As the saying goes, everyone likes to own a beautiful house. However owning a home is not always readily affordable for everyone. What about others, should they abandon their 'dream'. Not necessarily, thanks to the mortgage industry.

People borrow money as loan when they like to buy a house, purchase a car, pursue higher studies etc. or in an emergency. When they apply for a loan, banks or other lending organizations, known as creditors, seek an evidence of ownership of some property by the borrower. The borrower pledges the property to the creditor. If the borrower doesn't repay the loan according to the agreement, the lender may take legal steps to acquire the borrower's property.

Steps involved in the mortgage process:

Prospective homeowner, who applies for a mortgage loan, approaches a mortgage processing company and fills up a form of request known as Mortgage Lead. A mortgage lead normally includes details such as Date of application, Personal information, Details of collateral property, Purpose and Amount of Loan required, affordable Down Payment, Applicant's Annual Income and Credit Report. The mortgage processing firm sends the documentation to several lenders including banks, credit unions and mortgage finance firms.

Whether the loan applicant seeks the lender directly or through a mortgage firm, chances of his obtaining a mortgage loan depends upon his Credit Profile or Credit Report. Credit Profile is a documentation that shows how promptly or otherwise, the person repaid any previous loans. The loan advancing organization makes a very careful assessment of the credit profile and verifies the borrower's bank statement and deposits.

Most loan advancing organizations use FICO credit scores to assess the credit report. In the FICO system, there are 5 factors that are considered by lenders when assigning a credit score based on percentages, as shown below. They are: Borrower's Payment History [Loan applicant's punctuality in repaying any earlier loan/s] (35%), Credit on various accounts (30%), Length of Payment history [A measure of how long did the applicant take to clear any previous loan/s] (15%), Applicant's existing credit accounts and how they are used (10%), and New Credit Percentage [Ratio of newly opened credit accounts to that of total number of credit accounts owned] (10%).

Borrower's chances of obtaining a loan depends heavily on the data disclosed, particularly credit profile, as documented in the mortgage lead. If the borrower has a good credit profile, chances of his or her dream house coming true is greater. When going in for a mortgage loan, the most important question that the borrower needs to ask is Can I afford a mortgage loan. The affordability depends on the mortgage rate.

The mortgage rate is expressed as Annual Percentage Rate and includes the rates of interest and additional fees charged on the loan. All mortgage companies and lending firms are expected to disclose their APR in loan agreements, in accordance with The Federal `Truth in Lending Act'. APR is a convenient parameter to compare costs of loans or mortgage rates.