Knowing How Mortgages Work Will Make House Hunting Easier by:Stefan Hyross
Most individuals do not have the money to pay for a home in cash so they need to deal with a lender to finalize the deal. While most lenders do try to get you the loan amount you need you should bear in mind that to them it is just business. And while they may be friendly but at the end of the day they are watching out for what is best for them from a profit stand point.
Determining whether or not you will be able to repay the loan is critical in the bank's decision since they make their profits by charging interest on the mortgage amount. By examining your past credit history a bank can make a decision on how likely it is that you can repay the mortgage amount. The lending institution is attempting to make a prediction on the future by researching the past just like a historian would but your present situation with be taken into account.
In an attempt to learn about your past lenders examine your credit history. Part of your credit history are items such as how many loans you have taken out in the past and the size of those loans. They will also be researching your repayment history on those loans. Were you behind on payments and how many times, was the loan repaid in full and do you have any money owing on any loans?. All of these will be added together to arrive at your credit score. The chances of you qualifying for the loan are mostly based on this score.
The existence of credit scores are something that most people know about but there are other things that lenders can decide to look at it that are not so common. As an example they can look at other financial products you have to see how much profit a bank made from them. They can also discover if you have had any legal judgements against you which could adversely affect your ability to repay the loan amount.
The property you are looking to purchase is also a big part of the equation. The appraised value of a home will be compared to other factors and evaluated. First a lender will want to know how much you will be putting as a down-payment since most lenders will not loan you more than 75% of its value. Buyers may be able to acquire mortgage insurance that shields the bank in the case of default and allows them to loan at higher percentage of a property's value. A case in point is if you live in Ontario and want to purchase a piece of Burlington real estate but you did not have 25% of the purchase price as a down-payment you may still qualify for a Burlington mortgage as long as you can get mortgage insurance through institutions such as the Canadian Mortgage and Housing Corporation. As well the purchase price of the property will be reviewed. If it is substantially higher than the appraised value they may decide that the risk is too high and deny the loan.
In order to increase the success of your house hunting it is important to understand just how lending applications work. Mortgage lenders are in it to make money but that does not mean that they are not willing to work with you. Everything can be negotiated and at the end of the day if you get the mortgage you need and they can make some money it is win win for everyone.
About the author
Stefan Hyross writes on behalf of Diane Salman who specializes in the Burlington real estate market. Feel free to visit the site to search for property or for information on how to qualify for a Burlington mortgage.