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When applying for a home mortgage there are factors to consider. The more knowledgeable you are in what is required the more the chances that you will fulfill the requirements and qualify for the home mortgage. There are many home mortgage lenders mainly commercial banks, credit unions, internet providers and financial service providers. They offer different terms and conditions.

There are many ways you can shop for a home mortgage. You can check the newspapers in the real estate page to see the APRs offered by different lenders and compare them. Ask the lender if the APR is fixed, Adjustable Rate Mortgage or variable. Fixed rates do not change but variable rates change over time and you might find yourself paying higher repayments than you had planned. ARM start as fixed and change to variable after an agreed period of time.

You should also ask the lender if they charge penalties on early repayments. There are online home mortgage lenders which make the whole process easy for you. They have many options to choose from which range from the traditional mortgages, 100% financing, mortgages for those with bad credit to loans to refinance your home. Refinancing gives you an opportunity to change your home mortgage interest to lower interest rates which will lower the monthly repayments. This can also be achieved by extending the repayment period.
The mortgage lender will consider the credit rating of the borrower. The borrower with good credit history will qualify for lower-interest rates including brokerage fees known as APRs than the borrower with bad credit.  If he has a bad credit history he might not qualify for the mortgage loan especially if it shows re-possession, foreclosure, bankruptcy and default on repaying previous loans. If he is given the loan he will be given on stricter terms. The credit rating is recorded in a credit report and the borrowers score is calculated.

The lender will need to check the ability of the borrower to repay the mortgage. Income analysis is done taking into account the salary and other sources of income. Employed people who earn a regular salary will qualify for the loan because they will be able to repay the home mortgage which can be deducted from the salary directly. Self-employed people will need to prove their ability to pay by supplying the bank with income tax returns.

The income is evaluated to show if the borrower can be able to pay the mortgage over the 15-30 years depending on the agreed repayment period. The debt to income of the borrower is evaluated. When the ratio is high it means the borrower has heavy debts and lending to him might be very risky unless this is supplemented by assets especially liquid assets. These include cash, bonds, mutual funds and stocks.

Collateral is the property which backs the home mortgage loan. The home will be the collateral and the lender will retain or charge the title until the mortgage is repaid in full. 

Last modified onTuesday, 02 April 2013 23:45
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