If you’ve ever applied for a mortgage, you know how complicated it can get. If you’re a first-time applicant, you’re probably thinking that it can get very complicated indeed. It’s normal that you feel that way; a mortgage is, after all, one of the biggest financial decisions most of us will ever make, and both the amount and the time span bring in a lot of ‘what ifs.
Luckily, there’s help. There are some things you can do to get informed and make the best deal ever. If you’re applying for a mortgage, the best thing you can do is to put yourself in the lender’s shoes and try to see yourself as they would see you. It’s not easy, but it can be done. Worried about an application? Here’s everything you should know about what lenders look for in a mortgage application.
What lenders look for
The main thing to remember is that the lenders look for two main things: the ability to pay back the loan, and the willingness (or reliability) of the loan getting paid back. It’s an investment for them, after all, and they bear the risk. Here are some pointers:
- The lenders will look at your tallied income (including fixed salary, freelance work, bonuses, and so on) to gauge how much you can comfortably spare to pay back per month.
- They’ll be checking your monthly expenses to see how much is really left at the end of the month.
- They’ll also perform a stress test. This basically means they will envision negative scenarios to see if you would still be able to pay the monthly dues (for example, if you were to retire, if interest rates were to go up, or if you were to fall ill).
How to prepare your application
In essence, you’ll need proof of income and proof of expenditures. These can come in the following forms:
- Income slips, bank statements, and other documentation of income
- Utility bills, bank statements and transactions, contracts with payments still due, and other documentation of expenditures
- Proper IDs – passports, driving licence, etc.
Get professional advice
Mortgages tend to get complicated, and it’s always better to seek professional advice from an experienced mortgage broker if you are not sure about what kind of mortgage to get.
A mortgage needs to be thought through carefully – it’s not only your future, but also your dreams that are at stake. It’s a long-term commitment that has serious consequences on the way you live your life for many years – decades – to come. It’s important to get it right. Do the calculations carefully, and if you present your case in the right way, there should be no stopping you. Good luck!
Image courtesy of fantasista/FreeDigitalPhotos.net