Looking for your first mortgage loan can be a tricky experience. You are unsure about everything and do not know how to go about it. This article will help you understand the important requirements that you need to consider before applying for a loan. It will also present you with a strategy that you can use to successfully receive your first mortgage loan.
We first describe mortgage and then move on to present a few important tips that are extremely useful in successfully applying for a mortgage loan.
What is Mortgage?
Mortgage refers to a loan specifically taken for buying a property. It can be taken from a number of financial resources and generally requires the repayment in the form of regular monthly instalments. Mortgage is a secured loan, which means that the interest of the lending institution is safeguarded by your property.
If you are not able to properly pay for the loan, then your property is used to repay the money back to the lender. This is known as foreclosure. Mortgage is used around the world, because most people do not have enough savings to buy a costly home. They usually have a fraction of the amount of a property which they pay as a down payment. The bank pays the rest of the amount and the property is transferred to the borrower once the entire loan is repaid.
Eligibility for Mortgage
All UK residents are eligible to apply for mortgage loans as long as they are over 18 years old at the time of application. Another requirement is that the loan needs to be repaid before the applicant turns 75 years old. First time mortgage applicants need to understand that in order to get a loan, they need to have a good credit history and excellent financial standing.
Tips for Getting a First Time Mortgage
The first mortgage loan is the most difficult one, because you do not have a prior history of repaying such a large loan. You need to ensure that you use every tip and trick in the book in order to achieve success. Here, we share a few tips that may come in handy when applying for a mortgage for the first time.
Make a Budget
You should first research about the savings that you make every month. You have to take into account emergency needs and ensure that you are able to finance a sudden need before calculating the money that you can afford to pay on a monthly basis. You should select a monthly payment that you can easily afford throughout a number of years.
Research Interest Rates
There are many organisations that lend mortgage loans. You need to carefully perform comparisons in order to ensure that you are applying for the best mortgage, even if it is your first time getting a mortgage. The difference between the available options is very minute, but it is always better to save a few thousand pounds over the period of the mortgage.
Taking an Expert Opinion
You may not be good at comparing financial information. If this is the case, then you should take the opinion of an expert. A particular lender or mortgage broker will be able to better analyse your personal standing and point you towards a desirable mortgage product. The selection of an appropriate loan instrument will greatly enhance the chances of your success.
What you need to understand in this regard is that the loan with the lowest interest rate is not always the best choice. You need to look into other details as well, such as early repayment charges and the period of the mortgage before deciding on the mortgage deal that you want to apply for. You should prefer lenders that stress on offering you better support throughout the course of the mortgage, because it will help you a great deal during your first mortgage.
Improve Credit Score
If you are looking to apply for a mortgage, then you should ideally work in order to improve your credit score first. Remember, a rejected application for a loan will decrease your credit score so it is best that you apply to the right mortgage lender the first time around.
You should aim to reduce your other credits as much as you can before applying for mortgage. Ideally, pay all the loans that you already have, such as credit card bills in order to build a high credit score. This way, you can increase your chances of successfully obtaining your first mortgage.
Large Down Payment
Although you may not have much savings, when applying for mortgage for the first time; it is always better to pay a large amount of money as a down payment. This will decrease the risk of the lender, who will then be willing to lend you money at the lowest possible interest rate.
You will also not need to pay for mortgage insurance if you are paying for 20 percent or more as a down payment when obtaining a mortgage. You can use the money from family members or other resources in order to work as a down payment and reduce the amount that you have to apply for.
Documentation plays a key role in ensuring that you are able to successfully receive your first mortgage loan. You should include the copies of all the required documents. You should also attach additional documents, when you feel that they can help in declaring your financial position and stability. If you have these documents already prepared, then you will be able to quickly apply to your desired financial institution for a mortgage. The documentation requirements for most lenders are the same, so you should create a large number of copies of all your important documents, such as pay slips.
These important tips will help you get your first mortgage loan without a problem. You need to understand the individual aspects of your particular case and therefore, learn more about the requirements of different mortgage lenders. You can always visit QuiddiCompare and find more information about the available mortgage deals in the UK.