A mortgage is a type of loan that enables you to buy a home without having enough cash to pay for it upfront. The loan is secured by a piece of property, such as your home, and you agree to repay the lender with interest over an agreed-upon period.
Mortgages come in a variety of types and are offered by several lenders. Understanding the differences can help you choose the right type of mortgage for your needs and budget.
Getting pre-approved is an important part of the home-buying process, as it gives you and your real estate agent a good idea of how much house you can afford. In this stage, you provide basic information about your current income and debt, as well as the home you want to purchase. The lender will then verify your details and review your credit report.
Your credit score and debt-to-income ratio are key factors that influence how much you can borrow and how much of your monthly income you can spend on your mortgage payment. A high credit score can result in a lower mortgage rate, while a high debt-to-income ratio will mean youll have to make a larger down payment or pay more in interest over the life of your loan.
The lender will also take into account any other existing debts you have, such as credit cards or student loans. Your DTI should not be greater than 28% of your monthly pre-tax income, but you may be approved with a higher percentage if you have a strong credit history and a substantial down payment.
Once your lender is satisfied that you qualify for the loan, theyll give you an approval letter. This will list the specific terms and conditions of your loan, including the interest rate and mortgage term. The lender will also explain what happens if you dont keep up with your mortgage payments, which is called foreclosure or repossession.
When you sign your mortgage, you give the lender a legal right to take ownership of the property if you fail to repay your loan. This can be accomplished through a foreclosure sale, which is when the lender takes possession of your property and sells it to recover its money.
Mortgages are a necessary part of buying a home, but you dont have to be overwhelmed by the confusing terms and options involved. Our mortgage calculator will help you determine the amount of your monthly payment and how much of it will go toward paying down principal and interest on your loan.
You can enter all the details of your mortgage in our mortgage calculator, and then toggle between an annual and monthly view to see how much each of your monthly payments will be. You can even calculate the total amount of your mortgage and estimate your payoff date.
The mortgage calculator is also a great tool for homeowners who are interested in refinancing their loans. It can help you determine if its worth negotiating the rate or taking out a new loan with lower monthly payments and a longer term.