First-time home owners often find the whole mortgage & finance industry a bit daunting. They’re not quite sure how things work and of whether they will qualify for a mortgage. We will attempt to clarify a few common misunderstandings below.

A mortgage is basically just a loan granted to you by your bank or another financial institution. The property which you buy is then used to secure this loan. This of course implies that if you can’t keep up with the monthly repayments, the bank will eventually evict you from the property and sell it to someone else. This is of course only after they’ve followed a series of legal steps.

The housing market is currently in quite a bad state and banks have lost a lot of money through bad home loans. You are therefore unlikely to get a 100% mortgage loan if you’re a first-time buyer. This means you will have to put down a deposit. The size of this deposit will depend on a variety of things, amongst others on whether you have any investments, your monthly income as well as your credit record.

Even if you earn enough and are credit worthy, the bank must still approve the property you want to buy. They are going to send out a valuator to put a valuation on the property. Should he find that it’s worth less than what you intend to pay, the bank is not likely to grant you a loan unless you can put down a large deposit. You can’t blame them for this: it will be a high credit risk to lend you more than what the property is worth.

If you don’t want to spend months finding the perfect property, only to be turned down by the bank in the end, there is another option. You can go to them and apply for pre-approval. They will ask for proof of income and assets and check your credit records. They will then provisionally approve you for a certain amount. This still depends on the property being approved by the bank though.

It’s always good to err on the side of caution. You need to have a savings account not only to cover a possible deposit, but also for legal costs, transfer costs as well as possible alterations you would want to make at your new house. Banks often have special investment accounts with favorable interest rates for this purpose. This will also help you a lot when eventually applying for a mortgage.

As you will see from what has been written above, the mortgage & finance industry isn’t all that complicated. A substantial savings account and a good credit record will go a long way to ensure that you’re approved for a mortgage. It’s all about proving that you’re responsible with money.

How would you like to get more expert advice from Lisa Udy? Learn more by reviewing Lisa’s fantastic website at Smithfield Utah Homes For Sale and Cache County Utah Homes For Sale

Related Blogs