The majority of property buyers need to take the help of a mortgage to purchase any property. However, there are many aspects of home mortgage that any buyer should be aware of. So before you look for houses for sale in Bicester, here are some important aspects of mortgage you should know.
Before diving into the mortgage tips for first-time buyers, let’s understand what mortgage is all about.
What is a mortgage?
When you take a loan from any bank or building society to buy a property it is called a mortgage. As it is a secured loan, the bank holds the right to retract the property and sell it if the borrower is unable to pay the monthly repayments.
Now, let’s take a look at three effective mortgage tips that every first time home buyer should know!
1. Make sure to commit to the loan
Any first time home buyer needs to make sure that they are ready. The average mortgage period is 15 to 30 years. While buyers don’t need to inhabit the same property for the same period, purchasing any house is a huge commitment. Hence, be 100% ready to become a homeowner before filling for a mortgage.
Start by asking yourself a few questions!
· Is this the right time for me to commit to this house and the city for at least 5 years?
· Is there any emergency fund that will act as a safety net and cover 3 months of expense?
· Do I have a stable income that will help me cover all my expenses and pay the monthly?
If the answer to any of these questions is a no from you then you would want to put your decision of purchasing a property on hold. Take some time to save and do your research.
If there are upcoming events that might have any effect on the location, your income or your expenses, hold off your purchase for the time being.
2. Never skip the pre-approval
The temptation of beginning to search for the perfect houses is very difficult to resist, especially if you are a first time home buyer. However, it is important to get hold of a mortgage pre-approval prior to comparing different properties.
But don’t confuse pre-qualification with pre-approval.
- A preapproval letter contains the documents of mortgage preapproval that you can get from your lender. It states how much loan you can get and it is based on your financial background and information like credit score, bank statements.
- A prequalification letter contains an estimate of the total amount of home loan you can receive. A bank provides you with this estimate on the basis of an informal evaluation of your finances.
What are the benefits of pre-approval?
· You will know what you can exactly afford once you get the preapproval letter. This will help you understand whether you can afford a certain property or you need to search for another property that actually fits your budget.
· Your chances of making a strong offer will increase. As a buyer, you need to establish the fact that you are able to afford the house. With a preapproval in hand, your seller will understand that you have the money to purchase the property.
· You can avoid surprises. If you are preapproved, you can avoid the chances of unpleasant surprises and delays with the lender.
3. Maintain your line of credit
When you are preparing to invest in any property, you need to watch your credit line. So this is not the best time to open any new line of credit. Whenever you apply for a mortgage pre-approval, be assured that the lender will access your credit report. This process will get repeated again when you finalise the house and its respective mortgage.
You can’t risk losing your final approval if they see that you have applied for another loan, even a new line of credit, or if the credit balance has hiked, or if you have failed to make any monthly repayments.
So make sure to pay your bills on time and avoid any risky spending. Your lender will determine your creditworthiness on the basis of your spending behaviour.
First Homes Scheme
If you are living in the UK and you are a first-time buyer, you can avail an offer called the First Home scheme. Under this government initiative, you may be eligible to buy a house for a price that is 30% to 50% less than the market price.
However, there are a couple of guidelines that you should keep in mind.
· A property needs to be built by a developer
· You can also buy a home from someone who purchased it under the same scheme.
To sum up,
Buying a house is a big commitment. So make sure to do your research and avoid any unpleasant circumstances. I hope this article would’ve given insights into the mortgage tips that you’re looking for as a first time home buyer!