What is a home mortgage?

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You have made a promise to yourself to improve your credit history and work towards buying a new home. When you think of buying a property, the hassles of the mortgage process can be overwhelming. However, if home buyers educate themselves on the basics of the home mortgage, this does not have to be the case.

What is it: People planning to buy a home usually can’t afford to pay the whole amount of the home in cash. Hence, they require the services of a home mortgage lender. In simpler terms, you borrow money from a lender to buy a property, and need to repay the amount through specific monthly payments over an agreed period of time. The payable amount and repayment period are determined after considering your monthly income, expenditures and the total loan taken.

When looking for a mortgage, the primary factors that need to be considered are the amount that needs to be borrowed, current savings and the monthly installments you can afford to pay.

Types: Post economic slump, mortgage regulations have become more stringent and this limited the options for borrowers. However, with the help of flexible government-sponsored programs, it is easier to get home loans which may otherwise have been difficult.

Potential home buyers can find the following mortgage programs suitable:

FHA loans: These loans are insured by the Federal Housing Administration (FHA). So from a lenders perspective, the risk of not getting repayment is less in the case of borrowers who default on their loan payment. It is one of the most convenient loan options as it requires a down payment of just 3.5 percent. Moreover, a lower credit score is acceptable for this mortgage. This loan is ideal for people who cannot afford to pay 5%-20% as a down payment as required to take out a traditional loan.

VA loans: This is another popular mortgage option for veterans in the market. The Veteran Affairs (VA) is a government-backed program that has opened doors for many military servicemen to own a house in the tough lending market. The feature of these loans is that the borrowers need not pay any down payment. The interest rates for these loans are typically cheaper than conventional loans.

USDA loans: The United States Department of Agriculture (USDA) mortgage program provides borrowers the flexibility of making zero down payments. These loans are also offered with competitive interest rates. In this program people with poor credit history may qualify to receive a loan.

Besides the loans mentioned above, there are some state-specific programs available for borrowers. For example, for Texas there are some bond programs and a Veteran Land Program, through which Texans can get affordable mortgage financing in flexible terms.

These mortgage programs can be a great way to afford your dream home. However, if you ignore the simple rules, you may end up with home you can’t afford. In order to avoid such a mistake, contact a reputed home mortgage company to help you find the best option for you, and even help you with the complex paperwork.

 
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