What is a mortgage?
In simple terms, where a bank takes the legal title of a property and give you money in exchange promising that the title will be given back on payment of the debt, it becomes a mortgage. Typically, what is considered in how much the bank can lend you will depend on your income, your expenses and what you can pay back if the interest rates change. Based on this, they arrive at a number which will be around three-five times your income.
Some basic terms you will come across during this process is LTV or a loan to value amount. You will find that the loan to value amount is amount one seeks as a loan in comparison to the actual value of the property. Generally, it is about 75%-90% of the value of the property you plan to purchase. For instance, if the property that you plan to buy in USA is 5,00,000 $ the LTV will be 4,50,000$ and is usually represented in percentage terms as 90%. Where the LTV is higher, the rates that you will charged will be higher. This is because the assumption is always that the chances to default are higher when the amount to repay is high.
So how can you increase your chances of getting a mortgage? A few tips:
- A steady income: Lenders tend to appreciate stability. So, if you are applying for a mortgage, make sure you have been in the current job for at least 6 months and your chances improve when you have been receiving steady incomes. If you looking for a job change or a position change, it is better to wait it out until you get the mortgage. If you are an entrepreneur, then your earrings will be looked at completely before arriving at a decision about the same.
- Your credit history:your credit history is built with every transaction you have made in your credit card, your lending and the repayment etc. If you have not had a single transaction or have had repayment issues, these will show up as a negative in your credit history. All of this will adversely affect your credit history.
Where you have no history and plan to start, you could begin small by taking a credit card and repaying the monthly dues in full to begin with. This is however a lengthy process and hence may take time to set up a good history.
- Applying for the process:Always take help if you are unsure about how to apply for mortgages. Applying for many mortgages may deter the companies from lending to you. Always only apply for those that you are serious about and think that you have a god chance to get and read more details at http://www.whichmortgage.ca/articles/. Another important consideration is the deposit. A heavier or bigger deposit amount will always work in your favor. Find ways to do the same through various mortgage products available in the market. This can be a cumbersome and confusing process and there are several mortgage advisors available who can help you through it. Look for someone reliable either through contacts, friends of family.
While most of the above process is, technical and should be carefully considered, there are somethings that you can pay attention to get the best mortgage deal.
- Keep a close eye on your credit score and ensure none of your payments are missed. Make sure all your bills, rents and credit card payments are on schedule and not missed. A few misses and you realize that your score is falling and very soon your interest rates are much higher for credit cards or mortgages.
- Always compare your available options based on multiple criteria and not just interest rates alone. These could be loan tenure or processing fees. Once you have narrowed it down, you can compare based on the criteria that is important for you.
- Many a times, you or your spouse may qualify for a special status based on your standing in the society or your career. Take advantage of those by reading up about various benefits from state sponsored programs or federal agencies.
Considering that many of us can only afford that one single real estate property in the form a dream home, you should start saving towards it. Every small amount put away towards it can help in the final process of the mortgage. You are perfectly entitled to do adequate research to arrive at the best possible solution considering that this mortgage is a long-term one. Never hesitate to employ the services of good mortgage brokers or advisors who can help you through the legal jargon.