A 30-year mortgage can be an excellent financial tool for homeowners and the real estate industry. However, when the loan is originated, the customer is subject to certain requirements that must be fulfilled before the loan can be finalized. These requirements are completely different than those required of borrowers when purchasing a home. Understanding what is required can help you better understand what it is you need to do to get the best deal on your loan.
The basic requirements for a loan are that the customer is a citizen and that the income is substantial. In order to qualify for a loan with a 30 year term, you will also be required to have collateral in the form of property. This means that you are personally guaranteeing the mortgage that is securing the loan. The property that is securing the loan must be held by the loan officer. If you are not a homeowner, there are other options available to you, including securing the mortgage through a second mortgage or home equity loan.
Your income and your ability to repay both factor into the qualifying process for a mortgage loan. If your income is low or if you are retired, a 30 year mortgage probably won’t be a wise decision for you. You should compare your current interest rates with those of the prime rates available at banks and credit unions. Do this for each loan officer that you speak with. This will give you a good idea of what your interest rate will be and whether or not your income will be sufficient enough to make your monthly payments.
Your credit score will also be used when qualifying for a mortgage loan. Having a good credit score indicates to the lender that you are a responsible person who won’t default on the loan. It also means that you probably won’t have any other outstanding loans, so the terms are generally more flexible and affordable. The minimum acceptable score on a credit report is aroundting above 600. There are a couple different ways that lenders will evaluate your credit. One involves reporting to an agency such as Equifax, Experian or TransUnion; the other simply uses the credit scoring models created by the three credit agencies.
Another important factor is your employment history. If you are still working at least part time, you can qualify for a 30 year mortgage loan. Just make sure that you don’t have a lot of debt or too much interest on your mortgage. If you have a lot of credit card debt, you may not be able to qualify for a standard mortgage. Your credit score, income and employment history should be compared with the national average in order to determine your eligibility. The best advice for determining whether or not you qualify is to speak with your current mortgage company, but be prepared to discuss the possible terms with a loan officer.
Your age and health can also have a bearing on your ability to qualify for a 30 year mortgage loan. If you are older, you may be advised against a 30 year mortgage loan. This is because the interest rate tends to be higher for seniors. Similarly, if you have bad health, you may be encouraged to refinance with a longer term. Again, speak to your lender to see if this option is available for you.
If you are looking at a 30-year mortgage loan, remember that you will have to pay closing costs on it. Closing costs can be quite high if you choose to purchase a new house with a 30 year mortgage loan. In addition, since you will have to pay interest on the loan, be sure to budget the extra cost into your budget.
Many people buy their first house at a time when interest rates are at their lowest. If you decide to refinance in this scenario, it is important that you shop around to find the best interest rate possible. For many people, refinancing their mortgage loan will help them reduce their monthly payments and put more money in their pocket each month. Talk to your lender about your options and you may be able to make it even more affordable.