After you view real estate listings online, it’s time to get down to business and see some of the homes that peak your interest in person. But before you meet with a real estate professional, it is best to get pre-approved for a mortgage. A mortgage, by definition, is the loan you will need to borrow from a mortgage lender to purchase a home.
It’s important to note that a monthly mortgage payment is more than just repayment of the loan with interest. In that monthly payment, there are also property taxes, insurance on the property, and PMI (private mortgage insurance), which is required by loan institutions if you are borrowing more than 80% of the home’s value. In other words, your down payment is less than 20% of the home, than you would need to purchase PMI.) For the purpose of figuring out how much they can loan you, financial institutions will estimate the cost of these extras and factor that in to the equation of how much you are allowed to borrow.