First Mortgages
First mortgages are the most common of all types of mortgages and help realize the American Dream i.e. having a house of your own! Despite being the most common first mortgages are the most difficult and cumbersome to get approved. First mortgages enable an overwhelming majority of people to become homeowners. If we eliminate first mortgages from our financial and economic systems an overwhelming majority of people would no longer have access to basic amenities of life such as homes and cars etc. Imagine living in a world where only cash based transactions are allowed. What do you currently posses (owing to mortgage financing) that you would have to forego in such circumstances? As mentioned above first mortgages are the most common method by which individuals and businesses purchase residential and commercial properties. If we were required to pay in cash a very small number of people would be able to afford such amenities. Most people are completely lost when they set out to get first mortgage for their homes. However, this situation can be easily avoided by research thoroughly before you contact a mortgage broker or a mortgage loan company.
Pre-qualifying for your First Mortgage
It is a good idea to get pre-qualified for your first mortgage. You can get pre-qualified by going to a lender who will require some general information such as your current income, price range of the home you are planning to buy, monthly payments you can afford to make, interest rates etc. Pre-qualifying before the first mortgage is a good idea since it quickens and smoothes the process. Pre-qualification means that you will most likely qualify for a mortgage loan (from a particular lender) by keeping in view your current condition.
Mortgage Calculators
Before you start to looking for homes it is a good idea to use a mortgage calculator to assess various factors (such as whether you will qualify for a loan, maximum amount that a mortgage loan company will loan you, interest rate and monthly payments etc) to determine your exact position. Despite the overwhelming number and types of mortgage calculators it is a good idea to use simpler ones initially. Experts suggest using all or some of the following mortgage calculators:
- Mortgage Qualifier is a mortgage calculator that helps you determine if you are in the position to afford a mortgage to buy the house of your dreams. If you can in effect afford one what is the maximum amount that you will qualify for from different mortgage loan companies.
- Mortgage Required Income Calculator is used to ascertain the level of income you need to be eligible for a mortgage loan and how different interest rates would affect your required income. In effect it serves the same purpose as the mortgage qualifier i.e. determining if you can afford a mortgage.
- Mortgage Tax Savings Calculator helps you calculate tax savings from paying mortgage points and interest since these are deducted from income when calculating the tax liability on your disposable.
- Mortgage Point Calculator is used to determine the feasibility of buying mortgage points. Mortgage points refer to prepaid interest, are paid at the time of signing the mortgage loan contract and are expressed as a percentage of the total loan amount. Mortgage points calculator helps you determine the optimal number of points and if you should opt for them at all.
- Maximum Mortgage provides you a rough idea of what is the most likely mortgage you will be able to get. It also provides an idea about interest rates to be charged on various mortgage loan windows.
Mortgage Lenders
There are a large number of mortgage lenders operating in the mortgage loan market. These are providing various different types of mortgage loans. Mortgage lenders may be a person or an entity i.e. mortgage lending institutions. You should carefully choose a mortgage lender before signing the mortgage contract. This is because a mortgage contract is a long term relationship and may become difficult to manage if you can not easily and readily interact with your mortgage lender. Therefore choosing mortgage lenders is a very important decision and extreme caution should be exercised in making it.
Mortgage Insurance
Mortgage insurance provides protective cover (for the amount stated in the mortgage insurance policy) in case of default by the borrower. Mortgage insurance is available for almost all types of mortgage loans such as first mortgage loan, second mortgage loan, commercial mortgage loan, mortgage refinance loan, construction mortgage loan etc. Private mortgage insurance provides protection to (private) mortgage insurance company against default due to death or disability of the lender. Insurance cover provided by private mortgage insurance (PMI) depends on your individual circumstances. Most government mortgage loans are protected by private mortgage insurance. In decreasing term mortgage insurance protective cover decreases over the life of the policy i.e. lesser the share of the mortgage loan company in the property proportionate will be the cover provided by mortgage insurance company. Borrowers who want to protect their mortgage in case of death most frequently purchase decreasing term mortgage insurance. Decreasing term mortgage insurance policy guarantees to pay the outstanding amount of your mortgage in case of your death. As the protective cover provided by the decreasing term mortgage insurance policy decreases over time premiums also decrease. In case of cancellation, your decreasing term mortgage insurance policy does not pay any surrender value. There are various types of first mortgages available in the market. You should keep in mind your distinct needs (such as your budget, desired payback period and interest rate etc) when shopping for first mortgage. Never buy the first suitable mortgage financing contract you come across. It is a useful practice to compare the features of different types of first mortgage contracts. Assess the first mortgage contract very carefully to ascertain that you are not paying for services that you do not require or did not opt for. Mortgage points, home insurance, home warranties and hazard insurance are prime examples of these extra costs. Choose a mortgage broker with an immaculate record. It is always preferable to choose a broker recommended by a friend or relative.