Mortgages That Don’t Feel So Complicated | Better Mortgage (2024)

FAQs

Why is getting a mortgage so complicated? ›

Making sure you stay on top of your credit and are in a good financial position are two easy ways to be approved for a loan. Why is it so hard to get a mortgage today? Because of the home prices and high-interest rates, they are pushing up monthly payments, making it harder for buyers to get a mortgage to start.

Government-backed loan options, such as FHA, USDA and VA loans, are typically the easiest type of mortgage to get because they may have lower down payment and credit score requirements compared to conventional mortgage loans.

Sometimes the mortgage company goes silent and stops sending statements or communicating with you altogether. Years later, a debt collector reaches out to collect on the debt. Because these mortgages seem to reappear after being considered “dead” or gone for so long, they're sometimes called “zombie” second mortgages.

Mortgage Payment Ratios – The Rule of 28:

To get an idea of how much you can afford, take whatever you make each month, before taxes, and multiply that by 28%. That's approximately how much a manageable PITI monthly payment for you might be.

The upshot is that if you're over the age of 62, you're almost 30% more likely to get rejected for a standard mortgage.

One number should jump out at you: Total interest paid on a 30-year fixed mortgage is a lot! Nearly 2.5 times what the original loan amount was and almost double the value of the home. By comparison, you'll spend $120,000 more over 30 years than you would for the same home with a 15-year fixed mortgage.

1. Conventional loans. A conventional loan is any mortgage that's not backed by the federal government. Conventional loans have higher minimum credit score requirements than other loan types — typically 620 — and are harder to qualify for than government-backed mortgages.

A borrower must have a FICO credit score of 500 or higher to qualify for an FHA loan.

These loans are toxic to the lender since chances for recovery of funds are small and will likely have to be written off as a loss. During the 2008 financial crisis, many bad debts were packaged into asset-backed securities that became known as toxic assets, which were difficult to dispose of and highly illiquid.

What is a silent mortgage? ›

A silent second mortgage refers to a second mortgage on an asset (such as a home) that the borrower uses to pay for the down payment and does not disclose its existence to the lender of the first mortgage.

Depending on state law, a nonjudicial foreclosure process sometimes begins when a Notice of Default (NOD) is recorded at the county recorder's office. The NOD serves as public notice that the borrower is in default. The NOD often contains: the name and address of the borrowers.

One rule of thumb is that the cost of your home should not exceed three times your income. On a salary of $70k, that would be $210,000. This is only one way to estimate your budget, however, and it assumes that you don't have a lot of other debts.

With $2,000 per month to spend on your mortgage payment, you are likely to qualify for a home with a purchase price between $250,000 to $300,000, said Matt Ward, a real estate agent in Nashville. Ward also points out that other financial factors will impact your home purchase budget.

A $3,500 per month mortgage in the United States, based on our calculations, will put you in an above-average price range in many cities, or let you at least get a foot in the door in high cost of living areas. That price point is $550,000.

A number of things could stop you from getting mortgage-approved. Borrowers might be denied because of a low credit score, inconsistent income or employment history, or an insufficient down payment.

At the most basic level, home sales are complicated because people are complicated. Buying a house is often the largest purchase someone will make in their lifetime. Each buyer comes to this monumental transaction with their own search criteria and financial history, making it hard to take a one-size-fits-all approach.

For many prospective home-buyers, saving up enough mortgage deposit is the biggest hurdle blocking their path to the property ladder. Most lenders will only approve an application if it's backed up by at least a 10% deposit, and if you want the best interest rate, you'll likely need even more than that.

Still, while qualifying for a mortgage may be more difficult these days, it isn't impossible—in fact, nearly three out of every four applicants gets approved, according to government data from 2022. And your odds go up if you've prepped ahead of time.