Mortgage Loans 101

Mortgage Loan Basics

A mortgage loan is used to purchase real estate. Mortgage loans usually come in 30 year and 15 year intervals. There are two main categories of interest-based mortgage loans that most people deal with. These include the fixed rate mortgage and the variable rate mortgage. The fixed rate mortgage locks in your interest payment schedule for the duration for the entire loan (30 or 15 years). This can be beneficial, as there is no risk for sharp interest increases (which can be caused by demand and the Federal interest rate set by the Federal Reserve) to affect your loan interest rate (and interest payments). However, the interest on these at the start are usually slightly higher than variable mortgage loans, as they present more risk to the lender.

Variable rate mortgages typically have a slightly better rate of interest, but are more risky to the borrower, as the interest will fluctuate from year to year, yielding more uncertainty and risk with your interest rate. Upon the signing of a loan, interest payments are then made on a monthly basis. That means that on a 30 year mortgage loan, you will end up making a total of 360 monthly payments.

Mortgage Loans Down Payment

Down payments are a critical element in the LTV ratio (loan to value), which lenders use to determine the riskiness of a loan (which is then used to determine your interest rate). If you put a 30% down towards the payment on the property, the LTV ratio would be 70%, thus giving you a better risk profile than if you were to only put down 20%, which would give a LTV ratio of 80%.

The more you can put down as a down payment and lower the LTV ratio, the lower your interest payments will end up being. Many sources recommend that you should place at least a 20% down payment on the property when signing a mortgage loan.

 

Mortgage Loans Repayment Calculator

Using our mortgage repayment calculator is simple. Simply enter the purchase price of the property (which is also the total size of the loan), the down payment you are able to put down towards the property, the interest rate that you were either quoted by a lender, or an estimate. Finally, the last piece is the term of the loan (either fixed or variable).

Once you have made these inputs, the mortgage calculator will create a detailed payment schedule that you can use to see the amount of the payment made each month, as well as the breakdown between the principal vs interest in each payment. You can find it on LoanCompute.

Mortgage Loans Tips And Advice

First of all, it is important to have good credit when signing a mortgage loan. Make sure your credit score is as high as possible and that any late debts are repaid. Second, it helps to be aware of the Federal interest rate. If it’s at a low point historically, it may be wise to get a fixed mortgage loan, so you can lock in that rate for the entire duration of the loan.

Additionally, it’s important to understand that you aren’t permanently locked into an interest rate without a way out. There is an option to refinance the loan by taking out a new loan to cover the original, at a different interest rate (perhaps do to a lower federal rate or because your credit score improved). Third and most paramount of all, it helps to pay the loan off ahead of time. The quicker you are able to pay the loan off, the less interest you will incur during the duration of the loan.

Apply For Mortgage Loans

You can apply for a mortgage loan very easily, simply visit a branch or apply directly online on an online mortgage lender’s website. You will need to be able to provide several pieces of information, such as valid forms of ID, credit history, proof of employment and salary, and potential co-signers, which are parties that may share liability for the loan (possibly decreasing your interest rate).

Mortgage Loans Brokers

There are many home mortgage brokers with various loan terms to offer. For a detailed review of mortgage brokers, have a look at LoansHire, which provide a rating for the top brokers. It is important to take the time to examine each broker and speak with a representative about getting the best possible interest and payment terms.

Reverse Mortgage Loans

A reverse home mortgage is quite different from a regular mortgage loan or a refinance loan, as it does not require any credit approval and uses the property as collateral. For a thorough reverse mortgage faq, and a list of reverse mortgage companies visit WestVirginia-Mortgage.