Greater Boston is one of the real estate markets with the highest property values in the country. Most homes are priced at over half a million dollars. As such, it is nearly impossible for most families to buy a home in Boston using outright cash, without the need for a home loan. When purchasing a home for sale in Boston, buyers need to be knowledgeable of not only the neighborhoods and the overall home-buying process, but also about the mortgage lending process. To help home buyers in Boston, we have put together a list of 10 mortgage terms that you should know beforehand.
Mortgage
This is the home loan you will need to use to buy a home in Boston or anywhere else. When you get a mortgage loan, you repay the mortgage over a predetermined period, usually 15 or 30 years, although there are many options including fixed or adjustable. The lender will hold the “deed” to your home until your debt is paid in full. Your home acts as collateral to secure the mortgage loan. If you default in your installment payments, the lender may repossess your home. The process by which this is done is a foreclosure.
Debt- to- income ratio (DTI)
This is a metric that helps lenders evaluate your ability to acquire new debt. The DTI ratio measures how your debt obligations fare in relation to your gross (pretax) monthly income. The lower DTI the better. A low DTI it is preferred by lenders because it shows that you make enough income to be able to afford a new mortgage payment. The Debt- to- Income ratio is calculated by adding up your monthly debt payments, then dividing the total by your gross monthly income. For a conventional home loan in Boston, borrowers typically look for a DTI below 43%.
Pre- approval
A mortgage preapproval should be the first step towards buying a home in Boston. During this preliminary process, the lender determines whether you are financially healthy enough to borrow from them. This analysis will likely include reviewing details from your credit report, your…