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More Mortgage Basics for Homebuyers

By
Real Estate Agent with The Don Edam Group - Owner Options Realty

Mortgage Basics

 

Adjustable or floating rate, 15-year or 30? How much mortgage can you afford? These are just a few of the many questions home buyers will find information on in Yahoo! Real Estate's How-to Guide of Mortgage Basics.

So before you start mining for the perfect mortgage, make sure you have an understanding of the options available to you and check out their report. Some highlights include the following:

  • The first step in acquiring a home mortgage is to gather the information you'll need to include in a mortgage application.
  • Review your credit report by ordering a copy from the credit bureaus used by local mortgage lenders.
  • Prequalifying for a mortgage lets you know how much you can afford and makes you a more attractive buyer.
  • Conventional mortgages limit housing costs to 28 percent of gross income and total debt payments to 36 percent of gross income.
  • Mortgage terms are usually 15 or 30 years. The longer the term, the lower your monthly payment, but the higher your overall interest costs.
  • Thirty-year loans often permit additional principal payments. One additional monthly payment per year will reduce a 30-year loan to 22 years.
  • Interest rates are fixed or variable over the term of the loan. Variable rates may be best for buyers who plan to sell within three years.
  • Generally speaking, one point is worth 1/8 of 1 percent off the loan rate.
  • A balloon payment is a lump sum payable at the end of a specified term.
  • Points and interest on mortgages or home equity debt are usually tax deductible.

Comments (2)

R. B. "Bob" Mitchell - Loan Officer Raleigh/Durham
Bank of England (NMLS#418481) - Raleigh, NC
Bob Mitchell (NMLS#1046286)

Good basic information for the consumer.  I would point out that the ratios are guild lines rather than rules.  Just closed a loan yesterday that had a 47% back end ratio.

 

Bob Mitchell

ValueList Real Estate Services, Inc. 

Jan 24, 2008 02:30 AM
Richard Ives
Chicago, IL

Good information Don.

Have a great day!

Jan 24, 2008 03:05 AM