If the insufficient budget does not allow people to purchase their dream house, they may consider getting financial help by applying for a mortgage loan.
Mortgage loan means borrowing an amount of money from a reputable lender to buy the property you want. By checking your credit history, your income and your savings, lenders assess your creditworthiness and decide whether you are a risky customer or not. Most lenders require you to put down a deposit first before receiving the lacking amount you need. Generally, you will be completed your monthly repayments plus interest and fees within 25-30 years. The lender will have the possession of your property until you finish your repayments. Also, when you fail to repay the loan you have borrowed, you lose your property.
How to apply for a mortgage?
To be found eligible by a lender, you need to have a good credit score (680 or higher) and a stable income. You may choose a loan which requires you to make a down payment to reduce the loan amount you will borrow and lower your monthly repayments. There are several types of loans which include large down payments, low down payments and no down payments. To get a mortgage loan, you should also provide the necessary documentation to the lender:
- W2 (from past 2 years)
- Pay-stubs (last 3 months)
- Tax returns (last 2 years)
- List of your debts and assets
- Proof of employment and P60
- Additional income sources
Types of Mortgages
- Fixed-rate Mortgage: Requires you to repay the same amount of money and the same interest until the repayments finished.
- Adjustable-rate Mortgage: Interest rate you will be charged can be changed due to some conditions over the life of the loan.
- Balloon Mortgage: After paying off a low monthly repayment for 5,7 or 10 years, you need to pay the rest at once immediately.
- Interest-Only Mortgage: You should pay off only the interest for a set of time then you need to pay more principal over the life of the loan.
- Reverse Mortgage: You can borrow against the equity of you house if you are 62 years old or older and the lender will have a right to take possession of your house when you die.
- Combination Mortgage: If you can not make a down payment due to your limited budget, you can apply for 2 loans at a time and borrow an amount both for the down payment and the house.
- Government-backed Mortgage: The government will cover the lender’s loss when you fail to repay.
- Second Mortgage: You may pledge you current house as security to borrow a new loan.