Bob Hughes

Lenders

Income. Lenders measure gross monthly income, not take-home pay, when evaluating a borrower's ability to afford a mortgage payment. Most conventional loans require that home mortgage payments should not exceed 25% to 28% of a borrower's monthly gross income. If a couple is borrowing, the income of both are combined for consideration. Government loans allow higher percentages.

Total Debts. The lender will consider a buyer's anticipated mortgage payment and add it to all other borrower debts, including monthly car, credit card, and other revolving credit and real estate payments. For conventional financing, the total amount of monthly debt payments including home mortgage, should not exceed 36% of monthly gross pre-tax income.

Cash on Hand. A lender will expect the buyer to have enough cash to cover the down payment (5% of the sales price on a 95% loan, 20% of the sales price on an 80% loan, etc.); all of the buyer's portion of closings costs (some closing costs - M.I.P., etc. - can be financing), plus at least three months of mortgage payment left over in savings.

The amount of a mortgage payment is dictated by:

The size of the mortgage
The interest rate of the mortgage
The term of the mortgage
P.M.I.
Homeowners Association fees

The term or amortization period of most home loans is 30 years. Recent years have seen an emergence of popularity for the 15-year loan, which involves a somewhat higher monthly payment and slightly lower interest rate than its 30-year counterpart. Fans of 15-year mortgages like them because of the obvious advantage of faster equity accumulation; a home can be paid off in half the time consumed by most home loans.

Most people still prefer the traditional 30-year term and its lower payment. Many people don't realize that they can make extra payments on a regular 30-year loan resulting in faster equity accumulation and reducing the amount of interest paid over the term of the loan. You can often request that the lender apply the overpayment to the principal of the loan only or look for a loan such as the bi-weekly mortgage.

For more information on loans visit the site listed below:

www.goahm.com