#mortgage loan #

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Basic concept of a mortgage

Buying a home is still the one of the most reasonable financial investments for American families, and the process of purchasing a new home will invariably involve applying for a mortgage loan. The mortgage industry has undergone comprehensive reform in the past few years, and credit guidelines have become stricter. Throughout the industry, there is an emphasis on financial education. The following information should be read as a guide for house shoppers who will need a mortgage as their path to home ownership.

Affordability should be the foremost aspect of any mortgage application process. This is determined by:

• The buyer's income

• The amount of cash that can be used as a down payment

• His or her current debt obligations

• The potential expenses required to maintain the household

• The amount of the monthly mortgage payment due to the lender

To calculate a mortgage payment, applicants must also understand the current financial terms in the market. Typical terms include:

• Interest rate

• The term of the loan, also known as the life of the loan

• The down payment

• The housing expense to income ratio

Home affordability can be determined by a mortgage broker or bank loan officer during the prequalification process. A mortgage professional can calculate how much home you can afford by analyzing your income, debts and assets. While real estate agents used to perform prequalifications, the preference now is for the process to be performed by mortgage loan professionals.

After the prequalification is handled, the preapproval process comes next. A borrower's credit worthiness and ability to repay the loan are considered in this step. This is when preliminary loan amounts and the possible amount of monthly payments are communicated to the applicants. Most preapprovals will not include the type of mortgage loan or how much it will cost the borrower to obtain the loan.