When you search for a home loan or mortgage, you are going to be flooded with a whole range of different options. With so much choice available, it can be difficult to know where to start and how to tell the good from the bad. If you are going through this process for the first time, here are the questions you need to ask yourself.
How’s Your Credit Score?
Go through all your outstanding debts. Account for late or missing repayments. Pay off as many outstanding debts as possible before you start the process. Can you explain any gaps in your employment history? Your credit score is one of the first things that any loan provider will be looking at.
Are You Eligible For Support?
Find out if you are eligible for support with your home loan application. Some programs offer support for first-time home buyers. This is not to be confused with the Federal Housing Association loan, which is aimed at lower income earners and can be applied for if you have bought a home before. VA loans help military veterans by backing their loan and removing the need for a deposit.
A non-government home loan, or conventional loan, is the most common and generally requires an upfront payment of approximately 20% in order to secure a good rate of interest.
What Rate Do You Want?
Look at your budget and financial future to decide what kind of rate you want for the terms of your mortgage. A variable rate mortgage may save you money up front but can leave you paying higher and higher amounts. With a conventional mortgage you are more likely to get a fixed rate where the interest rate stays the same.
Can You Renegotiate?
Find a mortgage that will allow you to make overpayments if you find yourself doing better than expected financially. Some loan providers have penalties in place to discourage lenders from getting ahead of schedule so be careful. Another option is negotiating or refinancing your loan. This allows you to change the repayment schedule or interest rate should you find yourself in a better or worse situation.
Can You Keep Your Situation Stable?
Keep making loan repayments and avoid making any big changes, such as leaving your job, while your mortgage is in the pre-approval state. You should also avoid making any large deposits or making any large purchases as erratic behavior is a red flag.
Are You Doing Your Research?
Find out if your provider has a good reputation. Talk to your friends and family about the firms that they have used. Read the fine print carefully on your loan application. Think carefully about whether the interest rate is too high and if the repayment schedule that you have been offered is feasible for you. Don’t get caught in a bidding war.