Do You Qualify For A Mortgage? Here's What You Should KnowPurchase & Refinance Mortgage LoansUpdated on Jul 26, 2019 View more like this | Visit MONTREAL, WI | Contact Boris Dzhingarov |
In many places, the market value for real estate has exponentially increased over the last few years. This has weighed down on the average earner who wants to own a home. In this age and day, it can be a nightmare if not impossible to own a home if at all you’re going to wait until the day you save to raise enough money to build or purchase one. This is why a mortgage (or a home loan) is such a sound solution to many aspiring homeowners. Before we get to it, let’s first familiarize ourselves with what a mortgage is.
The Definition Of Mortgage
The word mortgage is derived from two words; “mort” old French for death or “mortuus”, a Latin word meaning dead, and “gage”, an old French word that means to pledge. So, literally, the word mortgage means a death pledge. But don’t fret, it’s not that you’re signing a contract with the angel of death when getting a mortgage! It’s just one of those contracts that will move you from rental space or your mom’s home to your own home. In a nutshell, a mortgage refers to the act of borrowing a sum of money to buy a home, making a pledge to pay back the lender, of course, with some interest within a specified time duration. Now that we have that established, let’s take a look at a few things you should know about qualifying for a mortgage.
1. Your Credit History Matters
Before applying for a mortgage, the financial institution in question will want to know about your credit history. This helps the lender to determine if you can repay the total sum of money borrowed plus the interest within an agreed-upon time duration. Your credit history shows what you owe on your credit cards, any missed or defaulted payments, your addresses, the financial links you’ve made, and CCJs (country court judgment on bankruptcy).
The truth of the matter is; your credit history may determine whether or not you qualify for a mortgage. This means that if you have delinquencies and defaulted payments, for instance, it affects your credit score and you may not qualify for one. Ted MacDonald from 1st UK Mortgages (https://www.1stukmortgages.co.uk/) says that it is important to have access to your credit report so you know your credit rating and history. Doing this will let you weigh your options better, since bad credit doesn’t always mean that all is doom for you. There are lending institutions that are willing to overlook your credit history and provide you with alternative solutions that can see your dream come true. These institutions have mortgage packages for both first-time homebuyers and those looking to remortgage, as well as older homeowners that could do better with financial solutions such as equity release and those whose mortgage applications have been declined due to poor credit rating.
2. Down Payment
The mortgage provider will expect you to part with a certain percentage of what you qualify for in deposit when applying for a mortgage. Having the mortgage down payment beforehand will help lower their risks as well as improve your chances of qualifying for one. It not only helps increase your chances of mortgage approval, but it can also help lower the interest rate on your part.
Mortgage lenders may require that you deposit a 10% to 20% down payment. But just like how some financial institutions will accept your application with a bad credit history, it doesn't mean that all is doom when you’re unable to raise a down payment. Some institutions will consider giving you a more suitable package for your needs in this case, even though it may be a bit expensive compared to a case where you raised a downpayment.
3. Credit Score
“What is a credit score”? you might ask. Well, these are statistical digits that financial institutions often use to evaluate a consumer's creditworthiness or ability to repay borrowed money. There isn’t a definitive number on the minimum credit score you should have to qualify for a mortgage. This is because this number may vary from one country to the other. Additionally, given the many financial institutions on the market today, the minimum credit score requirement may vary. In most places, however, you’re required to have a credit score of between 450 and 850… the higher the better.
4. Age
Your age matters a lot when applying for a mortgage. Qualifying for a mortgage in your sunset years can be difficult. This is unless you can make a larger deposit, or have an excellent credit history along with a high income. Different financial institutions have their age limits and qualification criteria for mortgages. In most cases, however, your mortgage lender will look at your retirement age against the repayment period. They’ll calculate their risks to make sure that you’ll be able to repay the mortgage in full before you die.
5. Mortgage Term
When lending, financial institutions will always give you a repayment term, which may range from months to years; and this is no exception when it comes to mortgages. However, mortgages are different from the other types of loans in that they tend to have longer repayment terms, which can range from 15-30 years. One thing to keep in mind is that the repayment term will affect your monthly payments, and sometimes the interest rates. The longer the loan term, the lower the monthly installments will be, and vise versa.
6. Are You Applying Jointly Or On Your Own?
In most cases when applying for a mortgage, there are no restrictions to applying jointly. Actually, if applying jointly, you may qualify for more because your partner’s income is also taken into account. However, you’ll need to involve the other person in the decision-making process because once the mortgage is approved, you’ll both be responsible when it comes to repayment. Nonetheless, joint mortgages are not just for anyone! They can only be taken by married couples, civil partners, or unmarried couples. But hey, you may have a friend or a family member you intend to share a house with, one who intends to help in financing your dream of owning a home, or perhaps a business partner who’s willing to invest in your property. These are situations under which you are allowed to get a joint mortgage.
7. Closing Speed
Most aspiring homeowners are somewhat reluctant when applying for a mortgage. They are worried about the time it takes from application to closing the deal. Well, things have changed over the past few years. The minimum amount of time it takes from application to closing is about 43 days, compared to months some few years back. All the same, it’s an important aspect to consider when taking out a mortgage, given the competitive nature in the real estate market these days.
Buying a home is perhaps the biggest decision you’ll ever make. It’s, therefore, very important that when dealing with mortgages, you know and understand the ins and outs of the whole process. The above pointers are fundamentally essential in helping you make that important final decision when seeking a home loan.
The Definition Of Mortgage
The word mortgage is derived from two words; “mort” old French for death or “mortuus”, a Latin word meaning dead, and “gage”, an old French word that means to pledge. So, literally, the word mortgage means a death pledge. But don’t fret, it’s not that you’re signing a contract with the angel of death when getting a mortgage! It’s just one of those contracts that will move you from rental space or your mom’s home to your own home. In a nutshell, a mortgage refers to the act of borrowing a sum of money to buy a home, making a pledge to pay back the lender, of course, with some interest within a specified time duration. Now that we have that established, let’s take a look at a few things you should know about qualifying for a mortgage.
1. Your Credit History Matters
Before applying for a mortgage, the financial institution in question will want to know about your credit history. This helps the lender to determine if you can repay the total sum of money borrowed plus the interest within an agreed-upon time duration. Your credit history shows what you owe on your credit cards, any missed or defaulted payments, your addresses, the financial links you’ve made, and CCJs (country court judgment on bankruptcy).
The truth of the matter is; your credit history may determine whether or not you qualify for a mortgage. This means that if you have delinquencies and defaulted payments, for instance, it affects your credit score and you may not qualify for one. Ted MacDonald from 1st UK Mortgages (https://www.1stukmortgages.co.uk/) says that it is important to have access to your credit report so you know your credit rating and history. Doing this will let you weigh your options better, since bad credit doesn’t always mean that all is doom for you. There are lending institutions that are willing to overlook your credit history and provide you with alternative solutions that can see your dream come true. These institutions have mortgage packages for both first-time homebuyers and those looking to remortgage, as well as older homeowners that could do better with financial solutions such as equity release and those whose mortgage applications have been declined due to poor credit rating.
2. Down Payment
The mortgage provider will expect you to part with a certain percentage of what you qualify for in deposit when applying for a mortgage. Having the mortgage down payment beforehand will help lower their risks as well as improve your chances of qualifying for one. It not only helps increase your chances of mortgage approval, but it can also help lower the interest rate on your part.
Mortgage lenders may require that you deposit a 10% to 20% down payment. But just like how some financial institutions will accept your application with a bad credit history, it doesn't mean that all is doom when you’re unable to raise a down payment. Some institutions will consider giving you a more suitable package for your needs in this case, even though it may be a bit expensive compared to a case where you raised a downpayment.
3. Credit Score
“What is a credit score”? you might ask. Well, these are statistical digits that financial institutions often use to evaluate a consumer's creditworthiness or ability to repay borrowed money. There isn’t a definitive number on the minimum credit score you should have to qualify for a mortgage. This is because this number may vary from one country to the other. Additionally, given the many financial institutions on the market today, the minimum credit score requirement may vary. In most places, however, you’re required to have a credit score of between 450 and 850… the higher the better.
4. Age
Your age matters a lot when applying for a mortgage. Qualifying for a mortgage in your sunset years can be difficult. This is unless you can make a larger deposit, or have an excellent credit history along with a high income. Different financial institutions have their age limits and qualification criteria for mortgages. In most cases, however, your mortgage lender will look at your retirement age against the repayment period. They’ll calculate their risks to make sure that you’ll be able to repay the mortgage in full before you die.
5. Mortgage Term
When lending, financial institutions will always give you a repayment term, which may range from months to years; and this is no exception when it comes to mortgages. However, mortgages are different from the other types of loans in that they tend to have longer repayment terms, which can range from 15-30 years. One thing to keep in mind is that the repayment term will affect your monthly payments, and sometimes the interest rates. The longer the loan term, the lower the monthly installments will be, and vise versa.
6. Are You Applying Jointly Or On Your Own?
In most cases when applying for a mortgage, there are no restrictions to applying jointly. Actually, if applying jointly, you may qualify for more because your partner’s income is also taken into account. However, you’ll need to involve the other person in the decision-making process because once the mortgage is approved, you’ll both be responsible when it comes to repayment. Nonetheless, joint mortgages are not just for anyone! They can only be taken by married couples, civil partners, or unmarried couples. But hey, you may have a friend or a family member you intend to share a house with, one who intends to help in financing your dream of owning a home, or perhaps a business partner who’s willing to invest in your property. These are situations under which you are allowed to get a joint mortgage.
7. Closing Speed
Most aspiring homeowners are somewhat reluctant when applying for a mortgage. They are worried about the time it takes from application to closing the deal. Well, things have changed over the past few years. The minimum amount of time it takes from application to closing is about 43 days, compared to months some few years back. All the same, it’s an important aspect to consider when taking out a mortgage, given the competitive nature in the real estate market these days.
Buying a home is perhaps the biggest decision you’ll ever make. It’s, therefore, very important that when dealing with mortgages, you know and understand the ins and outs of the whole process. The above pointers are fundamentally essential in helping you make that important final decision when seeking a home loan.
