It is most people’s dream to own a house or a landed property but most times these things cost quite a lot to come about. But that doesn’t mean you should give up on your dreams.
There are mortgages that could help you acquire the home of your dreams and all you need do is apply to the right bank that fits your preferences and you are good to go.
In this article, I would be talking about some effective tips to help you when applying for a mortgage. It is more of like dos and don’ts of mortgage applications.
And I strongly believe if you keep to these tips, you would definitely get all your mortgage application approved. So, let’s get right down to business.
Table of Contents
- What is a Mortgage?
- Why do I need a mortgage?
- Effective tips to help when applying for a mortgage
- #1. Start financial planning in advance
- #2. Keep your financial records
- #3. Get a loan pre-qualification letter
- 4. Avoid moving money during the application
- #5. Saving is important
- #6. Avoid unpaid debts
- #7. Make sure you disclose all financial obligations at the application
- #8. Improve your credit score
- #9. Avoid switching jobs
- #10. Ensure you attend the mortgage closing
- #11. Lower your debt-to-income ratio
- #12. Go large with your down payment
- #13. Speak with a financial advisor or mortgage broker
- #14. Restructure your recurring debt
- #15. Clean up any outstanding debts
- Frequently asked questions on Applying for a mortgage
- Why do people need mortgages?
- Can anybody get a mortgage?
- Where can I get a mortgage?
What is a Mortgage?
A mortgage refers to a loan used to purchase or maintain a home, land, or other types of real estate. In a mortgage, the borrower agrees to pay the lender over time in a series of installment payments split evenly into principal and interests.
The piece of property or real estate serves as collateral for securing the loan in question.
To apply for a mortgage, the borrower must first choose a preferred lender and must fully fulfill all the several requirements, including minimum credit scores and down payments.
A lot of rigorous work goes into mortgage applications which go through intense underwriting processes before reaching the closing phase. Mortgages, however, vary based on the needs of the borrower, such as conventional and fixed-rate loans.
Why do I need a mortgage?
The need for mortgages can’t really be exaggerated especially as it pertains to buying homes. The prices of acquiring a home are often too steep as compared to what most wannabe homeowners can save up.
This leads to the need for mortgages which allows individuals and families to purchase a home by putting down only a relatively small down payment.
With as little as 20 percent of the purchase price and with the help of a mortgage loan, that dream house you always envisioned could be yours. The loan is then secured by the value of the property in the event the borrower defaults on the terms of the contract.
Effective tips to help when applying for a mortgage
Buying a home is a worthwhile investment. Getting a mortgage loan to help get this done can also be very rough if you don’t know what to keep an eye out for.
So below, I have listed out a couple of professional tips that would be of utmost help when applying for a mortgage.
Be rest assured that if you stick to these effective tips to help when applying for a mortgage, your mortgage application would definitely get approved and you are that much closer to owning your dream home. Here are the tips;
#1. Start financial planning in advance
Before you envision buying a home, you have to make well-calculated plans for it. You have to set up yourself and have financial plans in place to help you achieve your goal.
You have to make sure your source of income is constant as well as have a good credit score. You must as well have all financial documents ready before you go ahead to apply for a mortgage.
#2. Keep your financial records
The fact is that a lot of people pay little attention to their financial records because they think it doesn’t matter.
Well, if you have intentions of applying for a mortgage you have to pay close attention to your financial records and make sure they are properly kept.
Before mortgages are approved, it is important that financial records are provided to the bank to help access your mortgage application.
#3. Get a loan pre-qualification letter
You might be wondering what a pre-qualification letter is, well, it is an evaluation of your creditworthiness before you can get a loan. You are to ensure you already have a pre-qualification letter before you begin searching for homes.
This would help greatly in the house buying process and increase the probability that your loan request will likely be approved when you apply.
4. Avoid moving money during the application
When it comes to getting a mortgage, moving money around can be a whole lot of work for you. You would need to provide a detailed financial report showing records of sources of all funds as well as transaction history.
Moving money around makes this process tedious and complicates the documentation.
#5. Saving is important
If you looking to apply for a mortgage, then your keyword should be saving. Most banks that give mortgages pay attention to the percentage of the cost of the properties you are willing to buy.
The higher the percentage the applicant has, the more likely it is for the bank to give the applicant the mortgage.
Also, the lower the percentage of the cost of the property, the less likely it is for the bank to approve your mortgage application. Try as much as possible to save as much as you can before applying for a mortgage.
#6. Avoid unpaid debts
Loans from financial institutions and other individuals could affect your mortgage application. Before you apply for a mortgage, ensure you have paid off all your pre-existing debts before you consider applying for a mortgage.
#7. Make sure you disclose all financial obligations at the application
When applying for a mortgage always make sure to disclose all details concerning your finances. Failure to do so may impact greatly your chances of getting your mortgage application approved.
You should disclose details like properties owned, child support, or any outstanding debt if any.
Some other additional information may be needed on the course of the mortgage application, so always try to be as transparent as you can and provide correct information.
#8. Improve your credit score
A credit score is your financial credibility in terms of how likely you are to pay back the money you are borrowed.
It is of utmost importance to have a good credit score when applying for a mortgage. Having a great credit score would highly improve your chances of getting your application approved.
#9. Avoid switching jobs
Switching jobs too many times might give the impression of a non-constant source of income. So, it is highly advisable that you avoid switching jobs when applying for a mortgage. This would go a long way in helping your mortgage application gets approved.
#10. Ensure you attend the mortgage closing
It is important you attend your mortgage closing. If for any reason you might not be able to make it, you can transfer a Power of Attorney (POA) for the purpose of your mortgage closing. You must approve the POA drafted by a lawyer before the closing.
#11. Lower your debt-to-income ratio
A debt-to-income ratio compares the amount of debt you have to your overall income. It’s calculated by dividing your total recurring monthly debt by your gross monthly income, expressed as a percentage.
Lenders look at your debt-to-income ratio to measure your ability to manage the payments you make each month, and to determine how much house you can afford.
When applying for a mortgage loan, having a low debt-to-income ratio shows you have a good balance between debts and income and would greatly improve your chances of getting your mortgage application approved.
#12. Go large with your down payment
It is a great sign if you are able to pay off a high percentage of the property cost. It reduces the loan-to-value ratio and helps improve your chances of getting a mortgage.
The loan-to-value ratio is calculated by dividing the mortgage amount by the purchase price of the home.
#13. Speak with a financial advisor or mortgage broker
Before applying for a mortgage. You should speak to a professional like a financial advisor or mortgage broker so as to fully understand your finances and what you are getting into.
It’s important you understand certain details like how much you can afford and the down payment requirements to determine the type of mortgage you choose and the lender.
#14. Restructure your recurring debt
Your ability to afford anything is directly proportional to your recurring debt payments. To maximize your purchasing price, you would need to pay off or restructure your debt to reduce your monthly payments.
By so doing, you would have more of your monthly income to apply towards your mortgage purchasing power.
#15. Clean up any outstanding debts
It is a very risky choice to take on a mortgage without carrying out proper investigations and clearing out outstanding debts.
Different banks offer different rates and services. So, it is to your best interest that you carry out proper investigation and understands fully what you are getting into before you send in that mortgage application.
Frequently asked questions on Applying for a mortgage
Why do people need mortgages?
Mortgages allow people to own homes by putting down like 20% of the purchase price and obtaining a loan for the balance. This loan or mortgage is then paid off over a period of time.
Can anybody get a mortgage?
Anyone can get a mortgage, however, there are certain requirements mortgage lenders require before they can give you a mortgage.
Where can I get a mortgage?
Mortgages are offered by banks and credit unions. They are also specialized mortgage companies that offer home loans.
From the above article, you can apply the guide given and improve your chances of getting your mortgage approved. This would also give you a rough idea of what it entails to get a mortgage and how to go about it the right way. I hope you enjoyed your read.
- propertypro.ng-mortgage tips for a successful application
- investopedia. com-personal-finance
- forbes.com-applying for your first mortgage