Real estate – the mortgage loan
When thinking about purchasing a property, most people think about getting a mortgage loan. Taking into consideration certain aspects, like the size of the loan, its maturity, the method of paying off the loan, mortgage loans vary greatly.
Recent mortgage situation in the U.S.
In 2013, the mortgage interest rates have fluctuated greatly. Right now, more and more homeowners make their mortgage payments on time, helped by low-interest rates and stable job gains.
In July-September, the number of mortgage holders that were behind with their payments fell to 4.09% compared to last year, when the percentage was of 5.33%. The latest rate also declined from 4.32% in the second quarter.
In November, the average rate on the 30-year loan increased to 4.16% from 4.10% at the end of September, which was the lowest level in four months. On the 15-year fixed mortgage, the percentage rose from 3.20% to 3.27%. See US 30 Year Mortgage Rate Chart & 30-Year Fixed Rate Mortgage Average in the United States
The Consumer Financial Protection Bureau is said to hold the reins a little tighter in the future, which doesn’t bode well for people who are looking to buy new homes. The new lending rules they are talking about will limit future homeowners from taking out a mortgage or refinancing an existing one, this putting their overall household borrowing at more than 43% of their income. The rules aren’t limited only to the financing part, but also expands to documentation and lenders who give their customers easier terms will be faced with consumer lawsuits if the loans aren’t paid.
This isn’t good news for certain people whose credit scores aren’t strong, for young adults or those who are just entering retirement, as they will probably feel the impact the most.
To help you have a general idea on what a monthly mortgage payment mainly looks like, here are some facts:
- Principal – after your down payment, this is the total amount of money you are borrowing;
- Interest – this is the money you are charged for the loan (a percentage of the total amount you are borrowing);
- Taxes – money that is often put into an escrow account to pay for your property taxes, holding these accumulated taxes until they have to be paid;
- Insurance – most mortgages require you to have a hazard insurance in order to protect the property against fire, storms, theft, floods and other catastrophes.
In the case of a fixed-rate mortgage, the monthly payment, usually remains the same for the whole period of the loan. The only costs that change every month are the mortgage payments that pay the principal of the loan and the part that is the interest rate.
Adjustable-rate mortgage, which has an interest rate that changes usually once a year, relating to the changes in the market. A changing interest rate affects the size of your monthly mortgage payment. This works best for some people because the initial rate is much lower than a conventional 30-year fixed-rate mortgage.
There is also the amortization, which is the gradual repayment of both the original loan and the accumulated interest.
Applying for a loan
To apply for a loan, you need to have some documents prepared. The lender will first look at your employment and credit history, in order to know how likely you are to pay the loan. Stability is very important, so you don’t want to have late payment during the last two years on your credit history. Other things they will look at is if you have any late payment for your credit cards in the last six months and if there are other rent or mortgage payments that you are more than 30 days past due. You have more chances of getting a loan if your income is stable and if you have been employed in the same place for the last two years.
With huge real estate consulting experience Denis is an expert in valuation, land development, commercial constructions and managing residential and commercial real estate assignments. He provides real estate industry insight and also detailed housing market information, guidance for new home buyers through articles, papers, websites and real estate magazines. Pall Spera is one of the websites where he shares his own views and insights.