10 things you need to know about mortgages in the US right now

10 things you need to know about mortgages in the US right now

More than half of Americans do not know what a mortgage is. For this reason, at Globe Live Media we tell you the 10 things you should know about mortgages right now, so that you can evaluate whether they suit you or not

One of the most curious news in the US came from the OnePoll pollster, which revealed a somewhat strange fact: only 49% of Americans know what a mortgage is. Or to put it another way: more than half of Americans don’t know what a mortgage is.

Therefore, at Globe Live Media we have prepared a list of the 10 essential things you should know about mortgages in the US today.

1- What is a mortgage or a mortgage loan?

A mortgage, or home loan, is financing issued by various financial institutions (such as banks or creditors).

This financing is granted under the agreement that the lender has the right to take your property if you do not pay the money you have received, including interest.

2- What should I take into account when applying for a mortgage in the US?

The United States Consumer Financial Protection Bureau (CFPB) recommends that anyone who is going to apply for a mortgage take into account the following points:

1) The amount of the loan.
2) The interest rate.
3) The costs of closing the loan, including the commissions of the lender or bank creditor.
4) The effective annual rate.
5) The type of interest rate, that is, if it is fixed or adjustable.
6) The term of the loan, that is, the time you have to pay it off.
7) If the mortgage has risk characteristics such as prepayment penalties.

3- What types of mortgages can I get in the US?

In general, it can be said that there are four types of mortgages in the US:

1) Fixed rate mortgages.
2) Adjustable rate mortgages.
3) Mortgages backed by the US government (Known as FHA, for its acronym in English).
4) Jumbo mortgage loans.

4- What are the benefits of applying for a mortgage to buy a house in the US?

In general, having a mortgage is considered a fairly common and beneficial financial movement in the US, and its main benefit is to serve as a fundamental financing lever for the purchase of a house that would otherwise be totally unaffordable.

Among other benefits that exist for requesting a mortgage are:

1) The boost to your credit score if you make your monthly payments responsibly.
2) It has benefits related to your taxes, such as the deduction of mortgage interest.
3) Mortgages are considered a “good” debt by financial institutions.
4) It allows you to use part of your income for other purposes.

5- Is it advisable to request a mortgage at this time?

Right now, mortgage applications have plummeted as mortgage interest rates hit 6%, their highest level since November 2008. This came after the Federal Reserve raised interest rates as part of its fight against inflation, which directly impacts mortgage interest rates.

Therefore, experts consider that this is not the best time to apply for a mortgage, although it is understood that, on many occasions, consumers have no choice but to do so in order to buy a house.

6- Why would I be denied a mortgage in the US?

There are several reasons why a bank or lender might deny you a mortgage in the US, including:

1) Have a very low credit score (less than 620 points in the FICO scoring system).
2) Have no credit history.
3) Have a high income-debt ratio.
4) Having little ability to pay down the house.
5) Have recently changed jobs.
6) Not including all of your financial information in your application or omitting information of interest to lenders.
7) That the lender considers that the house you want to acquire is an extremely bad investment.
8) Unusual movements in your bank accounts that are noticed by lenders.

7- How much money should I earn to be able to apply for a mortgage?

In general, the rule that most financial analysts recommend to take into account to know if you can ask for a mortgage, and how much it could be, is to multiply your gross annual income by two or 2.5.

So a person making $100,000 a year can theoretically afford a $200,000 or $250,000 mortgage.

However, if you have doubts, it is best to consult directly with a financial analyst.

8- What are reverse mortgages?

The reverse mortgage allows the request for a loan that, like regular mortgage loans, establishes the home as collateral, with the difference that the borrower does not make monthly payments.

Homeowners who opt for this type of mortgage (often 62 and older) don’t have to make any monthly payments or sell their home to receive the loan money, so they can continue to live in it.

This financing must be repaid when the borrower dies, moves permanently, or sells the home.

9- Can immigrants apply for a mortgage in the US?

The National Association of Realtors (NAR) clarifies that foreign buyers in the US can buy a house using a mortgage, although they will generally be required to be legal permanent residents or have a permit of work.

Also, lenders are likely to request documents such as a valid green card, a Social Security number, as well as verifiable income.

10- If I am late on a monthly mortgage payment, is it certain that I will lose my home?

Mortgages in the US generally have a grace period for late payments, although this will likely mean you’ll have to pay some penalties.

But if your payment is 90 days late, your lender may start foreclosure proceedings, in which you will lose your home.

If you have problems meeting your mortgage payments, the advice of mortgage loan experts is to discuss it immediately with your creditor, to reach a payment plan according to your budget.

Samuel Edwards
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