archiveSeptember 2019

Mortgage

Income Verified Mortgage Pre-Approval: Why You Want One

It is no secret that many lenders have tightened their credit requirements. Especially for mortgages, buyers may find that while interest rates are low, obtaining a mortgage can be especially challenging.  However, with the right documentation, potential home buyers can obtain the credit they need.

Income Verified Mortgage Pre-Approval: Why You Want One

Obtaining an income verified mortgage pre-approval letter can go a long way toward helping you become a home owner. A mortgage service can help you obtain pre-approval online. You can also compare and contrast different mortgage lenders to ensure that you are getting the best possible deal.

Mortgage Pre-Approval Definition

Mortgage Pre-Approval Definition
Mortgage Pre-Approval Definition

Many people confuse mortgage pre-approval with mortgage pre-qualification. While both mortgage pre-qualification and mortgage pre-approval are helpful tools for home buyers, mortgage pre-approval is preferable. With mortgage pre-qualification, you submit basic information to a potential lender such as income and debts; however, in many cases, the lender does not run a credit check. Therefore, the pre-qualification letter only represents a tentative estimation of what the lender believes you may be able to afford.

On the other hand, obtaining a mortgage pre-approval involves a thorough evaluation of the buyer’s financial resources. Buyers must present proof of income, good credit and verification of steady income, and undergo a credit check. If the results are favourable, the lender provides a letter to the potential home buyer stating that the lender would be prepared to approve a mortgage of a particular amount. While mortgage pre-approval does not represent a firm commitment on the part of a lender, buyers who present mortgage pre-approval demonstrate that they have the financial means necessary to purchase the homes they are viewing. With a mortgage pre-approval in hand, you are prepared to make a firm offer immediately for the house of your dreams.

 Establish a Specific Budget

Establish a Specific Budget
Establish a Specific Budget

 Once you have obtained a mortgage pre-approval, you know precisely how much house you can afford. You won’t waste a seller’s time or risk disappointment by considering homes that are far out of your financial reach. On the other hand, if you have a mortgage pre-approval in hand, you can begin to develop a concrete budget for mortgage payments and other financial aspects of home ownership. You can establish good estimates of your monthly payments and begin to determine how to allocate the resources from your income (and perhaps including the income of a spouse or partner). Going through the process of obtaining a mortgage pre-approval eliminates some of the financial surprises of home ownership, especially for first-time home buyers

Negotiation Advantages

Negotiation Advantages
Negotiation Advantages

If a seller receives several offers for his or her home, selecting a buyer from the various offers can present a challenge. Potential home buyers who obtain mortgage pre-approval present themselves as serious buyers who possess the financial means to see the sales transaction through to a mutually satisfactory conclusion. Potential home buyers who have obtained mortgage pre-approval definitely receive more serious consideration than  potential buyers who have only obtained mortgage pre-qualification. Buyers who have obtained neither mortgage pre-qualification nor mortgage pre-approval may find themselves shut out of a competitive home buying market.

Buy to let Mortgage
Mortgage

Buy to let Mortgage

A new government guarantee scheme to revive the mortgage market has a major flaw for some potential borrowers: it doesn’t cover investment properties. While the debate rages on over the decision, it makes it all the more important to look for the best deal for a buy to let mortgage.

The scheme, which is launching initially in England and applies only to new-build properties, is the first time the government has ever guaranteed a portion of a mortgage borrowing. It’s aimed at bringing back 95% mortgages to the market and works by the government and the construction company handing over a cash payment worth 9% of the purchase price to the lender. This money is returned when the borrower has repaid the relevant amount.

Buy to let Mortgage

Buy to let Mortgage
Buy to let Mortgage

One of the more controversial elements is the exclusion of buy to let mortgages from the deal. It can be argued that it’s unfair to exclude customers who will be buying with the intention of providing affordable rental deals, particularly to tenants who can’t afford to buy, for exactly the reasons which have prompted the government to make the unprecedented move in the first place.

The counter argument appears to be that the government shouldn’t be making riskier mortgages more available. From the perspective of the lender, buy to let mortgages not only carry the normal risks of house prices falling, making it difficult to recover the full amount in the event of a repossession, but there’s also the added factor that repayments often depend on the state of the rental market rather than the borrower’s personal income. There’s also a political element that the government might not want to encourage buy to let mortgage deals that may contribute to house prices growing too quickly.

Encourage Buy to Let Mortgage Deals
Encourage Buy to Let Mortgage Deals

For investment property buyers then, it’s a missed opportunity, but by no means a killer blow. There are still some great buy to let mortgage deals on the market if you know where to look.