In today’s economy, owning property is probably one of the best, if not even the best investment. This is because the value of homes is always rising and almost never drops unless the property is completely destroyed beyond repair.
However, not many people are lucky enough to have enough money to buy a house on their own, so they apply for mortgage loans. And when they do, the mortgage they get depends on a lot of factors, and it’s hard to choose just the right one.
The bank won’t give a mortgage to just anyone. Of course, a lot of things come into consideration before someone is approved. Therefore, there are certain things people should do before applying for one, because one wrong move could ruin all of your plans.
Here are five tips to help you make the right application for an approved loan.
Always start with your credit score
Approximately a third of your credit score is determent by your credit history and whether you can settle your payments in time. Of course, if you owe a lot and you’re late with your payments, your credit score will suffer. On the other hand, if you pay off your debts on time, your credit score will improve, and you’ll be approved for a loan with a much smaller interest rate.
Make sure you consider your income first
You should always be able to pay off your monthly mortgage and have enough money left for all your needs. The suggested repayment figure is approximately a third of your monthly income, and lower if possible. Even though lenders could approve you for a huge loan based on your income and financial status, you still need to determine whether you would be able to pay off the required amount without struggling and giving up on some essentials.
Before choosing a mortgage, make sure you’ve done your research
It wouldn’t be wise to pick up a mortgage before consulting a financial provider. Don’t rush into such a huge responsibility without knowing all the facts, offers, and deals. Also, pay attention to how interest rates are changing. Every bank offers a different type of mortgage, and so it’s smart to look at various interest rates and in the end settle for the lowest you can find.
Don’t take out a payment term that’s too long
In a long term mortgage, your monthly payment rates may be low, but the total repayment will be larger than you thought.
For instance, if you took out a 10-year loan, you could accrue a 50% interest rate. On the other hand, a 20-year period would give you smaller monthly debt, but a higher interest rate (up to 120%), so you would just be spending a larger amount of money over a longer period.
Your income isn’t the only thing that matters
The last thing that’s important to remember is that your ability to borrow, as well as the interest rate and the amount you are allowed to pick up, is not only determined by your income but what your entire family earns. Therefore, it’s important to discuss buying a new house with your entire family because not only will you all live together, but the payments will influence the general finances of the entire household.
A mortgage is a good thing to take on but never do it on your own if you have a family or a spouse to take part in the process.