Getting a mortgage will probably be the biggest loan most people ever take on. That’s why it’s so crucial that before taking out a mortgage you understand the process completely and are aware of all the ins and outs involved. A lot of people rush the process because they find a property that they love and want to get their offer put in as soon as possible.
However, to ensure that the mortgage chosen is a good fit for you, take the time to research what the options are. Buyers are also advised to take the time to look into what their personal options are. This is because there’s no guarantee that they’ll be accepted for every mortgage type. This is something that you should understand from the start.
It use to be easy to get a mortgage, but thanks to drops in property prices that’s no longer the case. Today, the process of getting a mortgage is a much more complex one than it was 20 years ago. That’s why when it comes to applying for a mortgage it’s crucial that you understand all the ins and outs of the process. As well as what each mortgage type will mean for you and the property that you want to purchase.
Before taking out a mortgage, there are a lot of things buyers should know. Below is a list of 11 things about getting a mortgage that you may not know.
- Mortgage calculators can be life-saving
Just like with any loan, it’s crucial that you are aware of how much you will be expected to pay back and when. For this purpose, mortgage calculators can be life-saving. You can find many calculators online to choose from that make it easy to work out the amount that you’ll be expected to pay back each month. This will include the principal, interest and possibly property taxes.To use a mortgage calculator, all you need to know is the loan amount, how much the interest will be, and the period you have to pay the loan off. Then you can calculate what your monthly repayment amount would be.
- There isn’t just one mortgage type
The one that you opt for will depend on which is the best fit for you and your property. The two most common mortgage types are fixed rate and variable rate loans. A fixed rate mortgage means that the interest stays the same throughout the time that you have your mortgage for. Whereas a variable interest rate means the interest that you pay will fluctuate each month. There’s also 203K loans that give you the amount that you need for the property, plus any additional funds needed to renovate it. You can learn about this loan and the other options by doing your research online. Before you apply for a mortgage loan, it’s important that you know which is the best option for you.
- Interest rates vary
As mentioned above, interest rates vary. A fixed rate mortgage can be a good option as it means that you’ll know what you need to pay each month, so can set aside the correct amount. However, these types of mortgages tend to cost more in the long run. While variable mortgages tend to come with a lower overall rate of interest. However, the downside is that the interest rate you’ll pay monthly will fluctuate. This means you will never know exactly how much money to put aside for your monthly mortgage repayment.
- Your income is crucial; your savings are not
Mortgages are funny old things. Most lenders take your income into account but take very little notice of the savings you have in the bank. So say, for example, you have $100,000 of savings in the bank but only earn $10 an hour, you could be denied a mortgage. It doesn’t matter that you have savings in the bank to help you cover the cost of your loan. All that matters to lenders is that you earn a high enough annual income.
- You need to have a credit score
Many people don’t realise it but to be able to get a mortgage, you need to have a credit score. This means that your score can’t be neutral, as this will impact you in the same way a negative credit score would do. Before you apply for your mortgage – at least six months beforehand, it’s a good idea to get some credit. This could be via a credit card, short term loan, or catalogue account. Just make sure to pay whatever credit you get off, at least three months before applying for a mortgage. By doing this, your credit score will rise.
- Being self-employed can be a problem
A lot of buyers don’t realise that being self-employed can be an issue when it comes to being accepted for a mortgage. The problem is that while a lot of small businesses make a good income, a lot of that is written off by accountants to keep tax payments low. However, when it comes to applying for a loan, this makes it even hard to be accepted. As it looks as if you’re only earning a small amount, and so it appears that you wouldn’t be able to afford the repayments.
- Don’t finance anything just before your mortgage application is approvedSource for image
Although it can be a good idea to take out some credit to boost your score a few months before applying for your mortgage, don’t do so just before. As each time you apply for credit, this takes your credit score down. Your score won’t go up until the credit loan is marked as paid. So it’s best to avoid applying for credit just before applying for a mortgage, as it could impact your chances of being successful.
- A deposit is necessary
To be considered for a mortgage, a deposit is necessary. This may be 10 percent of the value of the property that you want to buy, or it may be more, it all depends on what type of mortgage you opt for. There are various schemes that you can look into that will make the deposit that you need to save lower. However, this may then mean that the interest rate of your loan is higher. So it’s important to think carefully about what you want to do.
- The size of your deposit matters
As mentioned above, the size of your deposit impacts the interest rate that comes with your mortgage, but that’s not all. Some lenders will not accept applications from buyers who don’t have a certain percentage deposit saved. So before you start applying for loans, find out what deposit each lender requires. That way you can increase your chances of your application being successful.
- The application process can take months
It used to be the case that mortgage applications were quick and easy to do. All it took was the jotting down of your details and a signature, and that was it. Today, however, that’s no longer the case. A mortgage application can take weeks or even months to be processed. This is because of the amount of checks that have to be performed. For this reason, it’s advisable to start the application process before finding a house. So that you have your loan in place when you find the perfect property.
- You can compare your options online
Finally, did you know that you can compare your mortgage options online? Just like there are websites that compare insurance quotes, there are sites that offer comparisons of mortgages. If you’re unsure which is the best mortgage provider for you, comparing them online could be a good idea. As this will allow you to see the rates that each provider will offer, as well as the period they would give you to pay off the loan. Take the time to compare your options, so that you’re able to get the best loan for you.
A lot of buyers apply for a mortgage without understanding all the ins and outs of the process. However, if you want to up your chances of being successful and ensure that you get the best loan, take the time to understand mortgages. From the mortgage types on offer to the best interest rates, it’s crucial that you understand every aspect. So that you are able to go into the application process with all the knowledge that you need to pick the best option, take the time to read up on the process. The more you learn about mortgage loans before applying, the better. If you don’t take the time to do in-depth research into the options that come with getting a mortgage, the chances are you’ll kick yourself later.