Determining whether or not you are eligible for a home mortgage loan will boil down to several key factors, many based off of financial stability of yourself or co-signers; along with your credit score, price of the home, and the overall APR (Annual Percentage Rate) involved.
Also take into consideration the following dynamics for pursuing and successfully obtaining a mortgage loan for a home:
- Is your Credit Score on the lower-end, such as in the range of 500-550 or less If so, it’s likely you will face much higher and even non-affordable annual interest rates and even a larger down-payment in advance. That is, as lenders will look at you as a potentially unstable or otherwise financially inept borrower that at any time could default on the loan.
- Is your score in the range of 550-600? If so, the approval rates for you will be more consistent. Lastly, if your Credit Score is around 620 or more, you will be nearly guaranteed to get more offers on home mortgage loans, lower interest rates, a lower payment requirement, flexibility, and an overall more affordable and desirable experience.
- How much, and is your salary justified in comparison to the price or annual APR that is due, as well as insurance rates and other fees for the home in which you’re looking to gain a mortgage on (For example: additional repayment fee, break costs and exit fees, mortgage discharge fee or fees, redraw, and portability to switching fees.) If not, it’s likely more money will be required up front as a down-payment, and a co-signer might even be necessary. Unfortunately, such a position will also put you at a disadvantage if you’re shopping around for mortgage-loans on property homes that are way out of your realistic affordability range.
- Whether you’re considering, have been approved for, or are equating and comparing your cost of living versus your salary, be sure to not only take into account fees, taxes, and the likes due to your real estate agency or lender, but also how much house insurance on a monthly to annual basis will cost, and if such an element pushes the mortgage loan far out of your affordability range. If so, a lower-priced home might be in your best interest.
- Not every real estate agency and likewise bank or loan agency is required to provide the same quote, fees, charges, or otherwise rates to you for your application and approval of a home mortgage loan. Therefore, don’t be afraid to shop around, compare quotes, and try not to ‘jump the gun’ as exciting as it can be to purchase your new home.
Patience is a virtue; especially when you’re dealing with hundreds of thousands of dollars or more and a prospective new home for you and your loved ones!
Making Sense of Property Loans
Much like a home mortgage loan, successfully obtaining a loan for a property has many common denominators such as comparable fees, a deposit, credit checks, and variations in quotes or flexibility through different loan programs available to you.
Unlike home mortgage loans however, land loans typically require more money up front (as much as 50%), and will require approval for a predesignated purpose by the state or county for what you wish to use the land for. For example, are you intending to create a business, home, or perhaps both If so, you will have to first have a professional inspector or state official come out and not only have the land appraised, in lieu with working with your agent, but also have property lines, dimensions, easements and access all evaluated before seeking a loan quote or approval. These are all very valuable terms in which you should commit to learning for the stability and success of your future property purchase!
Unfortunately, for those interested in property-loans, since these are typically just areas of land without any predesignated or already built estate or business, it’s a higher risk to the real estate agent and the turnover is not in their favor. In lieu of this, interest rates are typically much higher as well. However, just as with a home or other real estate loan, you can use the mortgage or your current home or property as collateral and even transfer the value, amount-paid, or find other alternative solutions to paying down the property to increase the likelihood of approval to gain ownership of the desired land.
Some of these tactics and options are known as mortgage portability. Don’t forget to look into mortgage offset options, lump sum repayment, and additional repayment options in finding the most practical land-mortgage or loan program and agreement for you.
On the other hand, before or after purchasing the original land, should you decide to seek a land-construction loan as you immediately desire to build a property such as a home or business on the land typically agreed upon within a 1 year period of purchase expect a much higher interest rate and an even smaller window for repaying the loan which of course, is not desirable in most situations. Although there are plenty of good deals out there on land given the current economy, many fees, increased rates, and other collateral requirements can make it difficult to qualify for or afford the required land mortgage or loan options available for you.
Lastly, it’s worth noting since the economic boom of 2008 among banks, there are still indeed many alternative options for those with less money up front or lower credit scores, such as; home mortgage loans through the Veterans Affairs (VA), the Department of Agriculture, and even federal programs for first time borrowers, such as through FHA or other state-run programs.