FIN 101 Lecture Notes - Lecture 5: Lenders Mortgage Insurance, Mortgage Loan, Credit Score

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No bills (no law maintenance, snow removal, exterior painting) Great for retired people without headaches of a home to maintain. Rent payments go nowhere, no interest, mortgage deduction or taxes. When the home-owner"s equity reaches around 20% of the property value, the policy can be cancelled. If you want to buy a house, you need a down payment before you purchase. Bank takes away your home when you aren"t making payments. When qualifying for a mortgage loan, lenders consider number of factors including: Conventional lenders use the front-end ratio of 28, and the back end is 36 for debt to income ratios. It begins at one interest rate that is usually lower than fixed rate loans and then adjusts the rate at a predetermined point in the future. Negative amortization an increase in the principal balance of a loan caused by making payments that fail to cover the interest due. Buying a new car (financing, warranties, maintenance)

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