The mortgage lending process requires proper research to make the right decision. The internet is filled with a wide variety of resources designed to help homebuyers identify the best mortgage deals. These include home loan comparison sites and mortgage calculators. It is also necessary to consult with an experienced adviser or broker. This enables one to gain a detailed understanding of different types of mortgages available on the market.
During the preparatory phase for applying for a home loan, homebuyers should establish the amount they can afford to borrow and repay. The assessment must consider any potential rate hikes in the future. In addition, it is vital to creating a balance between monthly household expenditure, current debt obligations, and the home loan.
These considerations form part of the mortgage affordability rules, which are aimed at eliminating the potential of struggling with repayments when interest rates rise.
The preparatory phase can be initiated up to one year before lodging an application for a home loan. This provides borrowers sufficient time to plan and make any necessary changes to their financial situation, including clearing existing overdrafts and other debts. One needs to adopt new spending habits in preparation for the new debt obligation.
The majority of lenders consider a wide variety of factors when deciding to approve or decline a mortgage application. These include current income, debt obligations, monthly household expenditure, credit history, employment status, loan amount and more.
Banks and other lenders usually consider a loan-to-value measure that is expressed in the form of a percentage. The measure is designed to provide a practical way to compare the loan amount with the value of the residential property a borrower wants to buy. Applicants with an equity or a large deposit in an existing property find it easier to qualify for cheaper mortgage deals.
The credit report plays an important role in determining eligibility and cost of the loan. For this reason, it is recommended that mortgage loan applicants check the accuracy of information held by credit reference agencies. The information must provide a true reflection of the borrower’s current financial circumstances and must be up to date. All open credit accounts should appear on the credit report while old settled accounts should be marked accordingly.