How will mortgage help you to fulfill your American Dream?

 

The term American Dream is often associated with home ownership. In fact, to increase the number of people owning a shelter of their own, in 2003, President George W. Bush introduced the American Dream Down Payment Act, a federal program in which the US Government offered grants to mortgage borrowers so that they could afford the down payment and the closing costs.

Assess your repayment capacity

You may opt for home mortgage calculator so that you can find out which mortgage loan you can afford to take out. Because taking out a mortgage is a big financial responsibility and that is why you should be prepared to fulfill this responsibility till the time you don’t pay off your mortgage fully. There are various factors that will determine your repayment capacity. It is very important to assess your financial condition prior to taking out a mortgage. This is because unless you are able to make regular payments to your lender, you will not be able to enjoy your new home. Sooner or later you will lose the home in foreclosure thereby shattering your American Dream. 

You cannot let this happen to you. So, you need to find out how much financial responsibility you can actually take on. Some of the factors that will affect your repayment capacity include the following –

• Income
• Rate of interest (FRM or ARM)
• Term of your mortgage
• Debt-to-income ratio
• Credit score
• Principal amount etc

There is another very important factor that will affect your affordability. And that is the mortgage APR or the Annual Percentage Rate. Although it won’t affect your monthly mortgage payments, it will affect the total cost of the loan. So, you have to shop around for the lender who gives you a favorable rate.

Use mortgage calculators

There are many mortgage calculators you can opt for if you want to find how each of the above factors will affect your home affordability.

Mortgage lending has become stringent

It is a well known fact that subprime lending is one of the factors that led to the subprime mortgage crisis. Following recession, mortgage lenders have become stringent and selective in their lending activities. So, you need to have a good credit score that will reflect your financial habits and can make you eligible for a mortgage on favorable terms.

If you are looking for affordable mortgage rates, you can shop online or visit a brick and mortar office of a mortgage lender. Remember online mortgage lenders give you better rates. This is because the operating costs are much lower for online mortgage lenders. As such they can allow you to enjoy better rates.

Once you have found out your repayment capacity, you can look for the house that is within your budget. However, make sure you remain current with your mortgage payments so that you don’t have to lose your home in foreclosure.