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July 25, 2018 at 11:11 am

What You Need to Know Before You Apply for a Home Loan

Loan Application FormIt is great to have your own home while you are still young. You don’t need to wait until after you get married to have your residence. Having a home means a lot to most people, and it gives a person credibility and good standing in the community.

However, there are things you have to do first before applying for a home loan in Lake Oswego. These include computing for your finances, and paying off some of your existing loans.

How to Qualify

A mortgage is a loan on the house. As such, it has to be repaid within the term of the mortgage. The monthly mortgage payment can be computed beforehand and this amount is compared with how much a person can afford to pay. The clincher in this equation is computing for the affordable monthly payment.

Typically, this is 25% of the monthly take-home pay, less any monthly payment on existing loans. This is an essential factor which lenders would look at to determine how much of a mortgage you can afford, hence how much of a house you can afford.

Other Requirements

Aside from the monthly income and the total monthly debt payments for auto loans, student loans and credit card payments, it is also essential to know the person’s credit score. On top of that, it would also help if the person has cash which can be used as a downpayment for the house. All of the above data is used to calculate how much house is affordable.

All mortgage lenders rely heavily on the credit score. Having a good credit score gives a person a bigger chance of getting a loan. The downpayment amount is free cash available to the borrower, which could be cash savings of some form, or an asset which can be disposed of on short notice. Buying a home requires a down payment which is considered as participation by the borrower on the house and loan.

The price of the house, less the down payment is the amount of mortgage required. The monthly mortgage payment depends on the total loan taken out. A smaller house equates to a smaller loan and more affordable monthly payments.

Buying a home requires a taking out a mortgage, and for borrowers, they have to take stock of their cash for a down payment, and how much they can afford in monthly mortgage payments.