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Mortgages and Home Purchase Loans Are You Eligible – Which Type is Right For You?

August 4, 2009 by Kevinmiller
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It’s a rare situation that allows someone to purchase their home outright with no mortgage or borrowing whatsoever, most of us need some sort of financing to assist us when we are buying our homes. After all, the purchasing of property can be the biggest investment we ever make, and the most costly one. During a recession many people are under the misconception that financing will be hard to come by. This is not entirely true. While the recession does alter the way that monetary matters are considered, life still goes on and so long as certain criteria can be met there is no reason why obtaining a mortgage or home purchase financing should be difficult, in fact, lenders are eager to keep doing business with the right kind of borrower, as much as potential borrowers are eager to obtain home loans to aid them in purchasing their properties. Bear in mind that finance being approved is based on the value of the property to be purchased, as well as the borrower’s proven ability to honor their repayments. Every case is different and a great many factors must be considered. Overall though, it is still good news for the buyer.

Provided you have regular income that you can prove by official documentation, or the means to self-certificate a mortgage and provide a substantial down-payment as a deposit, you will qualify as mortgageable. In addition, the value of the property against which the lending is sought will be taken into account. That’s where a valuation survey comes into play. Entirely different from a full structural survey, this sort of assessment is made purely to ascertain if the amount you wish to borrow reflects the amount that the property is actually worth. This is not necessarily anything to do with the asking price. After all, you may not be asking to borrow the full purchase amount and it is rare these days for 100% mortgaging to be considered and granted – funders like to see a little input from you, as a show of good faith and as added security connected to the deal.

Do you qualify for a mortgage or other forms of home loan purchase funding?

The answer is yes if you:

  1. Have provable income.
  2. Are seeking to borrow significantly less than the value of the property you wish to purchase.
  3. Are able to put down a deposit.
  4. Have a record of keeping up with previous mortgage or loan repayments.

How much can you borrow?

This is rather like asking how long a piece of string is. It’s the ubiquitous hypothetical question. But, based on a calculation of a percentage of your earnings, or in the case of a joint purchase, an assessment made based on a combined income, a figure can be arrived at. It’s worth finding out just how much, in terms of an actual borrowing figure, a lender would be prepared to front before looking at property. Nobody wants to be overstretched, especially these days, so it really is important to shop within your means when searching for a new home and looking to finance the purchase of it.

What sort of home mortgage is the best?

Again, this is a tricky question to answer unless we are looking at a particular case. There are many types of mortgage available, all suit different purposes and situations. In short, an interest only mortgage may be ideal for the borrower who wants to keep their initial monthly repayments to a minimum, because they are only paying off the interest on the borrowing. However, in the long term, a capital and interest repayment schedule may be more beneficial. At the end of the term of an interest only mortgage the borrower is still liable to pay off the capital. When you opt for an interest and capital mortgage, by the end of the term, the entire debt is paid off and the property is yours and yours alone. There are advantages to both and of course, even in cases where borrowers opt for interest only mortgages as a means to keep their repayments within their means, they always have the option of refinancing a home loan before the term is up. Sometimes penalties are charged for doing so, but more often than not the advantages of increased value of the property and the benefits of a more advantageous mortgage deal make it well worth taking this step.

Is a mortgage or home purchase loan available for all types of property?

In theory yes, all types of property can be purchased using a home loan or finances acquired by mortgage. It doesn’t matter if the property you are interested in buying is a small apartment in Dallas or a 20-bedroomed Texas mansion house. Provided the real estate values appropriately, in order that the lender can see the deal as a safe investment, then funding can be obtained.

What about mortgage or home purchase loan interest rates?

Again, this is the proverbial piece of string scenario. Interest rates vary from company to company and depend on the type of mortgage. A fixed interest rate mortgage suits many people. Although there aren’t the perks that come with a variable rate mortgage when rates lower, there are also not the blows when rates rise.

Are penalties charged if a mortgage is paid off early?

In the majority of cases there are penalty charges attached to the early redemption of a mortgage. Again, what rate of interest this is charged at depends on the type of mortgage. It is, however, usually a relatively small percentage of the overall borrowing. And while it may seem incongruous to be charged for paying off a loan early, it is very often worth opting to pay the extra if changing mortgage for a different one will be financially beneficial in the long run. The penalty time frame with a mortgage may be a few years from commencement, after which normal rates apply to redemption.

Always read the small print before you sign any agreements, and ask your financial advisor which sort of mortgage or home purchase loan would best suit you when you’re looking to purchase property in the Texas area.

 
 

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