Buying your first home is an exciting experience, but it can be a challenge if you aren’t aware of the mortgage process; people often feel overwhelmed with the amount of paperwork that’s involved.
Knowing what to expect will help you make an informed decision with your home purchase and make the whole experience a lot less intimidating.
What Is A Mortgage?
Simply put, a mortgage is a type of loan that you use to buy or refinance a home. Mortgages are a way to buy a home without giving all the cash up front.
When you get a mortgage, the lender—usually a bank or financial institution—gives you a specific amount of money to buy a house. You agree to pay back the loan—with interest. So basically, you don’t completely own the home until your entire mortgage is paid off.
Also, a mortgage gives the lender the right to take possession of your home if you don’t repay the loan as agreed.
This is the basic difference between a loan and a mortgage. Mortgages are “secured” loans in which the borrower promises the lender collateral—in this case their home—if they stop making payments.
The Terms and Conditions
Before getting a mortgage, you agree to certain terms and conditions. These specify how long you have to pay the mortgage back—which can even span decades—in addition to the amount you’re required to pay at signing, called a down payment.
The terms and conditions also specify the interest rate, which can either be a fixed rate, meaning the rate stays same for the entire loan term, or an adjustable rate, where interest rates can be lowered or raised. Some mortgages can be a hybrid of both, called adjustable-rate-mortgages in which the interest is fixed for the first seven years, after which the lender can adjust the interest rate.
Who Qualifies For A Mortgage?
To qualify for a mortgage, you need to meet the minimum requirements of the type of loan you select. This process starts with a credit check, in addition to some basic information about your assets, income and monthly debt obligations.
The qualifying process continues with a loan application along with copies of documents that show your financial data. These documents can include paycheque stubs, bank account statements and tax returns.
Once all the paperwork is completed, the lender approves your loan and gives you a mortgage pre-approval letter. Having this letter makes your offer a lot stronger when you’re in the market shopping for a home.
There were 32,260 first-time buyer mortgages that were completed in October 2019, so just know that you’re not the only one. Plus, you can always consult first time buyer mortgage advisor who can help you with the entire process.
Sterling Capital is an award-winning London-based mortgage advice firm with expert mortgage advisors who combine industry experience with a customer friendly process to provide effective services to their customers.
Get in touch with their mortgage brokers today!
Your home may be repossessed if you do not keep up repayments on your mortgage
Some buy to let mortgages are not regulated by the Financial Conduct Authority