hr: Money

Photo Credit: Jim Moore
The biggest hassle that you’d probably face as a prospective homeowner is taking out a mortgage. Hearing all the interrogatory questions the bank asks you about your income and property can really be annoying. However, the bank does have reasons for asking all those questions.

They simply want to know whether you can be trusted as a borrower, whether you have enough source of income to pay back the loan, and whether you have some valuable property that can serve as collateral should you be unable to fulfill your obligations.

Are you earning enough to pay back your lender? Your lender of course would be interested to know not only the cash and assets that you now possess, but also how much money you will be able to generate in the long haul, say in a span of about thirty years. Another thing you need to disclose is whether or not you have other debts. Whether you have other assets or not will count a lot when the bank starts figuring out how much money the will lend you. They will most likely look into your personal property, like a car or other movables that they might consider valuable, or they might also look into stocks, mutual funds and other investments that you’ve made.

The thing to remember is you should try to come up with 20 percent, at the very least, of the worth of your new home. This will enable you to avoid having to pay for mortgage insurance, otherwise known as private mortgage insurance (PMI). However, you most likely are already qualified to avail of financing arrangements that will buy you a home for as low as three percent of its price.

Now, as a prospective homeowner, try to see whether you really need to buy a new home, and how long you plan to stay in it. If you’re planning to stay in it for only two years or so, why bother?

Can you afford the mortgage? This is something you really need to figure out before you start borrowing. Don’t rely on the bank to make that decision for you. Remember banks serve their own interests, not yours, and will at times loan you the money even if you can’t really afford to pay it back. You may have to give up certain things just to get that house, and if you don’t want your money tied up on that mortgage, then don’t buy that house just yet.