Tag Archives: Mortgage

Mortgage Terms in Layman’s Terms: What Exactly is Debt to Income Ratio?

Mortgage Loan AgreementDebt to Income ratio (DTI) is precisely what it sounds like. It’s how much debt you owe in comparison to your income. Lenders use this ratio to figure out whether a borrower is capable of maintaining mortgage monthly payments. They use DTI for purchase loans, including refinancing, as well.

DTI could likewise help you determine how much you can afford for a house deposit. Take note that DTI doesn’t measure a person’s willingness to pay, only the potential economic burden of a monthly mortgage payment.

Debt to Income Ratio Explained

Every single working person knows this scenario all too well:

Each month you try to figure out how much money you could keep and how much money you have to pay for all sorts of bills. You have regular bills for electricity and water, perhaps for your Internet and mobile phone, as well transportation costs and groceries. In addition, there’s money you need to pay off your debts — your mortgage, credit card, personal loan, or student loans.

Do you feel that sometimes all your available cash goes into repaying your debts? This means that your debt to income ratio might be too high for you to handle, says money experts and mortgage brokers in Sandy. Put simply, your DTI is a specific number expressing the link between your overall debts each month and your monthly gross income.

How Can You Calculate Your DTI

To calculate, you divide your total monthly payments for all your debt by your monthly gross income. For example, let’s say you put in $400 monthly for student loans and $1,600 monthly on your home loan. This means that you pay off $2,000 for your debts monthly. Your monthly gross income is the amount of your earnings before deductions and taxes — let’s say it’s at $6,000. This means that your debt to income ratio is 33%.

Your DTI is a critical measure of a borrower’s financial security. You increase your chances of securing a mortgage with a better rate if you have a low debt to income ratio. Likewise, a low DTI would allow you to take more financial risks and deal with them better.

Redeem Your Mortgage: 4 Things You Can Do

MortgageOne of the best feelings in the world is knowing that your mortgage has already been paid in full. So why not redeem your mortgage early on?

A redeemed mortgage is a mortgage that has been fully paid by the borrower. This means the end of monthly payments and the start of full control over your property. And yes, there are ways to do this without waiting for 25 years or so.

Ways to redeem your mortgage

  1. Pay more

Had your bonus for the month? Use it to pay your mortgage. Paying more than the usual is one of the most effective means to redeem your mortgage early on. Easier said than done as you need to manage your monthly expenses, but it is definitely doable.

  1. Pay more often

Instead of paying once a month, paying it bi-monthly would make you finish paying your mortgage at a shorter amount of time. This also means lesser interest rates. Discuss with a Salt Lake City mortgage company on how you would be able to avail this option.

  1. Refinance to lower interest mortgage

Technically, shifting to a lower interest rate would mean paying less for a longer amount of time. Do refinance to a lower interest rate mortgage but keep your payments the same. If the minimum is $700/month in your previous mortgage and the minimum is $500/month when you refinance, still stick with your $700/month payment.

  1. Refinance to a shorter period mortgage

Refinancing to a shorter period would mean lower interest rates and shorter payment period but higher monthly payments. If your monthly expenses allow you to pay more than the usual, then you may opt to choose this method.

Overall, discipline is the key to redeeming your mortgage earlier. Tightening your financial belts for a few months is definitely worth it, if it means being debt free earlier.

Questions to Ask When Applying for an Armed Forces Mortgage Loan

Mortgage LoanGetting a mortgage loan is one of the most convenient ways of securing a home for your family. There are direct mortgage lenders who offer convenient armed forces loans and VA loans at competitive interest rates. Consider a number of factors before making your final decision to avert any regrets down the road.

What is the interest rate?

According to Direct Mortgage Loans, most armed forces loans have shorter processing time to provide servicemen with the money they need. Before anything, the lender should provide you with accurate information about the interest rate and fees. The document you will receive should indicate the annual percentage rate (APR), points, and all other charges when repaying the loan.

What is the closing cost?

In most cases, the loan borrowers pay a closing fee for the services offered by the lender and the real estate company involved in the agreement. Being aware of these costs will help you make the necessary financial plans. The lender should provide a written estimate of the costs within three business days after you submit your loan application.

Can I lock the interest rate?

Fluctuations in the real estate market have a direct impact on interest rates. Locking the interest rate will cushion you from getting a higher rate between the time you apply and complete repaying the loan. Fees may apply, so inquire about them to make a conclusive decision.

Is there a prepayment penalty?

Some lenders impose a penalty to clients who prepay their loans. Take the time to inquire about the penalty specifics to make the necessary adjustment on your repayment plan.

The answers provided to these questions will help you to know if taking the armed forces loan is worth it. Be sure to read and understand all the terms and conditions to avoid any disagreements and inconveniences later on.