Do you have plans of buying your dream home? If the answer is yes, then you should polish up your knowledge on mortgages. There are numerous steps to taking out a mortgage from the application process to when the funds are disbursed in your account.
There are also some pitfalls along the way, but your mortgage can also be a savior in other ways. Here’s what you need to know before applying for a mortgage.
Check Your Credit
Your credit history provides a wealth of information to banks and other lending institutions. The money involved in mortgages is a lot and thus these lenders will be looking for borrowers who have a trustworthy credit.
If you have a good credit, it’ll be easy to secure a mortgage. On top of that, you benefit from lower interest rates. On the other hand, a borrower with a poor credit will have to deal with high-interest rates and a more limited choice of lenders. Therefore, it’s essential for you to know where you fall in terms of your credit before you approach potential lenders.
What Can You Afford?
Affordability is an important factor to consider when applying for a mortgage. You don’t want to take out a huge mortgage and then struggle to repay. In most cases, lenders will help you to calculate your mortgage payments to make sure you’re comfortable with the payments.
However, you need to be cautious since lenders will do all they can to create a monthly figure that meets affordability criteria and make it look like you can afford the house. The best way to identify whether you can afford the home is by checking the final figure and being sure that you will be able to manage that amount of expenditure along with all other outgoings.
If you aren’t comfortable with it, then you can’t afford it.
Are You a First Time Home Buyer?
If it’s your first time buying a home, then you might just be in for a special type of mortgage. You can take advantage of special programs, but you still have to tread with caution. Take your time and go through the terms and conditions of such programs before applying.
Is It Your Dream Home?
If you’ve settled on your dream home, you might want to take out a 30-year fixed rate mortgage. This will be the best and safest way, especially if you intend on living in this house for no less than 5 years. A good place to get an unbiased advice is with a mortgage broker such as The mortgage broker. A good broker has the knowledge and experience to guide you through the maze of lenders and deals available and ensure you get the right deal to suit your unique circumstances and will help you to gain that all important approval for your first mortgage.
Are You Taking Out a Second Mortgage?
Taking out a second mortgage offers a credit line against your home. This allows you to take a loan with your home as security. Furthermore, you’ll get the loan at favorable rates. However, there are some pitfalls associated with this move.
One of them includes losing your home. Remember that you are using your home as a line of credit. This means if you fail to pay, you could lose your home.
Rates might change or your credit score might have gained significant ground. This provides an opportunity to look into changing to a better mortgage deal. While refinancing a mortgage can be a smart move, it has to be done for the right reasons and at the right time. Again using the free expertise and advice of a regulated mortgage advisor is the best possible option to evaluate your circumstances and make sure that doing so will be beneficial before jumping into any refinance deal no matter how attractive it may seem.
Before taking out a mortgage, you need to make sure you have the necessary knowledge about mortgages. In addition, you also need to know why you’re taking out a mortgage. The tips outlined in this article will guide you before applying for a mortgage.