Getting home mortgage loan

Are you interested in getting a home mortgage loan soon? Here is some necessary information you need to know about home mortgages. Arm yourself with these pieces of information before moving further.

Everyone indeed believes that courage, hard work and determination are the keys to financial prosperity. One of the most predominant symbols of stability is owning a house. More often than not, owning a house today means getting a home mortgage loan for finance the purchase. A home mortgage entails that you pay a certain amount of monthly payment over an extended period (also called term, usually lasting 10 to over 30 years).

When you get yourself a home mortgage loan, it usually covers four inclusions, namely the principal amount, the interest you owe on balance, homeowner’s insurance as well as real estate taxes. There are two different types of home mortgages: the fixed-rate mortgage and adjustable-rate mortgage. Your home mortgage loan can also include conventional, non-conventional, interest-only, reverse mortgages and home equity loans, among many others.

How to apply for a home mortgage loan?

There are only three steps you need to take to apply for a mortgage. First, you fill out an application form and schedule a meeting with your lender. You must present all supporting evidence about your identity, financial status and credit situation. You usually need to pay around $100 to $300 for this. The next step to do is to wait for your lender to obtain your credit report for you and to verify your application and financial status.

After these two steps, your next move is to determine whether or not you should be approved or not. Your lender would rely mostly on your credit standing, your financial history and the appraisal of your collateral.

You can speed up the entire application process by first checking whether you are qualified for such a loan. If you think you are, complete all your requirements and financial paperwork beforehand, ready for submission anytime your lender wants them. It is also not a bad idea to check on your application every now and then, as it will call their attention for sure.

Who can qualify for a home mortgage loan?

Anyone who has a stable income and has an excellent financial standing can well qualify for a mortgage. Those with poor credit ratings may also qualify, usually at the expense of increasing interest rates. Furthermore, there are many ways by which you can achieve financial stability faster with home loans. You can, for example, make a sizeable down payment to lower your rate and to make it easier for you to get approved.


The key to success in your home mortgage loan is planning. A home is indeed a significant purchase, and preparing for it should be the way to go. You should start to aggressively save as much money as you can years before planning on your home purchase. Get as much help as you can, sell your investments and assets if need be, use your pension plan funds or personal savings – these are all good ways to get yourself the down payment you need.

Basic home loan terms explained

The wonderful world of home buying can sometimes overwhelm the first time home buyer. They are inundated with information riddled with terms of art. ARMS, points, interest rates, reasonable faith estimates, pay-downs, lock-in dates, so on and so forth. Though some or all of these terms may seem somewhat foreign to you, there are simple explanations for each one of them.

Let us start with the different types of loans there are. Typically all home loans fall into two basic categories: mortgages and home equity loans. Mortgages are simply a loan against property that is secured with a “mortgage”. This “mortgage” is a lien against the property until such time that loan is satisfied. So a mortgage is a loan against property that is secured with a lien against it.

A home equity loan is a loan that is also secured with a lien against the property. The home equity loan lien is secondary to the first mortgage on the home. This type of loan is based on the amount of equity in the house. Equity is the difference in dollars between the value of the home and the amount owed on it. Equity can be a positive number (the house is worth more than what is owed) or can be a negative number (negative equity) which means that there is more owed on the house than the house is worth.

A lien is simply a legal term that indicates that someone other than the homeowner has a legal right and interest in the property. So, if the property is ever sold, all liens need to be satisfied – any money owed to anyone with a lien must be paid. Otherwise, the new owner may become obligated to pay the amount owed. A lien is against property, not a person. Typically in all real estate transactions, there will be a title search that will reveal any liens against the property. This title search is an examination over anyone and anything that may have some legal interest, obligation or right to the property.

If there are multiple home loans on a property, the order they are paid in is the oldest to the newest. This is only a factor if the property is being sold for below what is owed. This is either through a “short sale” where the homeowner is selling the house for below the amount that is owed in the house. They will need approval from all lien holders in order to do this. This is also an issue if a house falls into foreclosure.

Within these two types of loans, you will want to know the difference between a fixed-rate mortgage and a variable rate mortgage. A variable or adjustable-rate mortgage is an ARM. Fixed-rate mortgages have the same interest rate from the first day of the loan to the last day of the loan unless it is refinanced. A fixed-rate or variable rate loan will generally start for a while at a specified rate. After that period ends, if the loan has not been paid off or refinanced, then the rate becomes adjustable based on specific conditions set forth in advance – typically tied to the federal interest rate. An ARM loan will have typically a 3 or 5 year period during which the rate is lower than the going rate. This is used to entice would-be borrowers or help borrowers have lower payments for the initial period.

“Points” are often discussed in connection with loan packages and interest rates. You can “pay down” an interest rate by paying points, for example. What this means is you can pay for a lower interest rate if you spend a specified number of points. Points are simply one percent of the loan amount. So a $100,000 loan equates to $1000 for every point.

Another term you will often here is PMI, private mortgage insurance. PMI is insurance for your lender when the amount you borrow is more than 80% of the value of the property. In these cases, the borrower needs to pay for this insurance policy. The calculation for your monthly PMI payment is 0.5% of your loan amount divided by twelve.

Tied to the calculation of PMI, as well as many other factors of the loan is an appraisal. An appraisal is a determination by a real estate professional of what the value of the property is. They will evaluate the property and similar properties in the area. They will consider market trends, recent sales and other factors to give an estimate on what the property is worth and how much could be sold.

Another potential add-on to your monthly payments is escrow payments. Escrow is money that is being held typically to pay taxes. Your lender will collect 1/12 of your yearly taxes every month to be assured that your taxes are paid. Your lender then makes your required tax payments. Typically your lender will have a cushion in the escrow account of 2 – 3 months in case you fall behind in your payments.

Though there are many more terms, you may encounter these are the most often used, misunderstood terms. During the home loan process, however, you should never feel embarrassed or ashamed to ask what a term means. The more you know, the better off you will be.