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The Simple Mortgage Guide
What should I do before a Mortgage Application?
You are required to put in a down-payment to show good faith and establish integrity on your end towards the investment. Depending on the mortgage lender and other factors, lenders may be willing to finance up to 75% – 90%, which means you will have to cover the remainder.
Therefore, before looking for a property to buy and beginning the pre-approval process, it is necessary to have sufficient savings to make your deposit to cover roughly 20% of the home’s value.
Depending on the price range you are looking at, you can determine how much you need to save for your initial down-payment.
What are the Types of Mortgage Financing?
One additional item to consider is the type of loan financing you wish to undertake. There are two broad categories of mortgages
Mortgages with Property – for purchasing a house on a property
Bridging Loans – purchase of land on which to build a property. Bridging loans takes the customer from land ownership to home ownership.
Fixed Rate Mortgages – Monthly premiums with one fixed interest rate during the entire mortgage period
Adjustable Rate – Mortgages with interest rates that fluctuate
How long should I take the mortgage for?
Most lenders allow up to 20 years of more for the mortgage re-payment period, or your working years left before the retirement at age 60. Keep in mind that shorter mortgage terms means higher monthly instalments and vice versa.
If you intend to be working beyond the retirement age and are able to show evidence of income, you will be able to access the mortgage for a longer period of time – 30 years or until you reach age 70.
What does Pre-Qualified Mean and Involve?
Getting pre-qualified by your mortgage lender usually involves an interview assess your financial situation and provide you with an amount which you qualify for. Typically, your mortgage lender requires the following to make that assessment:
Job Letter from your employer stating the criteria that would affect your eligible amount – job title, salary, years of working service, job status – whether permanent, temporary or contract as well as full-time or part-time basis.
Payslip indicating gross salary, monthly deductions and net income
Two (2) forms of National Identification
Banking statement showing deposits and current loan balances and monthly instalments
Self-employed applicants must produce financial statements from the last three (3) years showing revenues earned or a certified income statement produced by their accountant.
Pre-qualification can be performed within twenty-four (24) hours, where the mortgage officer will evaluate an applicant’s age, income level and current liabilities such as existing loans, to determine how much financing they are eligible to receive. Your officer will also be required to perform a credit check to determine the consistency and diligence with which past expenses and liabilities were paid.
You will be issued a Mortgage Certificate which shows a mortgage lender’s willingness to finance your dream home. This document is particularly useful when seeking an experienced realtor or building contractor as these professionals tend to work with pre-qualified home seekers due to their eligibility of receiving financing which indicates their service hours will not be wasted.
What happens during the Mortgage Application process?
Once you have identified a property within your budget and choice, made an offer with the seller which has been accepted, your mortgage application process can officially begin. To process your application your mortgage officer will require the following documentation:
Agreement of Sale – document drawn between you and the seller indicating terms of sale
Certificate of Title or copy of Title Deed which would have been searched by your attorney
Valuation Report – Findings by the valuation company within twelve (12) which indicates the estimated market value of the property in question and provides insight as to whether the seller has overpriced the property.
WASA Clearance Certificate – showing no outstanding water utility payments are due and all bills payable to WASA are up-to-date.
Job Letter and Payslip – Showing the applicant’s employment status, history and income.
Bank Statements reflecting loan and credit balances, also showing that the mortgage applicant has sufficient funds to provide down payment on the property.
Recent Utility Bill
If the property has been recently constructed, you will require a Certificate of Completion from the Local Government Authority.
National picture Identification
Life Insurance Policy – Security in the event of death of the borrower during the course of the mortgage re-payment period
How to Complete The To Final Mortgage Approval Stage?
Once your documents have been submitted and all the necessary checks, estimates and inspections are successfully processed, you will receive a Letter of Offer from your mortgage lender. This document asserts that the lender is extending mortgage loan financing to you and also outlines the terms and conditions about your new mortgage loan.
What are Fees and Costs associated with your Mortgage Application?
The process of qualifying, applying and drawing down of a mortgage loan can be a complex procedure which usually entails the following ‘hidden’ fees, which first time homebuyers may be unaware of:
Down-payment –Whether the standard 10% or more will be one of several costs that you will need to budget for as this comes directly out of your pocket. Typically this can be anywhere from 0% to 25% of the property value.
Valuation Fees – to get the estimated market value for your dream home, you will have to pay the valuation company for their services. This fee is typically ¼% to 1% of the property’s value
Handling fees – As happy and thrilled your mortgage lender is about owning your dream home, point is they are a business and they will be charging a fee for their services in getting the finance for your home to you. The handling fee charged by the bank is not always applicable, but if your lender has a handling fee, it usually costs 1% of the mortgage value.
Lawyer’s Fees –You will have to cover those costs for the Title searches, preparing Deed of Mortgage, Deed of Conveyance, legal advice, effort and time put forth by your attorney.
Lawyer’s fees usually = [ a title search fee of $1000 ] + [ .8 to 1.2% of market value fee ] + [ Stamp Duty ]
Insurance costs – the bank requires that you get your new home insured and therefore you must get life insurance, fire insurance and sometimes even mortgage indemnity insurance when the loan to property value ratio is higher than usual.