If you plan to buy your first house at some or other stage, you’re in all likelihood not quite familiar with the whole mortgage & finance world. You probably also wonder whether you even qualify for a mortgage loan. Let’s give you some relevant information.
A mortgage is basically just a loan granted to you by your bank or another financial institution. The property which you buy is then used to secure this loan. This of course implies that if you can’t keep up with the monthly repayments, the bank will eventually evict you from the property and sell it to someone else. This is of course only after they’ve followed a series of legal steps.
The housing market is currently in quite a bad state and banks have lost a lot of money through bad home loans. You are therefore unlikely to get a 100% mortgage loan if you’re a first-time buyer. This means you will have to put down a deposit. The size of this deposit will depend on a variety of things, amongst others on whether you have any investments, your monthly income as well as your credit record.
The bank will send out a trained appraiser to determine the value of the property you want to buy. If he should find that you are paying more for the property than what it’s worth, any bank will be very reluctant to finance you, unless you put down a substantial deposit. This is understandable: one can’t expect them to provide a loan for more than the value of the property.
One can sometimes spend a long time to locate that perfect house, only to find that the bank refuses your mortgage application. To prevent this from happening, you can always apply to be pre-approved. What happens here is that the bank will ask for you to provide proof of how much you earn and the assets you have. They’ll also check your credit record. They will subsequently give you pre-approval for a loan of a certain size. The house that you buy still has to be worth at least this amount to qualify though.
To be on the safe side, it’s always better to have a substantial savings account before thinking of buying a property. Many banks have special savings accounts paying decent rates of interests for people saving for a deposit on their first house. When you apply for a mortgage, being able to put down a decent deposit will certainly also raise your credit-worthiness in the eyes of the bank.
The mortgage & finance industry isn’t really that complicated, as you’ve seen above. All you need to become a home owner is financial responsibility. Once you’ve proven that you can manage your own finances properly, you shouldn’t have much of a problem to qualify for finance.
How would you like to get more expert advice from Lisa Udy? Learn more by reviewing Lisa’s fantastic website at Smithfield Utah Homes and Cache County Utah Homes
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