For those who are yet to own their first home and are thinking of getting a mortgage loan but are a lost on how real estate financing really works, the first thing you should know is that there are several types of mortgage loans. It is important to know which type is best for your current situation. The things you should consider are the term dates, the interest rate and the payments per period. You must keep in mind that the longer you will pay for the loan the lower the payments usually are, but the interest rate which might be fixed or fluctuating depending on numerous factors is higher.
There are several things you need to know to ensure you are eligible to apply for a mortgage loan and how it could help you achieve your dream home.
There Are Several Qualifying Factors
The following factors are the reason for the approval or rejection of your request for a mortgage loan. Before applying for one, make sure your standing for the following is favourable:
Lenders will look into your credit history and check your credit score. This score gauges if you are paying your bills on time, if your credit cards are not maxed out and if you don’t have unnecessary credits. Your credit score is proof of your creditworthiness and if the lender is not taking a risk on approving your mortgage loan.
Your assets are an important factor when it comes to proving to lenders you are in charge of your finances since you are able to amass resources that could be used as collateral or you could put up for sale to pay for the loan.
Proof of income is a confirmation of your monthly revenue and if it is enough to settle the amount of the payment per period.
There Is a Down Payment
Perhaps you are thinking the mortgage loan will cover everything you need and that you would not need to shell out any cent. Nowadays, lenders will require you to at least pay for 20% of the total amount of the property before your loan is approved. Not only that, lenders also expect you to:
Have Cash On Hand
Aside from the down payment, financiers also demand that you still have money left in your account and that the down payment did not use up all of your savings since there might still be unexpected fees or expenses. This will also show lenders that you are financially stable, and you have an emergency fund left over.
Your Period of Employment Is a Factor
Lenders prefer borrowers that have a solid employment. This shows that the borrower is not flaky and is committed. This also demonstrates that the lender has a steady income and the longer the lender has been in the same company, the higher the chance the application will be approved.
Real estate mortgages might be a complicated process and at times intimidating. Just talking about credit scores, incomes and assets make others feel anxious and apprehensive. Take it slow and try to have prior knowledge regarding the procedure so as not to feel overwhelmed. And don’t forget to have fun. Buying your first home is a milestone and that should be remembered on a happy note.