Chicago, IL (PRWEB) April 02, 2014
Part of the traditional American dream is owning a home. For most homeowners, getting a home loan is the best option for financing a new home purchase. Some Americans may choose to purchase a second home, which can come with its own mortgage. In this case, borrowers would have two mortgages and two sets of responsibilities for major purchases. If thinking about buying a second home, read below, as The Federal Savings Bank has put together a list of factors to consider before committing to a second mortgage.
One of the first things that lenders will consider is the debt-to-income ratio. If and individual already has a first mortgage then lenders will need to look at the amount of the applicants existing debts - including how much he or she owes on their first property. These debts are compared to their income. Lenders will generally not allow a borrower to have more than 30 percent or 40 percent of their pre-tax income devoted to paying debt. The Federal Savings Bank encourages prospective applicants to check their debt-to-income ratio to see if it meets their lenders requirements. This ratio is especially critical now that mortgage regulations are stricter than before.
When applying for a loan, it is important to know ones credit score. Typically, the better the credit score, the better terms one will be eligible for - including mortgage rates and fees. One may request a free credit report once a year from each of the three major credit bureaus. Be sure to review your credit reports carefully for any mistakes that could negatively impact your score, such as late payments or unauthorized charges.
When applying for a second mortgage, it is also important to consider which house will be considered your primary residence. In general, mortgage terms are better for primary residences, while secondary homes often have tougher standards that are under more scrutiny.
Contact the Federal Savings Bank, a veteran owned bank, to find out more about affordable mortgage options.