Mortgage First Time Buyers
Before applying for any mortgage, no matter how small, you must be absolutely certain of how much you can afford to pay back. If you need to, get some independent professional advice and make sure that you have included everything in your budget calculations. Be realistic about the sacrifices, such as a smaller car or the lack of an overseas holiday, that you may have to make in order to repay your mortgage.
Obviously the amount you can borrow will depend primarily on the amount of money you earn. Shop around for the best deal or go to an independent mortgage broker.
There are two things to bear in mind when applying for a mortgage: what is the percentage of the house value you can receive as a mortgage, say 80 to 95 percent, and what earnings limit will the lender impose, a typical example being three and a half times your salary.
If you are applying for a mortgage with your spouse or partner, what extra amount of mortgage is available if two salaries are available for repayment?
Many people applying for a loan worry about being turned down, but remember, lenders can usually adjust loan terms in many ways in order to help you qualify for a loan.
However, if you are denied, there are several steps you should take:
First, ask the lender for an explanation of their refusal to grant you a mortgage. The most common reason for declining your application is insufficient down payment, followed by excessive existing debt and poor credit rating. All of these can be corrected with time however.
Second, ask for a review of the decision. It is possible you could still qualify if you can satisfy the reviewer that your credit was adversely affected by an isolated and unpredictable incident such as a major illness.
Finally, if the first lender still denies your application, try another lender. Just because one lender feels you are not qualified for a loan doesn't mean they will all feel the same way. Different companies operate under different guidelines, and although you may pay higher rates, you may still be able to find someone who is willing to offer you a loan.
Mortgages are usually repaid over any term between 5 to 35 years. The longer the term however, the less the monthly repayments will be, but the extra interest involved means that longer term mortgages will cost you more in total repayments.
The mortgage lender will also insist that you take out a life assurance policy and that you also sign up for insurance on the property and it's contents.
You will be required to pay for a solicitor and you should take some time to ring around and get some quotes from solicitors before you continue.
The mortgage lender will also insist on an independent valuation report to verify the worth of the property. Again, shop around for the best deal. It may well be that you will need to obtain a valuation before making a final offer, especially if the property is old or in obvious need of some level of restoration
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