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Avoid Real Estate Frustration by Understanding Lenders
- By Stefan Hyross
- Published 05/12/2009
- General
Stefan Hyross
Stefan Hyross writes on behalf of Diane Salman who specializes in the Burlington Real Estate market. Feel free to visit the site to search for property or for information on how to qualify for a Burlington mortgage.
View all articles by Stefan Hyross
Most individuals do not have the money to pay for a home in cash so they need the help of a lender to make the deal. To a lender a mortgage is purely a business transaction but that does not mean that they won’t do as such as possible for you to get the loan. Yes they may be sociable but at the end of the day they are looking out for their best interests from a money making position.
Determining whether or not you will be able to repay the loan is critical in the lenders decision since they make their profits by charging interest on the loan amount. By looking into your past credit history a lender can make a decision on how likely it is that you will be able to repay the loan. The lending institution is attempting to make a prediction on the future by researching the past just like a historian would but your current situation with be taken into account.
In an attempt to learn about your past lenders examine your credit history. Included in your credit history are items such as the number of loans you have received in the past and the amount of those loans. Banks will also be looking at your repayment history on those loans. Did you repay the loans in full, how many times where you late on payments, and is there still money owed on any of them. When these items are added together they will come up with your credit score. The chances of you getting the loan are mostly determined by this score.
While credit scores are something that many individuals know about lenders often look at other criteria. As an example they may review other financial products you have to see how much profit a lender made from them. They can also discover if you have had any legal judgments against you that will negatively affect your capability to repay the loan amount.
The home you are looking to buy is also a big part of the equation. Banks will look at the appraised value of home and compare that to a couple of things. First they will want to know how much you will be putting as a down-payment as most banks will not loan you more than 75% of its value. Home buyers may be able to get what is known as mortgage insurance which protects the lender in the case of default and allows them to lend at higher percentage of a property's value. To give an example of this if you live in Ontario and looking to buy Burlington real estate you would normally need 25% of the purchase price as a down-payment, but you could still be able to obtain a Burlington mortgage if you also purchased mortgage insurance from a company like the Canadian Mortgage and Housing Corporation or CMHC. A lending institution could very well decide that the risk may be too great for them if the purchase price is much higher than the appraised value.
In order to improve the success of your house hunting it is helpful to know just how the lending process works. Mortgage lenders are in it to make a profit but that does not mean that they are not willing to work help you. At the end of the day everything can be negotiated so that both parties can benefit.
Determining whether or not you will be able to repay the loan is critical in the lenders decision since they make their profits by charging interest on the loan amount. By looking into your past credit history a lender can make a decision on how likely it is that you will be able to repay the loan. The lending institution is attempting to make a prediction on the future by researching the past just like a historian would but your current situation with be taken into account.
In an attempt to learn about your past lenders examine your credit history. Included in your credit history are items such as the number of loans you have received in the past and the amount of those loans. Banks will also be looking at your repayment history on those loans. Did you repay the loans in full, how many times where you late on payments, and is there still money owed on any of them. When these items are added together they will come up with your credit score. The chances of you getting the loan are mostly determined by this score.
While credit scores are something that many individuals know about lenders often look at other criteria. As an example they may review other financial products you have to see how much profit a lender made from them. They can also discover if you have had any legal judgments against you that will negatively affect your capability to repay the loan amount.
The home you are looking to buy is also a big part of the equation. Banks will look at the appraised value of home and compare that to a couple of things. First they will want to know how much you will be putting as a down-payment as most banks will not loan you more than 75% of its value. Home buyers may be able to get what is known as mortgage insurance which protects the lender in the case of default and allows them to lend at higher percentage of a property's value. To give an example of this if you live in Ontario and looking to buy Burlington real estate you would normally need 25% of the purchase price as a down-payment, but you could still be able to obtain a Burlington mortgage if you also purchased mortgage insurance from a company like the Canadian Mortgage and Housing Corporation or CMHC. A lending institution could very well decide that the risk may be too great for them if the purchase price is much higher than the appraised value.
In order to improve the success of your house hunting it is helpful to know just how the lending process works. Mortgage lenders are in it to make a profit but that does not mean that they are not willing to work help you. At the end of the day everything can be negotiated so that both parties can benefit.
