How to get mortgage financing.

How to get mortgage financing.

Getting a mortgage will help you realize your dream of owning a home. However, getting a mortgage can be difficult especially if your credit scores are not good. Banks also have strict lending standards that could deter many people from borrowing. However, if you’re determined to own your home and feel that you can be able to make the mortgage payments, it is important to take some aspects into consideration.

We will highlight these and hopefully, you can realize your dream of owning your home.

Get a mortgage that suits your financial situation.

 Buying a home gives you equity and you can also enjoy tax benefits. You, therefore, have to be very careful about what your mortgage terms and conditions are. For example, you will get a higher starting rate with a fixed rate mortgage but you are sure that your monthly repayments will remain the same. If however, you get an adjustable mortgage, the interest normally starts lower but may spike depending on how the market situation is. This can lead to frustration because you cannot predict and properly plan for the higher interest rates.

 Lenders will look at your debt to income ratio because it will give a good indication of whether you are comfortable in making the monthly payments. If your debt level is very high and your income is low then you will not be a good candidate for loans. Before applying, make sure that you reduce the number of loans you have, and if possible consolidate them so that you make lower monthly payments.

Cash-back mortgage -consider additional expenses.

When buying a home, additional expenses do come up including taxation, transfer fees, innovation fees, purchasing of furniture and other home equipment, amongst others. You may find that you are not able to do these things because of lack of money. Some mortgage lenders offer the cash-back option, which means that you can get a percentage of your mortgage amount once you make the down payment. The rates vary depending on the lender and will range between 1 to 7%. However, you need to know that you will be paying a higher interest rate on the cash-back loans, sometimes as high as 2% above the standard mortgage rate.

 If you can, you may want to consider holding off on some of this expenses until you’re able to pay for them from your own savings.  This is not to say that cash-back loans are a bad idea if you can afford them, then, by all means, go ahead and take them, but just be clear that you can pay them back as required by the lenders.

Be careful about your borrowing.

The lure of quick free money has seen many fall into the borrowing trap and not being able to pay back the lenders. This will negatively impact your credit rating, making it hard for you to access funding in the future. A bad credit score will also impact on the interest rate the lenders will charge you. Those with poor credit ratings are present a risk of defaulting and banks, therefore, apply higher interest rates as a way of protecting themselves in case of defaults.

 Try as much as possible to slow down on the number of loans you take and only take what you can comfortably service.

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