Are you now considering to buy your own home? Do you believe it is time for you to obtain a residential property which you can finally call your own? Do you think you are prepared for the long-term commitment of repaying a home loan?
Perhaps you already have a home loan and you are thinking about applying for a home loan refinancing.
There Are Ways to Get a Great Mortgage
Whether you will be a new homeowner or you want to apply for refinancing, there are ways for you to get great mortgage deals.
The first step to getting great mortgage deals is to have a good understanding of how home loans work, particularly if you are a new home buyer.
While the idea of getting your head around how the loan system works and the demand of a long-term financial commitment to a home loan seem intimidating, overwhelming and challenging, there is always room for learning and better chances of getting a great mortgage, especially if you are a qualified home buyer.
Presented here are 5 tips to get a great mortgage. Read the following sections for these pointers which may come in handy as you plan and decide on buying a residential property on loan.
5 Tips to Get a Great Mortgage
Your Credit Score: Maintain an Excellent Credit Score and Keep Improving It Despite the Already Good Credit Rating
You will know your credit score on your credit report which will contain all of the history of your credit activities in full detail.
It is very important to note that you should be completely aware of your credit rating before submitting an application for a home loan.
You credit score will have a major influence of your home loan approval and will need to be high enough to qualify for a mortgage.
What do you have to do then in order to obtain an excellent credit rating? Your credit history will need to show you are a responsible borrower. Always keep your credit balance in check and as much as you can, do not get too close to the limit of your credit line and credit cards.
It is also important to be reminded you should be actively utilizing your credit. The more information there is in your credit history, the more data there are for lenders to compute and base your score and rating on. In certain cases, it is not about failure to pay bills and credit, but it is about not having enough credit activity which result in low scores and rating.
Your Budget: Live Within Your Means and Pick a House Which You Can Afford
Know your needs without discounting your wants. While a particular house may be very attractive to you, yet it may prove to be too costly, you have to be practical about the situation and shop around for a residence which can provide for your needs and still be aesthetically appealing enough.
Knowing what you can afford will mean that you understand where you currently are financially. Your prospective lenders will be able to see you are aware of your financial health and stability. Otherwise, you will end up not getting a good mortgage deal or even increase the chances of your application being rejected altogether.
Your Source of Income: Keep Your Employment or Maintain the Business Which You Own and Operate
You will want to stick with your current work or strive more for your own business, whichever your main source of income may be.
If you are a tenured employee who has been with the same company for several years and you wish to buy a house, then now is not the time to quit your job. Years of employment, especially with the same company, will be crucial in the home buying process. This information will say much about your income status. If you are running your own business, then you will need to maintain its good profit margins.
Your prospective creditors will take a good look at this part of your application. They will need to know you are low risk debtor which can be evaluated with the stability of your source of income.
Your Savings: Laying Away for the Future Will Not Only Look Good on Your Record but It Will Also Be Good for Your Future
You have to spend money during the home buying process. Apart from the down payment, there are several other fees which will need to be paid along the way and having a healthy savings account will make payments easier for you.
Aside from this, maintaining and increasing your savings will mean you know how to handle your finances and that you are prepared for the future. This will be a good part of your financial records.
Your Creditors: Shop Around for Lenders and Compare Their Rates and Offers
Do not dive right in and agree with the first creditors to approve your home loan application. You will have to consider looking around for other lenders. You can even ask first for estimates and computations before applying.
You have to remember that great mortgage deals can be negotiated, especially if you are a qualified home buyer. Make use of your great credit score and financial records to obtain a great mortgage from the lenders who will be open and willing to adjust if your financial history shows you will make for a low risk borrower.
There has been a constant hike in mortgage interest rates in the recent years.
This begs the question, “Will interest rates continue to rise for home buyers?”
The answer will most likely be yes. This rising trend in mortgage interest rates may just carry on this year or even perhaps in the years to come.
Another question which you may be asking if you are a new home buyer shopping for a home loan from creditors is whether or not this continuous rise of mortgage interest rates should worry you and affect your budget plans and allocation for your impending home buying.
This article will discuss more this continuous rise of mortgage interest rates, why this fact is not as alarming as you might think it is and how you can even gain benefits from this continuous mortgage interest rates hike, and of course, the downside that comes with it.
So, Will Interest Rates Continue to Rise for Home Buyers?
Yes, it steadily will but more slowly.
Although this will be the case, this trend will not necessarily be very adverse and unfavorable. After all, in general, increasing interest rates suggest and indicate a currently stronger economy wherein more people are employed and are getting more income.
On the other hand, when the economy is slumped down, home loan interest rates tend to be lower and the lenders are even more lenient in the residential real estate business so that they can make it easier for homebuyers to borrow and spend. This then will help recover and bring back up the general economic state and conditions.
The Continuous Rise of Mortgage Interest Rates Affecting You as a Homebuyer: Should You Be Worried?
The continuous rise of mortgage interest rates affecting you as a homebuyer will not necessarily put you in the losing end.
It may just be the other way around for you. While higher interest rates will mean higher home loan monthly amortization or repayments, these will also mean less competition amongst the consumers or the market base over residential real estate properties and in turn, will result in lowering of house pricing.
The reason for this is because lower interest rates tend to encourage homebuyers to shop around, borrow and spend money to buy a house taking advantage of the low interest terms and rates. This will mean less monthly repayments for homeowners. However, with more consumers trying to acquire a residential property, creditors will lean on increasing on the house prices due to the higher demand from the real estate market.
On the other hand, with higher interest rates, interested and qualified homebuyers tend to hesitate over proceeding with home buying which then leads to creditors making a move to decrease on the house prices so as to attract more potential homebuyers to make the business swing upwards again.
The Continuous Rise of Mortgage Interest Rates Affecting You as a Home Buyer: The Downside
While the projection will generally be that the competition amongst real estate consumers will be less so that house pricing may tend to be lower, this will not be entirely the situation. This is because of the rise of more stable and driven millennials who must be in their late 20’s to mid-30’s by now and who are more adamant to acquire their own homes. These millennials will make for some of the toughest competition in home buying.
An emerging topic in today’s market is mortgage rates and their impeding rise. Undoubtedly, the Fed’s will hike short term rates this year. The million dollar question is— how many times? There are a litany of data points that go into the Fed’s decision and rate movements. For instance, the Consumer Price Index, Producer Price Index, Non-Farm Payroll report, Housing Starts, GDP, FOMC Meeting Minutes, Consumer Sentiment, Builder Sentiment, reports and speaking engagements.
The bigger question to ask is: How will these rate movements influence either my payment or purchasing power? To help summarize, here’s an example:
Let’s say you are looking to buy a $225,000 home, with a down payment of 5% and your credit score is 742. Under the current interest rate environment your principal and interest payment, on a 30 year mortgage, would be approximately $1,067.22. This same scenario, 6 months down the road, and assuming 2 FOMC interest rate hikes of .25% each, would put your principal and interest payment at approximately $1,098.97 (roughly a $32 a month increase).
To look at this from a slightly different perspective, let’s say your maximum total payment (including taxes, insurance and mortgage insurance) is $1,500 utilizing the same parameters as above. Under today’s climate, you could buy a home priced roughly at $225,000 – $230,000. Applying the same assumptions above as it relates to future rate decisions, 6 months down the road your buying power would be in the $220,000 – $225,000. As you can see, it will make a difference in your overall purchasing power as mortgage rates rise.
If you have the desire, motivation and means, now would be a great time to embark on purchasing a home as it will only get more expensive from here. Adjustable Rate Mortgages (ARM) financing will also become more popular as rates rise. At one point, they comprised about 30% of all mortgage originations. Depending on your unique situation, ARM financing may make a lot of sense.
It’s imperative to consult a qualified mortgage and real estate professional to help navigate the murky waters. The loan officers at Flat Branch Home Loans are available to assist you!
The new tax year is underway and the first stage of changes to landlord’s income and tax regimes are now in effect. As a reminder below these are the changes that have been implemented so far :-
April 2016 – 3% Stamp Duty Land Tax surcharge on additional properties – paid by anyone with more than one property
January 2017 – Lenders tightened their criteria for Buy To Let properties which included minimum interest coverage ratios and higher affordability stress tests
April 2017 – Phasing out of tax relief so landlords will no longer be able to claim finance costs as a deduction from rental income to calculate the taxable rental profit (to be restricted to basic rate by April 2020)
Still to come in September of this year, lenders will be required to apply specialist underwriting to landlords with 4 or more mortgaged buy to let properties. This means more paperwork and a slower mortgage process.
As a result, there has been a move from many landlords to purchase properties in a Limited Company name and it is important for all landlords looking to increase their portfolios to take proper tax advice as well as speak to a professional broker, such as us of course, with experience in this field who can help them to make the best choices and avoid some of the obstacles.
There is still a wealth of choice around for landlords and mortgage rates themselves have never been so low, with products available from Buy to Let rates are now available from just 1.44% (4.06% APRC), hence we would recommend all landlords review their mortgage requirements now.
Atom bank is offering customers the chance to lock into a 5 year fixed rate mortgage at the same rates as their current 2 year products, starting at just 1.29%.
This revolutionary move of aligning rates across short and longer term fixed rate mortgages will enable customers to fix one of their most significant monthly outgoings at a lower rate for longer.
For a limited time from Wednesday 12th April, all new mortgage customers will be able to apply for a 5 year mortgage at the 2 year rate, via one of the bank’s selected partners who offer independent mortgage advice of which Coreco is proud to be a part of.
Director of Retail Mortgages, Maria Harris, said, “This move is entirely unprecedented, but we know consumers have an appetite for it. The recent success of our disruptive savings pricing has taught us that.
“We remain fully committed to only providing mortgage products through intermediaries. It’s important to us that a customer has received proper independent financial advice, ensuring they get the right mortgage – and that is not always just about the rate. Our ultimate aim is to help people get what’s right for them, while having the best experience along the way, and our intermediary partners are crucial to helping us deliver this.”
Andrew Montlake, director at Coreco Mortgage brokers comments, “Talk of disruption in the mortgage industry has taken many forms, with digital banks such as Atom being at the forefront of this.
“However, this latest move, offering 5 year fixed rate products at 2 year fixed prices, has really turned the mortgage market on its head.
“A five year fixed rate available from just 1.29% at 60% Loan-to- Value and from 1.99% up to 90% Loan-To-Value shows that product price disruption could be a real game changer, enabling consumers to really benefit from this new breed of lender and points to exciting times ahead in the mortgage world.”
We laughed during the Scottish Referendum, we cried during the Brexit vote and now, just when you thought it was safe to walk past your local polling station without a second glance, that little booth where you put your crosses is back – and this time it’s personal. People care about this issue unless you’re on the level of Deion Sanders total worth or Nick Cannon career earnings, which most people do not of course.
Yes, Theresa May (who I heard someone on the radio describe as a pound-shop Thatcher), has gone and given us all another few weeks of listening to Politicians avoid questions, make up stats and generally make promises they cannot or have no intention of keeping. Is it too much to hope for that we do not see another bus emblazoned with more outlandish statements?
Election fever will at least be mercifully brief, but is actually a good thing and a wise move from the PM. It should give us more security after the result and hopefully a new, strong and proper opposition will emerge out of the inevitable fall out of Labours travails. The question is will a resurgent Liberal Democrats be that party?
The main topic will be Brexit and it is a chance for many to cast their vote tactically with that in mind. For me it means that a soft Brexit is more likely and the UK will seem like a much more resilient and stable proposition than most of the rest of Europe.
I also don’t believe it will cause another “wait and see” moment for clients. With everyone expecting a comfortable Tory win, the result and stability that will ensue means that the economy, good will and property prices are more likely to increase after the election. The IMF have already raised its economic growth forecast for the UK to 2% in 2017 and I think I would rather buy now than after.
This is especially true when you look at interest rates themselves and the offers available. One lender brought out a mind-boggling 0.89% 2 year discounted variable rate last week, whilst fixed rates are still extraordinarily low.
Talk of a “new mortgage rate war”, as the press have been putting it, always has an effect and phones start to ring that bit more whenever this happens. It is something we should all be building on to ensure the public know that the mortgage market is open, competitive and those who automatically think they can’t get a mortgage may well be mistaken as there are now many more options around.
Borrowers are now able to get 2-year variable tracker rates from 1.18% (3.41% APRC), 2 year fixed rates at 1.14% (3.35% APRC) and a 5-year fix from a mere 1.59% (2.99% APRC).
Buy to Let rates are now available from just 1.39% (4.23% APRC).
The big news today is around a new report by Legal & General which found that the Bank of Mum and Dad contributes 26% of funds to the UK housing market. This is set to be a stunning £6.5 billion this year which, if the Bank of Mum & Dad were an actual bank, would make them the 9th biggest lender on a par with Yorkshire Building Society.
To most of us active in the London property market this comes as no real surprise, but the scale overall is nonetheless pretty astounding. According to the FT, “This year 42 per cent of prospective homeowners expect to get help from relatives, up from one-third last year.”
This is all despite the fact that interest rates are at record lows and there is now much more choice at higher Loan-To-Values for those with smaller deposits. Recently, for example, we have seen lenders reduce rates for those with just 10% deposit to just 1.99%, (3.53% APRC) on a 2 year fixed basis which is cheap in anyone’s book. Even 5 year fixes are below 3% now whilst at 95% LTV there is more choice.
Where the Bank of Mum and Dad, or even Gran and Grandad these days, are concerned there are also more clever options around rather than just gifting the cash. Several lenders have good Family Guarantee schemes such as Barclays Springboard Mortgage and the Family Building Society schemes which mean you can help your kids without waving goodbye to the cash forever.
That said, parental help is not going to abate anytime soon and has become an important part of the market, but the good news is that there are so many different and competitive options around now if you know where to look.