If you’re planning to buy a house, chances are you’ll need to get a mortgage approved, and that’s not always the easiest thing in the world. It pays to understand what lenders are looking for in a borrower, and this is now even more important as the way mortgage lenders judge applicants has changed since the Mortgage Market Review (MMR) in 2014.
In essence, banks and other mortgage lenders will focus on the affordability and the credit score, and this is often a problem for those who have had to deal with financial challenges in the past. Even if your situation has drastically improved and has a positive outlook, it’s still possible your application gets denied. Can you afford a Right to Buy mortgage? Here are the essential factors lenders will assess.
The main questions
There are some important questions that the mortgage lender may ask you – some of them uncomfortable, but they are necessary. Here’s what you can expect:
- What’s your income?
- What are your expenses?
- What are your plans for the future?
- Do you have debts?
- How long have you lived at your latest residence?
Your income is important – you should be able to show proof of this through bank statements and pay slips. Lenders may not take all your income into consideration; often only the basic salary is taken into account.
Your expenses are important because the income minus the expenses will determine how much you have to spare at the end of the month; hence, how much you can realistically pay the lender over a period of time.
In general, the more deposit you have, the less the lender has to loan you, so the more favorable the bank will consider your application – it’s also to your advantage, of course, as you will have less capital and less interest to pay over time. If you have a low deposit, you can try to look at cheaper options that can be affordable without jeopardizing your quality of life, such as New Homes in Kelowna from the 500s or similar ones.
Duration and future plans
Do you plan to have children? Do you travel a lot? These things matter in the long term.
Expect your bank to do a background check to see how you handle finances and how your credit rating is.
You may find some of the questions the lender asks an undue imposition – may even find it offensive – but you have to understand the lender’s point of view; to the lender it is a big investment, and they have to assure themselves of the will and ability of the borrower to make good on this important, long term commitment. If you have any difficulty or have many questions, remember there are professional Right to Buy mortgage advisors willing to give you a helping hand and welcome advice.
AS A MORTGAGE IS SECURED AGAINST YOUR HOME OR PROPERTY, IT COULD BE REPOSSESSED IF YOU DO NOT KEEP UP THE MORTGAGE REPAYMENTS.