Most individuals do not have the funds to pay for a home in cash so they need to deal with a lender to make the deal. To a lender a mortgage is purely a money making activity but that isn’t to say that they won’t do as such as possible for you to get the loan. It is important to note that even though they may be friendly the best interest of the lending institution will always come before your needs.
Mortgage lenders make their money on the interest charged on the mortgage loan you so your ability to repay that money is pivotal in their final decision. By looking into your past credit history a bank can make a decision on how likely it is that you can repay the mortgage amount. The lender is trying to make a prediction on the future by researching the past just like a historian might but your present situation with have some bearing.
In an attempt to learn about your past banks examine your credit history. The amounts of any loans that you have taken out in the past are some of the items that are part of your credit history. Whether or not you were able to repay those loans is the other part of the equation lending institutions look at. Were you late on payments and the number of times, was the loan repaid in full and do you have an outstanding balance on any loans?. When these things are added together they will make up with your credit score. The chances of you qualifying for the loan are largely determined by this score.
Credit scores are something that many people are aware of but there are other criteria that banks can choose to look at it that are not so common. For example if you have had other loans or investments they may review how much money those items have made for the lending institution. If there are any legal judgements against you they can have negative consequences on the loan application.
The home you wish to buy is also a important part of the equation. Banks will review the appraised value of home and compare that to a couple of things. The majority of banks will not loanmore than 75% of a property’s value so they will look at the size of your down-payment. This percentage may be higher, however, if a buyer is able to obtain mortgage insurance which will help to protect the lender in case you default on the mortgage. A case in point is if you live in Ontario and want to buy a piece of Burlington real estate but you did not have 25% of the purchase price as a down-payment you could still qualify for a Burlington mortgage as long as you obtain mortgage insurance through institutions like the Canadian Mortgage and Housing Corporation. Second they will look at the purchase price of the home.
Knowing what the expect when you are applying for a loan will help you be better prepared when you are house hunting. Banks are in it to make money but that does not mean that they are not willing to work help you. At the end of the day everything is negotiable so that both parties can benefit.
