A home morgage is most likely the largest debt you will assume in your lifetime. A morgage is a long-term loan that you arrange through a bank or other financial institution, or even through the seller of the property. The house or property serve as collateral for the morgage loan. Morgage loans are generally paid in monthly or by-weekly installments over the either a 15 or 30 year period.

Taking out a morgage is probably the biggest obstacle facing prospective homeowners. The bank may not want to lend you as much as you need for your morgage needs. This is a big problem for you, but there's a reason for it. Put yourself in the bank's shoes: If you were going to lend people money, what would you want to know about them? Basically, you'd like to know 1) if they make enough money to pay you back, 2) if they've been trustworthy in the past, and 3) if they have something of value should they be unable to pay you back.

Morgage lender's job is to provide you with their own criteria for approving or denying your morgage application. In addition to that lender's calculate the maximum morgage amount you are eligible to borrow. A morgage lender adds up your monthly housing expense, the components of which the morgage lender considers to be the morgage payment, property taxes, and homeowners insurance.

In the early years of repaying your morgage, almost all of morgage payment goes toward paying interest on the money that you borrowed. Not untill the later years of your morgage do you being to quickly pay down your loan balance (morgage principal).

For a property that you are considering buying, a morgage lender calculates the housing expense and usually requires it not to exceed 28% of your monthly before-tax (gross) income for conforming morgage loans and 33% for the jumbo morgage loans. Some of the morgage lenders allow the percentage to be higher.