In today’s economic environment, many graduates and youngsters are keen on investing in something more tangible, and buying property is one of these brilliant investments that anyone can make to secure a means of side income and have a reliable asset to pass down from generation to generation.
However it’s seldom the case that as a home buyer you will have the entire amount of money to pay for the house upfront. In which case the best solution is to get a home loan. If you are unsure about what a home loan or mortgage is or how to go about getting one, click here to find out more.
Due to the sizable investment that a home loan requires, many smart buyers seek the services of a mortgage lender or home loan company services. In its simplest explanation, it is a loan that you can take out when you are acquiring a property or land. The majority of them have a repayment timeframe of on average 25 years, depending on the type you go for. Or the company you acquire it from.
In the case where you cannot pay the amount back, the lenders are allowed to repossess your property and sell it for a certain amount and give you your money back.
Where Would You Go To Acquire a Mortgage
There are a few places where you can go to apply for a loan, some include a bank, while others can be got from a building society or a mortgage broker, also known as an Independent Financial Advisor (IFA). It is always best to contact them via email or phone call to speak to them first about how to go about the process and what paperwork is needed.
There are a few things you, as the home buyer should speak to them about, these include:
- The type of mortgage that will be suitable for your particular needs.
- The exact amount you want to borrow
- The exact property you need to buy whether it is a flat or a house
- The type of interest and the rate that you can borrow the money on
If you have not done your research on the above 4 points, there is a possibility that things could go wrong and you end up borrowing more than you bargained for which could lead to extraneous circumstances with paying back the loan. If you are not sure how to go about doing this, we have some guidance for you below.
Steps When Applying for a Mortgage or Home Loan
There are two stages to applying for one. The first one is one you should be doing yourself. This involves the calculations of the right numbers. You should be able to work out the exact amount you will be able to borrow, based on what you can afford, as well as the type of mortgage to acquire.
If you are unsure of the different types of mortgage on the market, it is best to look through a reliable source for information such as this one to help you choose, as there may be the best option right in front of you and you won’t even know it: https://www.which.co.uk/money/mortgages-and-property/mortgages/types-of-mortgage/mortgage-types-explained-af1319h2cmck
There are plenty to choose from such as the fixed-rate ones, standard variables, tracker and more, and sometimes if you are lucky you even get your hands on a discounted mortgage. Be sure to ask about this option too.
The lender will ask you several relevant questions and help you work out the best one for your circumstances as well as to figure out how long is the best length of paying it back. They may look into your financial situation to work these numbers, so having your paperwork in order is key to avoid wasting time and any extra expenses on your part.
Lenders generally should provide you with all the important information, including key data on the variety of unforeseen circumstances that can affect your ability to pay, and this is crucial for you to understand or else you may end up in debt that will last you a lifetime and put you in a situation where you won’t be able to buy the home or will have to sell other personal assets.
The second stage of this process involves the application and the paperwork necessary for it to get started. They will do their fact-finding and will need to ask you for any remaining information, and paperwork. They usually go into a lot of details so be prepared for this and know your information like the back of your hand.
Assessments are also done regarding any interest rate repayments and any future unforeseeable increases that they will include in their result. Once your application has been accepted they then provide you with what’s known as a ‘binding offer’, along with the mortgage documents and will explain everything including the terms and conditions listed out in the documents.
At this stage, you will still have the choice of accepting their offer or looking at another company. The grace period or as they call it ‘reflection period’ lasts for 7 days, up until you can make your final decision to go with them or not. This typically gives you the upper hand to check out a few other quotes from providers, and make any necessary comparisons between them all and narrow down your choice to just the final one.
In some circumstances, the lender may be able to change or update their offer, however, this is seldom the case. Some homeowners provide false information, in which case this would require changing the paperwork.
Don’t forget one crucial thing – the deposit. Without a deposit, there may not be any point in applying for the above, because for anyone to secure a place, they will need a deposit which would normally amount to either 10 or 20% of the sale price of the property or land.
For example, if the sale price is $200,000, and the deposit needed to secure the place is 10%, you would need at least $20,000 for it plus extra for all the paperwork with the solicitors and middlemen. The remaining 90% would go to the LTV or the ‘Loan to Value’ which is the process mapped out above.
We hope this gives you a brief idea of what it takes to get a home loan so you are more confident about it the first time around.