If you haven’t applied for a mortgage before, you probably don’t realise that the application packet can be more than 100 pages. With this many pages, it can often be hard to skim through every little word to understand what everything means. Since you’re dealing with a lot of money, it’s important that you know about any surprise that may come out to bite you and potentially kill the deal.
A Valuation Kills the Deal
When you apply for a mortgage, the lender will want to know what the home is worth. In order to get this number, they will have to order a valuation to get a fair market value. If the value comes back lower than your offer, the buyer will either have to cough up the difference or scrap the deal.
You Get to Choose the Loan
Many future applicants often think that they have to sign up for a mortgage the bank throws their way. Thankfully, this isn’t the case. When you apply for a loan, you’re going to want to choose the mortgage that fits your budget and lifestyle. Almost all lenders now have a repayment mortgage calculator which you can use to work out your repayments. Some of the most common types of mortgage include: fixed rate, tracker, discount and offset. Make sure that you explore every option to know their advantages and disadvantages.
Tougher Financial Standards
In the past, when the economy was booming, applying for a mortgage couldn’t have been easier. As the economy started to tank, many banks started applying stricter guidelines.
Today, banks are looking for a higher credit score, a larger deposit and a credible work history that can be verified. One of the biggest reasons mortgages get declined is because the buyer either has a poor credit score or can’t come up with a large enough deposit.
Generally, as long as you have a high credit score, a 20 percent deposit and you’ve been working with a job for more than two years, you should have a great chance at getting an approval letter from the bank.
Rates Can Rise
The loan rate you see on your application today doesn’t mean you’re going to be paying that for life. Some interest rates, such as a tracker mortgage, can increase with the current market conditions. While it may be tempting to be lured to the lower interest rates in the beginning, keep in mind that this rate can raise in the future, potentially costing you thousands in interest.
When you apply for a mortgage, don’t sign any paperwork until you understand what you’re getting yourself into. It’s also important that you know the important questions to ask lenders, so that you can make the right decision. If you don’t feel comfortable with the process, consider hiring a professional to help guide you along with the process.