Purchasing a home is an important part of everyone’s life. However, less is known about what goes into getting a mortgage. We’ve discussed a couple of key things that will familiarize you with this.
Table of Contents
You’ll Need Documentation
You need to realize that getting a mortgage is not easy. It’s a process that will take a lot of time. You’ll need to provide the bank with a range of documents. This would include your salary slips as well as tax filings. Many banks expect you to hand over 3 months’ worth of bank statements too. If they find questionable activity in your statements, you’ll be interviewed. Depending on the bank you’re working with, their approval process will defer.
You’ll Be Spending Quite A Bit
You can get a mortgage for a lot of money. That’s why banks have standardized the amount you’ll be paying back. Usually, it’ll be 28% of your income. To make sure you can pay the loan, you’ll only be approved if your debts are below 36% of your gross income – this includes the mortgage you’re about to take. The two percentages may not be the same depending on where you live.
Your Credit Score Is Important
You might not be approved for the mortgage if your credit score is not good. You should work on this before applying for the loan. This would be paying off anything you owe as well as not opening new bank accounts, and doing anything that requires the checking of your credit score. From this assortment, paying off a loan would boost your score the most.
Remember that there are many banks and reverse mortgage companies out there. Some may offer mortgages if you are unable to raise your credit score. However, think about the pros and cons of bad credit mortgage. It will generally have a higher interest rate than a regular one.
What Happens If You Can’t Pay Your Loan?
If you can’t pay your loan back, your home will be taken from you. This is a major reason why people are afraid of mortgages. They don’t realize that mortgage refinancing exists. This is when you take a loan out to pay the mortgage you currently have, at a lower interest rate. It might be something you’re considering in the future so reading up on the pros and cons of mortgage refinancing is a good move.
It’s Not Over Until You Get the Check
Everything may be in order, resulting in you being approved for your loan. However, you may have made some huge purchases before the lender signed your check. They’ll be monitoring your bank account, so they’ll know what you’re up to. This would potentially lead them to cancel your approval. This is especially true if you’ve made ahuge purchase through cash.
Purchasing a home of your own is a major part of everyone’s life. Many people don’t know what they’re in for as getting a mortgage is not an everyday thing. You should know that a good credit score is needed. If you want to boost yours, you can pay any debts you have. If you have a bad score, you might still be able to get a loan, but at a much higher interest rate. If you can’t pay your mortgage back, don’t worry. Mortgage refinancing is popular!