What Is a Mortgage?
Mortgage is a loan from a bank or other financial institution that provides individuals and families with the funds they need to buy a home. When you take out a mortgage, you agree to pay back the loan plus interest over a certain number of years until you own the property free and clear. Typically, these loan terms last for 15 or 30 years. Mortgages are backed by the property, meaning that if you fail to make payments, your lender can foreclose on your home. This is why it is important to keep up with your monthly payments.
In the mortgage industry, there are many different types of loans and processes. It’s important to understand the differences between each in order to choose the right one for you.
A conventional mortgage is a common type of loan that is available to most homeowners. The borrower will generally need to have a credit score of at least 620 in order to qualify for a conventional mortgage. Other requirements may include having a debt-to-income ratio that does not exceed 41% and a debt-to-assets ratio that does not exceed 28%.
The first step to getting a mortgage is completing an official application with your chosen lender. This application will ask for a variety of financial details including your debt, employment history, and assets. In addition, an underwriter will review your finances to ensure you can afford the mortgage payment each month. In some cases, a mortgage lender will require you to have homeowner’s insurance, which protects the lender against loss if the borrower defaults on their loan.
Borrowers can also choose to purchase discount points in order to lower their mortgage’s interest rate. These are fees that are paid upfront, and they reduce the amount of interest you will pay over the life of the mortgage. When comparing mortgage rates, be sure you are accounting for any discount points so that the comparison is apples to apples.
Mortgage lenders look at both your debt-to-income (DTI) and credit scores when determining whether or not you are a good candidate for a mortgage. In order to improve your chances of being approved for a mortgage, focus on paying down any outstanding debt and working on improving your credit score.
If you are unsure of which mortgage lender to work with, consider a local bank or financial institution. Choosing a local lender can make it easier to communicate with your mortgage consultant and can help you avoid any delays in the mortgage process due to distance or communication barriers. You should also ensure that the mortgage lender you select has a reputation for customer service and is accessible online or in person. For example, PNC Bank has local branches that you can visit in person, and its online mortgage application makes it easy for you to start your mortgage process from anywhere.