If you know the standard terms for a home mortgage loan and fill those requirements, your application will be approved, and you will be able to make your monthly payments.
Your lender will want to determine the size of your down payment as it relates to the total cost of the property, and this is called the “loan-to-value (LTV) ratio.” Ideally, this should equal 80% or less, and you should aim for a down payment of 20%, although 10% or 15% will also provide you with some equity in the property.
Other standard terms for a home mortgage loan
As a rule, a lender will require that your monthly home-ownership expenses—including property insurance and taxes, combined with other debt payments (credit card bills, car loans, student loans) —be no greater than 36% of your pre-tax monthly income. This is known as the “debt-to-income (DTI) ratio,” and it is used to determine how much you can safely borrow.
Your credit score is an important part of the standard terms for a home mortgage loan
You will be given the most reasonable interest rate if your score is 720 or above, and if it is not, but higher than 675, you will still be able to secure an acceptable loan. A score below 620 may put you in the subprime category, and getting a loan could become much more difficult. With this in mind, you will want to review your credit report to see if it contains any errors about three to six months before applying for a mortgage. (You can obtain your credit score from Experian, TransUnion, Equifax, or LendingTree.com.)
Job history also plays a role in the standard terms for a home mortgage loan, and more detailed financial information may be required if you work on commission or are self-employed.
*Affects pricing. With the No Closing Cost
Option, borrowers finance the closing costs instead of paying for them at
closing. Borrowers who pay closing costs at closing may qualify for a lower
interest rate. Some upfront fees (ex. credit report and appraisal) may apply
and may be credited at closing.
*Refinancing or taking out a home equity loan or line of credit may increase
the total number of monthly payments and the total amount paid when compared to
your current situation.
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