How Does Equity Factor-In for New Mortgage Borrowers?

The 3,000 year-old Manusmriti, or “Code of Manu,” was one of the earliest traces of mortgage law in the world; the text emphasizes the creation of valid documents, law of mortgages, hypothecation, partnership and joint ventures to such a concise degree that it was used as a basis for Modern Indian law by the British in the 1800s. Although contemporary mortgage lenders and borrowers may not be familiar with the script, such historical documents provided the basis for modern mortgages used today — although to compare mortgages from 3,000 years ago with today’s mortgages probably wouldn’t help those looking for home mortgage lenders!

Tips for New Mortgage-Borrowers

Buying a home is a big step for anyone to take, especially the first-time home buyer. Two of the most important factors relating to mortgages are one’s credit history and the size of one’s down payment. The Home Loan Learning Center found that most lenders typically require a minimum credit score of 680; those with lower credit scores potentially face higher mortgage rates, although this can be countered with a substantial down payment — at least 20% of the house’s value is typically considered substantial. Securing finances and budgeting is crucial for the first-time mortgage borrower: your monthly payments should not exceed 36% of your gross income, so lock in your rate as soon as you feel comfortable with the figures..

Reverse Mortgage Lenders for Seniors

Reverse mortgages are available to seniors over the age of 62 and uses the home buyer’s equity to supplement their income in the form of a loan. Reverse mortgage lenders allow seniors to live in their homes while receiving income as it uses the equity of the home as collateral — once an individual choose to sell the home to live elsewhere, they receive whatever is left from the sale price of the home minus the loan they received as monthly payments. In the case that an individual passes away before they sell their home, the home is typically sold by the bank to cover the expenses of the loan, plus interest. So although young mortgage borrowers may be discouraged when they compare home loans, it may be reassuring to some to find that reverse mortgages allow older Americans to turn their equity into an income.