If you are purchasing a property for the first time or planning to renew an already existing one, it is important to know about the mortgage rules. It is essential for anyone who is buying a property to qualify for mortgage well in advance. That is why it is critical to plan ahead. Planning ahead means that you not only want to get qualified but also be a person who is of low risk to the mortgaging sources like Mortgage lenders and brokers. Here are some key points to consider before seeking a mortgage.
1. Have a Plan
Are you planning to buy a single property or is your financial goal oriented towards buying several properties? What are your long term and short term investment plan? You need to ask yourself such questions when you plan for a mortgage. Careful planning before going for a mortgage will allow you to stand in a better position in future. It is also a good idea to take the help of financial advisors to plan your investment and mortgage plans.
2. Credit Rating
A good track record in credit rating is essential to get qualified for a mortgage. There are so many ways to get hold of your credit rating and see how it looks like. A bad credit score is one that is lesser than 680. If your credit rating is less, it should still don't stop you from aiming for a mortgage. You can take actions like paying bills on time, using the credit cards responsibly, and so on, to increase the credit score. A better credit score always means a better chance to get financing.
3. Proof of Income
Any lender will look for the proof of income to ensure that you can pay the mortgage. A proof of income is an essential document for getting a mortgage. Salaried people need to give the most recent pay slips, tax returns, and a few other supporting documents. In the case of self-employed people, a proof for the business and proof of income need to be submitted. Every possible document that provides information about the income of the individual will help in getting qualified for a mortgage.
4. Down Payment Proof
When a property is purchased, a down payment of at least 20% of the total purchase amount needs to be done. Though some people agree to 15%, the general rule is 20%. The down payment amount must be a one that is not a borrowed amount. The lender who has been approached for a mortgage will look for some kind of proof to be assured that the down payment amount is not a borrowed one. For this purpose, a bank statement confirming that the payment is done from your bank account needs to be furnished to the lender. If the down payment amount is made from the sale of another property, then the proof for that must be submitted to the lender.
5. Emergency Funds
This is another important aspect that the lender looks at. Some percentage of the purchase price must be set aside as a contingency or emergency fund to help people deal with unexpected things or expenses. The emergency funds are checked to ensure that funds are already available during the time of crisis.
6. Property Details
The agreement of purchase and sale deed and any other documents applicable to the new property must be submitted to the lenders. Other documents like the lease document are expected by the lenders.
In case there are other properties that you own, then the details of those properties must be provided to the lender. Documents such as mortgage statements and property tax statements are good examples. These documents are required to better calculate your affordability.
7. Experts Advice
People like a good mortgage professional, a real estate agent, property insurance broker, real estate lawyer and a property manager can help you with getting the best results. Even if you do not know anything about these people, a real estate agent will be able to help you with the recommendation.
The right knowledge about investment and mortgage will make you get the best mortgage deal in the market. Make your dream a reality by learning the right strategies.