Owning a home is part of the American dream, though there
are many American’s who cannot afford the house they
dream of. Those who are able to purchase a home generally
have to take out a mortgage on the property. The first mortgage
taken out on a property, whether commercial or residential,
is called a principal mortgage.
First time home buyers can increase the amount they are able
to borrow on a principal mortgage. One way to increase this
amount is to reduce the amount of long-term debt. Both income
and debt are taken into consideration when determining the
amount of loan a borrower can afford. It is often easier to
decrease your debt than increase your income, so this is a
good option to afford a larger loan.
You can also consider getting a co-signer to help you afford
a larger loan. The co-signers income will be used in calculating
the amount the borrower can afford, but the co-signer is responsible
if the borrower doesn’t pay. If you have money to pay
upfront, you may also be able to afford a larger house, while
your principal mortgage amount remains the same, by paying
a larger down payment.
If none of these are an option, or if you don’t have
the money for a large down payment, you may consider a second
mortgage to lower your down payment or avoid mortgage insurance.
Second mortgages are a mortgage in excess of a principal mortgage.
The other mortgage type separate from a principal mortgage
is a refinance, where the borrower gets another loan to pay
off the principal mortgage, usually at better terms or with
extra cash back.
Generally, principal mortgages can come in a large number
of types, featuring many different terms and repayment options.
They are more complicated than a refinance, and have a longer
escrow period. Principal mortgages are the gateway between
consumers and the dream of owning a home, making the principal
mortgage agreement a very important transaction.