Buying a home is probably the biggest purchase you will make. Before you make a mortgage or a real estate loan, make sure you know everything you need about such a loan. Find out where you can get the best mortgage loan, the different types and how the process works.
What does mortgage credit mean?
A mortgage is a loan made to buy property or land. Most have a duration of 25 years, but the term may be shorter or longer. The loan is “guaranteed” by the house, until its payment. If you cannot pay the installments and you cannot repay the money, the lender can take the house and sell it so that he can recover his money.
When you buy a house, in most cases, you will be required to pay a certain amount in advance, usually between 3.5% – 20% of the purchase price. The remaining amount is borrowed from a mortgage or a bank, and this loan is called a mortgage loan. There is also the possibility to make a mortgage loan without advance or real estate loans with zero advance, but this means buying a house directly from the developer.
Find out how much you can afford to pay monthly
You have to make a calculation and see if you can afford the rates. If there is a possibility of having trouble repaying the money, think twice before opting for a mortgage loan. Also, think about the running costs of a house, such as household bills, tax, insurance and maintenance. Creditors will want to see proof of income and of certain expenses, and if you have debts. They can request information about household bills, child care, and personal expenses.
The lenders want proof that you will be able to repay the money if the interest rate increases. They may refuse to give you real estate loans if they don’t think you can afford them. Before going to the bank, use a mortgage calculator. This way you can see if you qualify for a mortgage loan, and how much you will have to pay monthly. For your safety, it is best to choose a fixed interest mortgage, to avoid expenses that you do not have in the calculation if the interest rate increases.
From where you can get a real estate loan
You can apply for a mortgage directly from a bank or a real estate company, choosing from their range of products. You can also use a mortgage broker or an independent financial advisor who can compare different mortgages on the market. In order to pay the advance of a mortgage loan, you must look for the best loan for personal needs, apply, and wait to receive the money. Before going to the bank you must know:
- What kind of real estate credit do you want
- Which is the home you want to buy
- What amount you want to borrow and for how long
- The rate you want to pay monthly
- What you need to make a mortgage loan
Applying for a mortgage is often a two-step process. The first step usually involves a finding that can help you find out how much you can afford and what type of mortgage is most advantageous to you. The second stage is the one where the mortgage lender will perform a more detailed check.
In general, the lender or mortgage broker will ask you a series of questions to find out what type of mortgage loan you want and for how long. The lender will try to find out details about your financial situation. Also, it should provide you with key product information, services, and any fees, if any.
This is usually the stage where you apply for the loan. You will need to provide evidence of specific revenues and expenses. This may involve some detailed questionnaires of finances and future plans that may affect your income. Also, the bank will evaluate the impact on your repayments, if the interest rate increases in the future. This does not happen if you choose to make a fixed interest loan.
You need a steady income
Your income must be large enough to allow you a mortgage loan. Not all types of income will be accepted by creditors. Revenue must be consistent and reliable. If you are an employee paid on commission or paid on the project, the creditor will need 2 full years of tax returns. Then, it will calculate the average income you have had in the last 2 years.
Prepayment of 3% – 20%
Advance payment is a percentage of the purchase price, which a borrower must pay in cash upon signing the contract. The amount you have to pay in advance will depend on the type of mortgage obtained. The more you pay in advance, the lower the rate.
How does a mortgage loan work?
The money you borrow is called capital, and the lender will charge interest on it until the loan is repaid. You pay the interest and part of the capital every month.
At the end of the contractual period, usually 25 years, you should be able to pay for everything and own your own home.
Different types of mortgages
Once you have decided that you can pay the monthly installments, you must choose the best mortgage loan.
This can be a fixed or variable interest mortgage. With a fixed-rate mortgage, your repayments will be the same for a certain period of time – usually two to five years. If you choose a variable rate mortgage, the rate you pay could decrease or increase.
Mortgages do not have to be complicated. Make sure you work with an experienced real estate agent and a lender who can guide you through the process of buying the home from start to finish.