A Simple Guide to Getting a Mortgage
Getting a mortgage can be intimidating, but it doesn't have to be.
16:15 16 December 2021
If you are thinking about buying a home, you will need to get a mortgage. Getting a mortgage can be intimidating, but it doesn't have to be. This simple guide will walk you through the process of getting a mortgage and help make it as easy as possible. So, whether you are a first-time homebuyer or just looking for a refresher course, keep reading for everything you need to know about mortgages.
What is a mortgage and why do I need one?
A mortgage is a loan that is used to purchase a home. It is typically a long-term loan, with a repayment period of 20 or 30 years. A mortgage is necessary because most people do not have enough money saved up to purchase a home outright.
You need a mortgage because:
- It can be difficult to save up enough money for a down payment and closing costs.
- The interest rates on mortgages are typically lower than those of other types of loans, such as car loans or personal loans.
So, now you know what a mortgage is and why they're useful, let's go through some important things you need to be aware of while going through the process.
Set your budget
It is critical to set a budget before you begin looking for a home. If you don't, this can lead to disappointment when you finally find the house of your dreams and realize that it's out of your price range. Once you have set your budget, stick with it! Just because another house is slightly cheaper than the one you want does not mean that it's a better buy.
When it comes to mortgages, lenders typically only allow homeowners to spend a certain percentage of their income on housing costs each month. This percentage is called the Gross Debt Service Ratio or GDSR. It typically sits at 33 percent, although some lenders allow up to 40 percent if their borrowers put down more money as a down payment.
Your GDSR is calculated by taking your monthly housing costs and dividing them by your gross monthly income.
Considering your options
There are two ways to get a mortgage: from a bank or from a private lender.
If you get a mortgage from a bank, you will typically have to go through an approval process. The bank will evaluate your income, debts, and credit score to decide if you are eligible for a mortgage. If you are approved, the bank will give you a loan that covers the cost of the home and will set up a repayment plan for you.
There is no approval process if you get a mortgage from a private lender. You simply need to find a private lender who is willing to lend you the money. Private lenders typically charge higher interest rates than banks, but they also offer more flexibility in terms of the types of mortgages they offer.
Find a good mortgage broker
Don't just go with the first bank or private lender that offers you a mortgage. Shop around and compare rates and terms before making a decision. You may be able to find a better deal elsewhere.
This is where a mortgage broker comes in handy. Drake Mortgages Limited is one of the best. They are specialist mortgage and finance brokers who operate independently of all lenders. This means they can focus on getting you the capital that you need for your home. Make sure you check out their full range of services and see whether they can help.
Stay in communication
Once you have chosen a bank or private lender, it's important to stay in touch with them throughout the process. Let them know how much you are willing to spend and what kind of home you want to purchase so they can provide you with an accurate mortgage quote. Keep them updated on any changes that may affect your eligibility for a mortgage, such as if your credit score suddenly drops.
A good way to make sure that all of this goes smoothly is to be well organized while going through the process. Make lists, complete application forms before they're due, and ask questions whenever necessary. This will make both finding a home and getting a mortgage far less stressful than it would otherwise be.
Keep on top of the paperwork
Mortgages are a big commitment, and, as such, the paperwork involved can be quite daunting. Make sure you keep on top of everything by organizing all of your paperwork in one place. This will include your mortgage application form, your credit report, and proof of your income and assets.
A mortgage is a great way to buy a home, but it's important to do your research before jumping into anything. By following the tips in this article, you can make the process of getting a mortgage much easier and less stressful.