With the turning of the calendar into a brand new year, many people choose to make resolutions that will help them live a happier, healthier, more productive life for the next 12 months. Some will have thought about buying their first home or moving onto their next one. It might be time to settle down or to find a larger house for a growing family. Perhaps you have finally found the place you want to live in for the foreseeable future.
Before you can buy a house, you will need a mortgage, and that means being approved for one. If you are considering applying for a loan like this, these are the criteria for approval – it’s best to ensure everything is in place before you apply so that you are more likely to get a positive outcome.
Your income is one of the most important factors when it comes to obtaining a mortgage. The bank or lender needs to know that you can pay the loan back, as well as the interest added on top so that they can be more confident in lending you the money in the first place. Therefore, you need to know what your annual income is, and be sure that it will be enough to cover the mortgage.
What you need to earn will depend on the lender and the price of the property you want to buy, but to get a rough idea you can look at what you are paying either in mortgage payments or rent now, and you’ll know whether you can comfortably afford any more on top.
As well as working and earning enough money to pay the mortgage back, lenders will want to know that you have a good credit rating too. The better your credit score, the more likely a lender is to give you the money that you need at a reasonable rate. If your credit score is poor, for example, and you have missed payments or defaulted on debt entirely in the past, any lender might be wary, unsure if you can service the loan that they would give you.
If they do lend you the mortgage needed to buy a home, the interest rate could be much higher than normal.
Ideally, if you have bad credit it is best to try to fix this before applying for a mortgage, as being turned down for credit can make your score even lower, and cause you additional problems.
A lender will want to know that you have the best term life insurance so that, should the worst happen, your mortgage will be paid off. This is often a requirement of lending, and therefore if you don’t already have life insurance you will need to search for something that you can afford to pay each month, and that will last for at least the life of your mortgage, if not longer. There are plenty of options available to work with whatever budget you have.
The Down Payment
There aren’t many lenders – if any at all – who will lend you one hundred percent of the property’s value. This is a major risk for them, and it makes your loan much larger too. Therefore, having a down payment is essential. This could be anything from 10 to 20 percent of the property value, and if your credit score is low you might be asked for more. Having this in place will help you to choose a home you can afford, and will make it more likely that you can be given a mortgage in the first place.