A mortgage is a debt owed to a bank or some other lending institution by a person for the purpose of the purchase of Real Estate. As time passes that debt is paid and you become the owner of that particular item of Real Estate free and clear. The truth of the matter is that few people can afford to pay cash for a home.
Those who seek a mortgage so that they can eventually own their own residence must meet the standards that are required by the mortgage lender in order to move into the property in question and begin to repay the mortgage debt. A buyer must qualify for and/or satisfy the terms of the mortgage lender.
Generally, a buyer must be employed doing the same kind of work for at least five years. A percentage upfront payment is also required that can be as much as 10% of the purchase price. So too, the buyer’s monthly income should be high enough for the buyer to easily pay that monthly mortgage payment. That payment usually is about 25 or 30% of the buyer’s monthly income.
The end result is that a buyer might have to purchase a less expensive home in order to receive the mortgage. The length of the mortgage and the rate of interest on the mortgage are major considerations and can be adjusted so the buyer will get the mortgage.
It is wise for a first-time homeowner to determine just how much the mortgage lender is willing to loan for such a long term debt and if the buyer is able or will qualify for a mortgage of a certain amount. Doing so will save a great deal of time in that the buyer will not view homes that are too costly, knowing full well that he or she will not be granted the mortgage. It is also wise to go to more than one mortgage lender because the mortgage terms vary from one lender to another.
Once you know if you can receive a mortgage, including the maximum amount that can be obtained, you can then go shopping for your new home. Keep in mind that paying rent each month is money that is gone forever. On the other hand, paying a mortgage is money that will eventually be returned to you when you sell the property in question plus any increase in equity due to the fact that home prices increase for the long term as time passes. Therein is your best reason to own rather than rent the place where you live.