What is a mortgage?
A mortgage is a loan you take out from a mortgage lender to pay for a property. If you don’t pay back the loan, as per the agreement you make, then the mortgage lender can take possession of the property and sell it to repay the loan. The loan is divided into the capital (i.e. the amount of money you borrowed to buy your property) and the interest (i.e. the amount the mortgage lender charges for lending you the money).
Why should I use a mortgage broker?
The difficulty for most people in shopping for their own loans is that they don’t know all the right questions to ask and most banks/lenders offer only two or three programs.
A mortgage broker, on the other hand, can submit your loan to many different lenders, have access to many different types of loan programs and shop around for the best and most competitive mortgage rates and terms available tailored to meet your particular needs. With so many programs, rates, qualifications and conditions, it can be overwhelming. A mortgage broker can sort through requirements and find the best program for your situation.
How much can I borrow?
The amount you can borrow depends on how much you earn, how much you owe and how much the property you want to buy is worth.
Depending on the property’s value: Most lenders will loan up to 80% of the property’s value and many will go to 90 or 95%. Ask the experts at PA Financial Group about what we can do for you.
Depending on how much you earn: The amount you can borrow will vary between lenders but the rule of thumb is three times your annual earnings.
Depending on you much you owe: Most loans require a debt to income ratio of less than 43% of your total income. Lenders will calculate this by checking your average outgoings i.e. your household bills, any debts etc. by reviewing your credit report.
If you’re a first time buyer it will always help if you can show you’ve been paying regular rent for a similar amount to what your intended mortgage payments will be, therefore avoiding payment shock.
How do I prove my income?
If you’re employed: The lender will ask for written evidence i.e. paystubs, W2s, 1099s and possibly tax returns for the past two years.