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If you’re thinking about buying a house, then you know it’s often not quite possible to purchase a home out of pocket. While you may have a large nest egg saved up for such a purpose, house prices can change over time while your finances might require a longer-term view of paying for your house. Additionally, sometimes you may be able to pay for part of your home (the down payment) but not enough cash on hand to cover the full amount. In these cases, taking out a regular loan is not usually advisable because they’re intended for more immediate purposes. Instead, mortgage loans are designed specifically to be used to finance a home purchase, and therefore are accompanying by longer repayment terms compared with other loan types. Most importantly, because mortgage loans (also known simply as mortgages) are tied to home sales and purchases, lenders have a legal right to lay a claim against a borrower’s home if they default on the terms of the agreed-upon mortgage. Essentially, until you’ve finished paying off the entirety of your mortgage, you have possession of your home, but the lender technically owns it.
In theory, anyone who applies can be approved for a mortgage, but the reality doesn’t often match up. Although they’re meant for a specific purpose, mortgages are still loans, and the same rules apply that do for qualifying for any other type of financing. In short, the most likely recipients of mortgages are adults between 25 and 40 years with a large and reliable income, large savings you can use for a down payment, and strong credit.
Before applying for a mortgage, it’s important to keep in mind that there are multiple types of mortgage loans available, each of which depend on a variety of factors. Each offers its own benefits and unique takes, and they also cater to different needs. Scroll down to the "Mortgage Loan Types" section for further information.
While the total amount you can borrow will also depend on the property you’re trying to buy, your income will also be a factor when determining how much you’ll ultimately be approved for. Usually, lenders will let you borrow roughly four to five times your income. Additionally, younger borrowers may also be approved for even larger sums.
It has become significantly easier to apply for mortgages thanks to the internet, but it still requires some consideration on your part to be as easy and smooth as possible. You should also remember that unlike a smaller loan you can pay off rather quickly, your mortgage will be with you for several years, so it’s important to put in the work ahead of time to make sure you can be in a good position to maximize your mortgage. Scroll down to to the "How to Apply" section for further information.
The online mortgage market is very wide and competitive and so, picking the right brand might prove to be rather tedious and time-consuming. Moreover, not every lender is the same, and not every lender works for your particular needs. Learning which option is best can take a little work and research, but it will pay off in a big way when it comes to accessing the best possible loan terms. Scroll down to the "How to Choose a Lender" section for further information.
When you’re ready to think about purchasing a home, you’ll probably also start considering a mortgage to help you cover the costs. Most people don’t have the upfront cash to pay for a home outright, and a mortgage can help you spread the cost out over a more manageable period, albeit with some interest. Even so, you shouldn’t assume all mortgages are made the same. Indeed, you may be able to access a more favorable deal depending on which loan type you apply for.
It has become significantly easier to apply for mortgages thanks to the internet, but it still requires some consideration on your part to be as easy and smooth as possible. You should also remember that unlike a smaller loan you can pay off rather quickly, your mortgage will be with you for several years, so it’s important to put in the work ahead of time to make sure you can be in a good position to maximize your mortgage. Follow these steps to prepare and apply for your mortgage more easily:
Choose the Right Lender – Especially for first time borrowers, it’s tempting to go with the great-sounding deal you see on your first search, but you should avoid locking yourself in too early. Different lenders give you distinct advantages and may be more suitable for you depending on a variety of factors.
Prepare Your Income Documents – When you go to apply, most lenders will require a large number of documents, but they will be especially concerned with your income statements, which can help determine how big of a loan you’ll be able to access, as well as your repayment term.
Decide What Terms are Most Important to You – Crucially, you should have a very clear idea of your preferred terms, and what’s most essential when you apply. It may be that you prefer lower monthly payments and a higher deposit or would rather have an adjustable rate mortgage.
Start Filling Out Applications – Once you’ve established your criteria and thought about your important terms, you can start carefully filling out your applications. Have documents ready and sorted to upload and approve, and make sure to carefully examine every document you’re asked to sign.
As we mentioned above, not every lender is the same, and not every lender works for your particular needs. Learning which option is best can take a little work and research, but it will pay off in a big way when it comes to accessing the best possible loan terms. Here are some factors to help you determine which lender represents the most appropriate choice:
What type of lender is it?
Today, you can get a mortgage from a variety of sources, and each has their own benefits and drawbacks. Online lenders, which are increasingly popular, make it easier for you to apply (since you can complete most steps from the comfort of your couch), but may sometimes have higher interest rates or more stringent qualification criteria. Traditional banks and lenders come with the stability and support of major financial institutions, but they also tend to involve more steps to get approved. Credit unions are also useful, but they may have a smaller range of options available to prospective borrowers.
What’s your score and budget?
One of the great things about today’s digital mortgage market is that many lenders offer you tools to calculate your financial picture. Using a mortgage calculator can help you understand your budget better while adding clarity about which lender works for you. Additionally, check your credit score at the start of the process to determine which lenders are more likely to grant approval and those you can avoid to dodge a potential rejection. This way, you’ll be able to narrow your list to the most relevant choices.
Do they have customer support access?
As we’ve mentioned, you’ll be involved with your lender for the next 15 to 30 years, so you should be worried about how easy they are to reach. While access doesn’t mean the same to everyone, you should ensure your chosen lender is as accessible as you want them to be. This may mean having a phone number you can call on weekends or a live chat that’s available around the clock all year. No matter which you consider necessary, your lender should at a minimum provide that service.
What are others saying about it?
Perhaps one of the best things to remember when looking for the right lender is that you’re not alone. Millions of people have applied for mortgages before, and many of them have shared their opinions on how well it worked. Online user reviews are a great tool to get a better idea of what a lender looks like in action, and if they meet your specific demands. They can also key you in on small details you may have missed, or potential pitfalls. Additionally, you can explore expert reviews that give you a more comprehensive look at each lender’s profile, services offered, and experience. Using both types of reviews will help paint you a better picture of which lender is suitable to match your unique circumstances.
Can you get preapproved?
Being preapproved is not a necessity, but it is an important part of assuring you can afford the home you want. Preapproval is a process whereby your chosen lender certifies that you are more likely to be approved for a loan when you apply. It’s an important sign that the lender has seen your financials and decided that you qualify for the amount you need to borrow. Having a lender who can work to preapprove you is also an important factor to keep in mind, and can make the actual approval process easier once you’ve chosen the home you want to purchase.