Definition: The term "how much mortgage you can afford" refers to a range of financial terms that describe how much of your budget you are able to allocate towards your home loan or other types of financing.
1.
Down payment
: This amount is typically set by lenders based on various criteria such as credit history and income. It's the part of your total monthly expenses that goes into the down payment, which can include a mortgage or any form of secured lending.
- Definition: Down payment refers to the initial loan amount that you have put down with lenders to secure their approval for a home loan. This typically includes your down payment as well as other deposits like a savings account or emergency fund.
2.
Mortgage rate
: It's the interest rate on your home loan, and it's often calculated based on various factors such as creditworthiness of the borrower, loan duration, and location.
- Definition: Mortgage rate refers to the interest rate you pay per month for your home loan. It can be a fixed rate or an adjustable-rate mortgage.
3.
Monthly payment
: This is the amount you pay each month towards your monthly mortgage payments. It's based on the total amount of your monthly mortgage payments and the length of the loan.
- Definition: Monthly payment refers to the amount of money that you need to pay every month towards your home loan, including all principal (principal balance) plus any interest on the loan.
4.
Interest rate
: This is the percentage of your principal amount that is used for interest during each period.
- Definition: Interest rate refers to the cost of borrowing or lending money at a particular time, and it's typically calculated based on various factors such as creditworthiness and location.
5.
Closing costs
: This is the fees charged by lenders before you can receive your home loan.
- Definition: Closing costs are expenses that are incurred during the closing process of purchasing a property, including notary fees, escrow fees, and other legal and administrative fees.
6.
Down payment savings
: This refers to the amount of money you save each month from your income by keeping some or all of it in an account that earns interest.
- Definition: Down payment savings refers to the amount of money you save each month from your income by keeping some or all of it in an account that earns interest, which can be used for various financial goals.
Understanding these terms will help you better understand the mortgage process and make informed decisions about your finances.
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