credit value and employment history. Use FHA mortgage by run the numbers, so you can know if you’re a homeowner.

3. VA Loans Calculator

As we know this loan require zero down payment. Also, the credit scores and income levels are lenient. This calculator shows home buying power when you use VA Mortgage Loans.

4. USDA Loans Calculator

You don’t have to pay down payment in USDA Loans. An USDA mortgage calculator will describe details of costs associated with USDA Loans.

But many home buyers don’t know why each cost exists. So you have to pay attention to the descriptions of each cost.

5. Mortgage Payment Calculator

This mortgage payment calculator will help home buyers to specify the cost of homeownership. The cost is based on mortgage rates.

The Mortgage rate and loan periods can be easily adjusted to reflect your current finance situation.

6. Home Affordability Calculator

Home Affordability Calculator is depends on Home Price, your Income, and Monthly Payment.

7. Down Payment Calculator

If you know about home general price range or its actual value, put it into Down Payment Calculator to see the type of mortgage loans you are eligible.

This is based on the home’s value (in percent) you can afford to pay.

Loan Limits

The Federal Housing Finance Agency (FHFA) publishes loan limits that occur to all conventional mortgages type depends on geographic location. Every loan limit is different from other regions.

USDA Income Limits

In order to be eligible for many USDA loans, every household have to meet the income guidelines. Purchase of a house must be located in an eligible rural area as determined by the USDA.

Why Home Buyers Decide to Use Mortgages

We all know buying a home is not cheap. When you decide to buy a home, it’s likely that you’ll seek a loan from a bank. With a home mortgage, the home buyer borrows money from a lender to afford a home.

It depends on several things, every home buyer is different and mortgage is different, too. Your loan terms are depends on your financial situations.

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