Matters To Consider When Applying For A Mortgage

Contents 

1. Introduction 
2. What is a Mortgage 
3. Considerations to take when applying for a mortgage
4. What to watch out for
5. Credit Report 
6. Debt
7. Deposit

Looking to buy your first home can be one of the most exciting moments in your life. It is not only an exciting time, but also a big financial commitment. This is why it is crucial to consider various factors and ensure that you have a good understanding of what is involved in the process. This article will explore the various factors you will need to consider before you begin the process of your mortgage application process to help you achieve the mortgage that is right for you.

What is a mortgage?

A mortgage deal is a loan which is taken out to purchase either a property or a plot of land.  This loan is secured against the property until it is paid off. Most mortgage deals are taken out for a duration of 25 years but the duration of the loan can be determined based on either the individual financial circumstances of the applicants or the lender’s conditions. You will repay the mortgage in monthly mortgage repayments.

What is taken into consideration when undergoing the mortgage application process?

Besides proving monthly income and expenditures, you must check whether the amount of the loan matches your needs and lifestyle. Lenders will examine your financial commitment which could influence what your mortgage repayments will be.

What to watch out for when applying for a mortgage?

You want to make sure that you are eligible for a mortgage prior to purchasing any home.

Obtaining a credit report

Prior to deciding to apply for a mortgage, it is a good idea to check your credit file report from main credit reference agencies such as Equifax or Experian. A credit report will allow you to pre-empt  what a potential mortgage lender would be able to see when they review your mortgage application.

If your credit rating isn’t ideal,, there are a number of things you can do to boost your credit score. For example, ensuring that you are on the electoral roll in addition to keeping up with any credit payments you might have are good ways to boost your credit score.

Potential debt

If you have a significant amount of debt and you are struggling to keep up with the repayments, this may appear unattractive to a prospective lender. Reducing your debts before making an application for a mortgage will demonstrate that you can manage your money responsibly and can handle monthly repayments.

Do i need a deposit?

You will need a deposit in order to buy your property or plot of land. The bigger the deposit you have for your property, the more choice of potential mortgage providers you will have. The best interest rates are available to individuals with high deposits. Consequently, the sooner you start saving, the better.

Mortgages are generally available either directly from the bank or from a building society. The product range in respect of mortgages varies and therefore you would be able to compare different mortgages on the market and choose the most suitable option for you.

Buying a home is a high expense, however, spending money on a mortgage broker or a financial adviser can be very beneficial. Financial advisers as well as brokers will have access to mortgages that are not directly offered to individual customers. They will look for mortgage options suitable to your individual circumstances that will fit within your monthly repayment budgets as well as be the lowest repayment rate available.

There are normally two stages to applying for a mortgage. The initial stage normally involves finding out exactly what you can afford in terms of monthly repayments and the type of mortgage that would suit your individual needs.

During this process, the lender or the broker will ask you a series of questions to determine your financial situation and to work out what the best type of product is for you. At this stage, the lender or the broker will also be able to provide details with an indication of how much you will be able to borrow.

During the second stage of the application, the lender or the mortgage broker will initiate your mortgage application. At this point, you will most likely need to provide evidence of your income as well as your monthly expenditure. The impact of the monthly repayments of the mortgage will also be assessed during this stage to ensure you can afford a mortgage. If your mortgage application is accepted, you will get an agreement in principle.

There are different types of mortgages but the two main mortgages are fixed rate mortgages and variable rate mortgages.

The interest rate during this mortgage loan will stay the same no matter what happens to interest rates. The interest rate is normally fixed for two to five years. This type of mortgage will give you peace of mind and allow you to budget for a mortgage that will have the same monthly repayment rates. This type of mortgage is very appealing as it ensures that you have security during the fixed interest rate period. It is crucial to note that fixed rate mortgages are normally slightly higher for monthly repayments than variable rate mortgages. In addition to this, should the interest rate fall, you will not benefit in any way.

Variable rate mortgages have rates that can change at any time. This therefore means that your monthly repayments can increase or decrease based on rates. Variable rate mortgages vary and can come in various forms such as standard variable rate, offset mortgages, tracker mortgages as well as others. Before committing to any mortgage, it is essential to compare them all and consider any fees that you might need to pay for taking the mortgage or exit penalties.

When applying for a mortgage, there are various factors which you will need to think about such as deposit, type of mortgage, credit ratings as well as what is involved in the process of the application. Obtaining advice at an early stage can make this process easier and less stressful. To discuss the process of buying your first home, please contact our experienced team of conveyancing solicitors today.

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