Jared Lee asked:




Several types of mortgage loans are being floated in the market by multiple financial institutions. However, it is advisable to have information regarding various criteria that are taken into consideration by mortgage lending firms while determining the eligibility of a borrower for a mortgage home loan. As these criteria determine the interest rate on the loan, knowledge about them is even more vital.

The most important criterion that lenders usually go for is about the repayment capability of the borrower. Credit history and FICO scores of the borrower provide ample information regarding financial status and the repayment history of the borrower. Lenders usually give prime importance to borrowers having a reasonable credit history with credit scores of more than 600. Credit reports of the borrower can be obtained from any of the three leading credit bureaus in the U.S.. Credit reports contain details such as the income of the borrower, his credits, and any late payments made towards rent, mortgages and credit card bills.

Another important criterion is the debt-to-income ratio of the borrower that determines the eligibility and interest rate on the loan. Borrowers having a debt-to-income ratio of 28/36 are considered ideal for a mortgage loan. However, certain lenders entertain customers with a poor debt-to-income ratio. But, loans to these customers are provided at a higher interest rate and require a high down payment.

Apart from these, the customer is expected to have a steady income and a satisfactory employment record so as to multiply his chances of getting a mortgage loan approved. The customer must be employed with a single employer for a minimum period of 2 years in order to be eligible for a loan.

Interest rates on the loan also vary if the loans are federally insured or assured by any private mortgage insurance companies.

Mary

Belizegirl asked:


i was told my Wells Fargo whom i currently have my home loan with and when i asked them about the program they said that i did not qualify because i have private mortgage insurance.

Maureen

Joseph Kenny asked:




When you need the cash out of the equity of your home you may wonder which one is better for you – a cash out mortgage or a home equity loan. The truth is that both have their advantages – but probably one will be better for your situation than the other. This will mean that you need to know a little about each in order to make up your mind. Here are some differences between the two.

A cash out mortgage will involve refinancing your first mortgage. This could be a great way to go, especially if you can get interest rates on the refinance that are at least one percent (two percent is to be preferred) lower than your present mortgage rates. So not only could you get the equity you want, but also you will save thousands of dollars by getting better interest rates, too.

You get the equity you want in a lump sum when your cash out mortgage is approved. All you need to do is to refinance for the amount of the mortgage that is still outstanding, and add the amount of cash you want from your equity. You will want to watch and make sure that you do not refinance for an amount equal to 80% of the value of your house – that includes the equity, as well. The reason for this is simple, you want to make sure that 20% of the value of your home is left intact so that you do not need to pay the Private Mortgage Insurance. This could add thousands of dollars each year to your payments.

You can enjoy further savings if you decide to shorten the term length, too. If you make the remainder of the refinanced loan to be about 5 years less than what you have now, you could literally save tens of thousands of dollars more over the life of the mortgage.

A home equity loan is another way to get to the cash in your equity that you want. A home equity loan is a second mortgage, and you may be able to get it as either an adjustable rate mortgage or a fixed rate mortgage. While it obviously does not require you to refinance your first mortgage, it will give you a new monthly payment – and the cash you want. As a second mortgage, there will also be closing costs and other fees – with the possible exception of going through your present lender.

The interest rate will be higher than on a first mortgage, when you get a home equity loan. The interest rate, as well as the amount you can borrow, will depend mostly on your credit rating, and your ability to repay the loan. Make sure your credit report is accurate before you apply. If there are inaccuracies on the report it can hurt you and give you higher interest rates than you might have otherwise, or even cause your home equity loan to be rejected.

Before you agree to either a home equity loan or a cash out mortgage, you will want to shop around to find the best deal. It will take some time to do it right – but you are the one who will benefit from the savings. Check the various features, such as the interest rate, the fees, and the terms of repayment – including the monthly payments.

The choice is now yours. It can basically be summed up as – do you want to refinance your existing mortgage, or get a second mortgage? Both have their benefits, but only you can decide which one will work best for you.

Stella