New mortgages are still being granted every day, even with the global crisis in full swing. Lenders use a variety of factors to determine whether you qualify for a loan with them. For the most part, we can place these factors into three categories: your income, how much the property is worth and their estimation of your ability to pay.
Your Annual Income
Every lender uses their own formula to determine how much they are willing to give you during the home buying process. Most lenders are willing to give you a minimum of 3.5 times your annual salary. Using this formula, an average salary of £26,000 would qualify you for a £91,000 loan. Lenders obviously take other factors like credit history into account when applying this formula.
If you have a skilled broker and good credit, you could even see a lender go as high as four or five times your annual salary. Lenders often offer 3 to 3.5 times the higher salary plus 1 year of the second salary when dealing with couples. A couple where both people earn £26,000 per year would be eligible for a loan of around £130,000 using these formulas.
Even if it seems like getting a mortgage is difficult, competition between lenders is high. They rely on underwriting loans to stay open, so they need you as much as you need them. The best way to find out how much you can borrow is to find an independent mortgage adviser with experience in the local market. Most have solid relationships with the local mortgage lenders and will be able to accurately estimate your limits. Since every case is different, lenders carefully way the unique aspects of each situation. For example, a couple with expensive cars and high insurance premiums will not be able to borrow as much as a couple who earns the same amount but has cheaper vehicles.
What the Property is Worth
Each lending firm uses its own loan to value ratio as a guide for mortgage loans. This is usually a percentage which shows the size of mortgage vs the property's value. E.g. if the mortgage is £80,000 and the property's value is £100,000 the loan to value is 80%. For most lenders this is usually 75%, however some may offer 90% or even 100% financing. However, the higher the percentage, the more you will likely pay in interest rates.
The value of the home is also measured against the value of the other properties located in the same area. Some lenders may refuse a loan if they feel ฝากขายทาวน์เฮ้าส์ the property isn't expensive enough for the area. More often, it's the opposite case - where a property is seen as too expensive.
The Lender's Evaluation of Your Particular Case
If you're a first time buyer it will always help if you can show you've been paying regular rent for a similar amount to what your intended mortgage payments will be. Providing this type of information helps convince the lender that you will be able to cover the payments. Bear in mind that the final loan amount may not be congruent with what you can actually afford.
You may be able to get a mortgage that taxes your budget to the very limit, but gets you into trouble when other costs involved in the buying process appear. You should also take into account the future maintenance, taxes, insurance and other related costs when determining how much you can afford on your new home. Some lenders will want to estimate this by checking your average expenditures like your household bills, any debts etc. Some will get you to fill in a detailed questionnaire either by hand or on the phone or online etc.
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