In this installment of our series on tackling mortgage issue we will continue to look into common misconceptions regarding mortgages.
Your Credit Card Limits Can Affect How Much Money You Can Borrow
It’s true. You would think that the balance mattered more, but that is not so. It is the total amount of money that you are able to borrow that matters to lenders. If you have a high limit card, even if you don’t owe much on it, it can affect your ability to get a mortgage loan.
You Don’t Need To Have A Huge Down Payment
It helps, but it is not an absolute necessity. It used to be that you had to have 20% down to get a mortgage loan. Having a large down payment will help you by showing lenders that you are really serious about getting a new home and committed to the financial responsibility that it represents. It is also a bargaining tool as you can shop around for the best mortgages you can find if you have more money to throw around. If you have a higher down payment you can generally secure a lower interest loan and will often times pay lower fees as well. However, if you don’t have that much money saved up you can still get a mortgage. Many lenders off up to 100% financing.
Cheaper Is Not Always Better
If the deal sounds too good to be true, then it probably is. Beware of mortgages that offer low interest rates but tack on so many fees that you end up paying more money in the long run. Many of these “value loans” also have less flexibility and will not allow you to make lump payments towards the principal or your loan. A better option is a nice steady loan that does not have any penalties or extra fees.
We will continue to explore more mortgage issues in the next installment.
Sean Rasmussen
Property Options Australia
Property Options Blog © 2006 – 2008
Hi Sean,
I think it’s a good idea to save for that 20% downpayment. It’ll help you develop the habit of regularly putting aside a set amount of money. This is really going to help when you have to pay regular mortgage payments.
And, you’ll be able to negotiate a better home loan as you’ll have more bargaining power.