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Questions First-Time Homebuyers May Have about Mortgages

by Alfred Parker

Buying a home is one of the most important life goals that many people will have, and this should not be surprising given the numerous advantages that come from home ownership. Unfortunately, most people lack the money to buy property without financing, and the process of applying for a mortgage can be somewhat stressful and complicated. If you are unsure about mortgages, learning these answers to a couple of routinely asked questions will help you to better understand this part of buying a house. 

Can You Include Inheritance or a Company Bonus as Part of Your Income?

A critical part of your application will be proving your income. The bank will largely base the amount of your loan around your income because this will indicate the amount you can pay back. Not surprisingly, it is important for you to report all of your applicable income to ensure you get the loan amount you need. 

However, it should be noted that inheritance or work bonuses may not be included in this part of your application. The bank is primarily interested in income that is likely to continue in the future. If you have a long and established history of being awarded a bonus from your job, the bank may consider the average of all of the bonuses you have received, but you will need to provide a complete history of these bonuses for this to be possible. 

What Does It Mean to Refinance Your Mortgage?

Refinancing is a commonly used term that first-time home buyers may not fully understand. Over the life of your mortgage, it is likely that the prevailing interest rate will fluctuate. When you refinance, you take advantage of lower interest rates by essentially taking out a new mortgage. This mortgage is used to pay off the one with the higher interest rate, which can drastically reduce the amount you will pay for your home. 

However, it should be noted that there are restrictions for how frequently a mortgage can be refinanced. As a result, you will need to carefully review your loan contract to ensure that you fully understand the rules of refinancing your mortgage. 

Owning your home can help you start building equity while also enjoying the privacy of your residence. But financing this purchase can be challenging due to the complexity of being approved for these large loans. When you are familiar with the types of income you can include on your application as well as how refinancing can help you pay off your mortgage, you will be better informed when making this life-changing purchase. For more information about home mortgages, contact an establishment like McHenry Savings Bank.