Mortgage Qualification and Financing
Mortgage Qualification and Financing |
 |
|
|
|||||
|
|
|||||
|
|
|||||
|
|
|||||
|
|
|||||
|
|
|||||
|
|
|||||
|
|
|||||
|
|
|||||
 |
|||||
 |
|||||
|
|||||
|
|
The word 'mortgage', as well as the process of qualifying for one, is often the biggest and most daunting financing hurdle most people will face in their lifetimes!
Mortgage lenders differ from other financiers because they have both an advantage and disadvantage others don't. When a mortgage is placed on a property, the lender has the advantage that the funds they invest are against an 'appreciating asset' as opposed to a depreciating one!
This represents investment security to them. However, there is a risk side as well that lays in the fact that if the lender were forced to foreclose on a mortgage in default, there is the possibility they may have to sit on the property for a considerable time until it can be sold ... hopefully at a price that covers both their investment and interest losses.
For these reasons the process of qualifying for mortgage financing can differ significantly from that of simply taking a consumer loan!
The process of qualifying for a mortgage is a straight forward process in most cases. At the heart of the qualifying process is simply determining your "ability to pay" on a sustained basis. "Ability to pay" the mortgage payments is based on a formula that takes into account your gross household income, less debt load and payments and other items considered the essentials of everyday life.
To determine this, there is a formula established that calculates what your Gross Debt Service (GDS) and Total Debt Service (TDS) ratios are. This formula is for your protection as much as that of the mortgage lender. The ratios are represented by percentage factors after the appropriate calculations are done, and are there to ensure that once you have paid the mortgage payment there is sufficient income left for you to live a reasonable lifestyle as well.
A legitimate lender will never place you in a position where your shelter payment (mortgage) would consume too large a part of your income because they know that sooner of later something would collapse and then a problem would follow. Its not enough to simply have sufficient funds to male a payment … you must also have the funds to live comfortably as well.
Of course your credit standing is a central part of the mortgaging process as well and you must demonstrate a history of managing your obligations in a responsible and timely manner because lenders do not want to be chasing anyone for payments or go foreclosure processes where they can be avoided by sound decision making at the outset..
When your banker or mortgage broker reviews your financial situation he or she will become well acquainted with your financial picture. He or she may offer you suggestions regarding how to better arrange your financial affairs to maximize your credit standing.
The advice they may offer you is based on experience and therefore your choice of broker should lean toward one with sufficient experience to give you the best possible advice in this regard. Bear in mind that it is not a matter of making you ‘appear’ a better risk just to get qualified for the mortgage. It is a realistic suggestion or plan to assist you to obtain the mortgage and manage your financial life comfortably and successfully so that you will have a successful relationship throughout the amortization period on your home purchase!
Last Updated: 19-Mar-2006
|
