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Mortgage, in simple words, is a loan for buying house/property, where the property itself serves as the collateral. In case you cannot repay the loan as the per installment plan, the mortgage lender will take your property to get back the dues. This is known as foreclosure – the number of which is increasing at an alarming rate in almost every state. Before you opt for mortgage loan for home, check a few aspects below that matter.
The requirements
Lenders and banks are usually interested in knowing if you can repay the loan. It is important to mention here that mortgages can have a fixed/lock-in rate or a variable one, and the term is usually between 15 to 30 years, but there are no fixed norms as such for the same. Lenders will check four major aspects before they consider your application.
- Your income. Self-employed professionals often have a hard time proving their income, but typically, bank statements can suffice.
- Credit score. Every lender keeps a norm for the minimum score, which can vary.
- Current debts. How many debts you have and the number of installments you pay is also important.
The debt to income ratio is another aspect one must consider. Many lenders follow the 28% rule, which means that 28% of your gross income should ideally go for mortgage payments.
Things to note
You can actually improve your credit score effectively before applying for the loan. It is easy to understand why experts stress on being current on the payments. Also, if you can repay or clear some of the personal loans and dues, it will help your score positively. Make sure that you have all the papers and documents handy with you, so that there aren’t any delays in documentation. Check online to find the best lenders now.
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