Broadly speaking, the mortgage lender lends you the money that you require for your house and expects you to pay back the same within a specified time along with interest. There are two basic types of players in the mortgage market: lenders and brokers. You have the option of going directly to an authorized lender, or you could approach a mortgage broker who helps you obtain the mortgage from any of the several lenders in the market. It is a jungle out there and it might be helpful to have someone who can help you navigate in it. But remember that the fee that the mortgage broker charges may be higher than what the authorized money lenders charges. Also be aware of the fact that most of these brokers are not licensed and hence are not bound by any regulation.
What do mortgage lenders look for?
Mortgage lenders are mainly concerned about your credit report. In a credit report they scrutinize your debt ratio which is an indicator of your earnings and how much you owe, as well as over all credit rating. Proof of earnings is another key criterion to decide whether the lender will finally approve your loan amount or not. This information is generally obtained from tax returns and pay stubs submitted by you. In order to get the mortgage without much hassle, it is important to keep your records clean and unquestionable. But what if you have a not so perfect credit report? – Well in that case there are several other lenders who can still give you a loan, by charging you a higher rate of interest.
Why do mortgage lenders sometimes turn down mortgage request? This may be due to factors such as bad credit report, low annual income or even when they are not satisfied with the house that you plan to buy.
How much of a mortgage loan can you reasonably expect from these lenders? A kind of thumb rule states that you can get a loan amount that is 4-5 times your annual income. So the more you earn, the bigger the mortgage you are eligible for.
What is the process of obtaining a mortgage? You can either approach the lender to get a fair assessment of your situation and ask them how much they are willing to give you, and then look for a house in that budget. You can even select a house and then apply to the lender for payment. Whichever way you go, you have to first obtain an ‘Agreement in Principle’ which states the amount the lender is willing to pay for your house. This document is valid generally for a period of 3 months or so. After this you are expected to complete the ‘Mortgage Application’ and submit the same with required documents pertaining to your financial stability and creditworthiness. The house is then inspected by a qualified valuer.
After your mortgage application is found to be satisfactory the lender will issue a ‘Mortgage Offer’, or an ‘Offer of Advance’. This document will also state the conditions on which the lender is offering you the mortgage.
What are the fees associated with mortgage application process? One is generally required to pay an ‘Administration or Application fee’ for setting up the mortgage. A separate ‘Valuation Fee’ may sometimes also be charged.
You can choose a lender and mortgage, apply for the loan and get your mortgage 'approved on principle' before you even start looking for a house. This means that you know what your budget will be and can be fairly certain that your mortgage will be accepted. The lender will still want to see the valuation survey, however, and there may be other checks that have to be completed before the deal is closed.
While most people used to take out their mortgage with a building society or bank, these days there are a number of other options to consider. Smaller, specialist mortgage providers can offer good deals and are sometimes more flexible about terms.
Banks and Building Societies
Since the market has become much more competitive, the larger finance houses have adapted their practice to become much more flexible with their mortgage deals. You will have the advantage of knowing that a reputable lender provides your mortgage, and local branches can make your day-to-day banking more convenient.
Insurance Companies
Some companies now offer their own range of mortgage products, which can give good terms, along with insurance products and investments. Legal and General are a well-known example. Check that you are not committed to taking out insurance policies with the lender along with your mortgage.
Specialist and Centralised Lenders
Generally this type of lender operates from one location - you won't be able to visit a local branch, but they may offer lower rates as a result of having fewer overheads to cover. Virgin Direct and Mortgage Trust are two lenders who can offer particularly flexible mortgages. Telephone and internet banking make this kind of borrowing more convenient.
Local authorities
Council house residents may wish to apply to their local authority for a mortgage. There are also some mortgages available from some authorities for people who wish to renovate derelict houses - contact your local council for more information.
It's good practise for a lender to subscribe to the Mortgage Code - this is a voluntary scheme that means the lender has promised to uphold commitments to good service.
Joseph Kenny has sinced written about articles on various topics from Credit Cards, Debt Consolidation and Credit Cards. Joseph Kenny writes for the financial portal and get information on the. Joseph Kenny's top article generates over 550000 views. to your Favourites.