Securing a mortgage is often make or break when it comes to affording your own home and particularly for first time buyers, there can be a lot of pressure to get the right deal. Even with recent schemes such as ‘Help to Buy’, many people still find that the help available is not substantial enough and with so much bad press surrounding house prices and mortgage rates of late, it has been enough to put off some people from even applying. With so many myths surrounding the process of getting a mortgage however, it is important that people sort the fact from the fiction and know, whether for better or worse, if they can in fact afford a mortgage.
1. You need a 20% deposit
While it is true that some lenders may demand a 20% down payment when applying for a mortgage, not all will. The truth is that the size of the required deposit can vary hugely from one mortgage banker to the other. 20% deposits are famed mostly because generally, the higher the deposit, the smaller your mortgage needs to be and therefore the lower your monthly payments.
2. The process is complicated
Many people are daunted by the mere thought of applying for a mortgage, believing it to be too complicated. While it can often seem this way, much of it is simply formalities that while they can take time, don’t have to be a deterrent. For those who feel they would benefit from a helping hand, sites like Totally Money offer complete guides that will walk you through each step of the application process, while also offering the opportunity to conduct filtered searches of over 3000 different mortgages to help find the deal that best fits your individual needs.
3. You should go to your own bank
Many people wrongly believe that they should simply stick to the bank they know best when looking to take out a mortgage; why do this when there could be far better deals to be found elsewhere? Shopping around for the interest rates, deposit size and monthly payments that work for your budget will go a long way towards helping you cope with the repayments later down the line.
4. Pre-qualification and pre-approval are the same thing
Though they may sound similar, pre-qualification and pre-approval are in fact very different. Pre-qualification is a very rough figure of the kind of mortgage you could expect to be given based purely on your own declared income and debt while pre-approval is a much more detailed and realistic figure that is worked out once the lender has conducted a thorough check of your credit history. It is a pre-approval that homeowners will want to see when you approach them to make an offer on the property.
5. Income alone determines your mortgage rate
It is wrong to assume that people on a high income will automatically be accepted for a large mortgage. While income plays a part in the final decision as to whether a lender will enter a deal with you, your credit history in relation to the upkeep of any previous debts is a much more influential factor. The likes of your employment status can also be taken into account, with self-employed people often considered a higher risk investment.
6. Buying is more expensive than renting
Some people decide not to apply for a mortgage because they believe that buying a home is always more expensive than renting. While initially this is often the case, it is important to remember that once you own a house, it is yours to sell on whenever you choose and property often appreciates in value over time, meaning that buying your own home can often be a wise investment for the future. Sometimes it is also possible to get a deal where monthly payments for a mortgage are lower than the monthly cost of renting, meaning it may once again save you money in the long run.