How Much Money Can I Borrow for a Mortgage?
Chances are you don’t have the cash in the bank to pay for a home outright. Most people cannot afford to pay cash for their new home. Being an aspiring home buyer, means you need a loan to cover this investment, however, this isn’t a short-term loan.
How much money can you borrow for a mortgage is not an easy question to answer. It’s important to remember that you need to now your buying power before you shop around, giving you the upper hand when it comes to bidding on the home of your dreams.
What Size Mortgage Can I Quality For?
As with any loan, a mortgage lender will confirm your eligibility and affordability of the home loan. Lenders look for home buyers with a stable income and excellent credit history. Even if you have a few marks on your credit record, you may be able to qualify. As long as you have a good income that is stable, you have a good chance of being approved for a mortgage.
When you apply for a mortgage, you are offered an amount by the lender that comes with monthly repayments, which includes interest and often home owners insurance. It must not exceed twenty eight percent of your monthly income.
When it comes to asking the size of mortgage you can qualify for, there are a number of factors to be taken into consideration. You need a good credit score and a decent salary to secure a better deal. Every lender will have their own eligibility criteria, they also check your debt to income ratio, including any outstanding loans. If you have a high debt to income ratio, you may not be able to secure the mortgage that you need.
A mortgage will require collateral, which is usually the property you are purchasing. This means that lenders also check the loan to ratio value, helping them identify the risk. The ratio is the loan amount and the difference to the value of the home. In addition to this, they will carry out a credit check, checking your credit score.
How Much Will I Be Approved For?
The amount you are offered for a mortgage is determined by the lenders evaluation of your financial health. If you have a steady cash flow, you can expect the amount to be twice the amount of your income. So if you earn £300,000 per annum, you may be able to secure a mortgage of up to £600,000. Remember that each lender has their own qualifying criteria, so the amount you are approved for can range from one lender to the next.
Things to Consider When Applying for a Mortgage
When it comes to applying for a mortgage, you need to remember that you may be offered a large loan, more than you need, which can impact your future finances. It is better to adjust your expectations based on your finances and know what you can afford each month, ensuring you pay your mortgage on time and don’t damage your credit score moving forward.
Don’t forget that most lenders will require you put a certain percentage of the purchase price down in cash as a down payment. The down payment you have available can impact how much you can borrow, along with your monthly payments. The higher the down payment, the smaller the mortgage, making it more affordable moving forward.
In addition to your mortgage repayments, you need to keep cash aside for your upfront costs, which includes your down payment, insurance premiums and closing costs. Closing costs are calculated at the start of your purchasing process, these include appraisal fees, filing and more.
We recommend you using an online mortgage calculator which will help you decide how much money you can borrow.