Real Estate: Home Mortgage

Applying for a home mortgage loan can be tough and tricky for many families and individuals. Not everyone qualifies for a home mortgage as several state and financial requirements need to be provided to be able to qualify. A homebuyer needs to have a good credit rating, history and standing to be approved for a home mortgage. He also needs to have enough amount of money for a down payment, and a good and steady source of income. Calculating the debt and income ratio of a borrower is important as lenders will unlikely approve applicants who are obviously incapable to paying their mortgage.

Any borrower who has standing mortgage loan can apply for a 2nd mortgage, also known as a subordinate. If both loans – the prior and the subordinate – go into default, the 1st mortgage gets paid off first before the second; making the 2nd mortgage riskier for lenders. This is why the interest rate for this loan is higher. Lenders will have to take a look at the financial capacity of the borrower to see how able he is to pay off debt.

There are many home mortgage refinancing options that a borrower can choose from. Depending on the reason for mortgage refinancing, borrowers could choose to lower their monthly payments by extending the number of years they pay the loan; or pay less interest by electing to convert the length payment into a shorter amortization; or refinance with a cash-out option.  This option buys out the remaining principal of the original loan with additional cash proceeds that can be used to merge debt or make another major investment.