The Basics of Mortgage - Part 2

10:05 AM Posted by Jason


Types of Mortgage

Mortgage also depends on mortgage term and interest rates. The mortgage term is usually 15 or 30 years. There are rates too of two types Fixed rate or adjustable rate mortgage. In fixed rate mortgage the mortgage interest rate will be same through out the loan term. In case of adjustable rate mortgage, its completely opposite to the previous. In ARM (adjustable rate mortgage) the mortgage rate fluctuates according to the market rate. The most popular mortgage is 30 year mortgage of fixed rate. This longer time frame will lower the monthly payment and the fixed rate will stabilize your future payment. With the lower interest rate it is very popular among the borrowers. But its problem is that if the interest rate declines then still you have to pay the older high interest rates. But if you have good credit history and adequate income then you can opt for refinancing your mortgage if the mortgage interest rate goes down. There is another term is also available its 40 years mortgage.

Mortgage Rates and Minimum Incomes Needed to Qualify

Mortgage Rates and Minimum Incomes Needed to Qualify

Interest Rate

Monthly Payment

Minimum Annual Income

4%

$454

$21,770

5%

$510

$24,479

6%

$570

$27,340

7%

$632

$30,338

8%

$697

$33,460

9%

$764

$36,691

10%

$834

$40,017

11%

$905

$43,426

12%

$977

$46,905


All Mortgage companies generally use ratios to determine the mortgage payment. From above you can check the monthly payments of principal and interest, and income needed to qualify for $95,000 mortgage at different mortgage rates, amortized on thirty year schedule and assuming the payment ratio of 25%.

From: National Association of Home Builders, The Economics Division.


Some other options:

When you can’t afford a conventional mortgage, there are many options available in the market. The seller can sometime propose owner financing. FHA (Federal Housing Administration) can also offer you loan at merely 3% down payment but then you have to buy mortgage insurance. For the veteran U.S. army personnel, the VA (Veterans Administration) can offer no money down payment mortgage. You can local mortgage lenders, FHA, Fannie Mae or VA for more information on mortgage options.

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