If you plan to buy your first house at some or other stage, you’re in all likelihood not quite familiar with the whole mortgage & finance world. You probably also wonder whether you even qualify for a mortgage loan. Let’s give you some relevant information.

A mortgage is simply a loan provided to you by a bank or similar financial institution. The loan is secured by the property which you have bought. This means that if you’re unwilling or unable to meet the monthly mortgage repayments, the bank has the right to evict you from the house and sell it to someone else – after following a range of legal procedures of course.

With the world economy being in the situation it is right now, you will find it difficult to qualify for a 100% mortgage loan. That means the bank will require you to put down a deposit. The size of the deposit will depend on your income, as well as on your credit record.

Even if you earn enough and are credit worthy, the bank must still approve the property you want to buy. They are going to send out a valuator to put a valuation on the property. Should he find that it’s worth less than what you intend to pay, the bank is not likely to grant you a loan unless you can put down a large deposit. You can’t blame them for this: it will be a high credit risk to lend you more than what the property is worth.

If you don’t want to spend months finding the perfect property, only to be turned down by the bank in the end, there is another option. You can go to them and apply for pre-approval. They will ask for proof of income and assets and check your credit records. They will then provisionally approve you for a certain amount. This still depends on the property being approved by the bank though.

To be on the safe side, it’s always better to have a substantial savings account before thinking of buying a property. Many banks have special savings accounts paying decent rates of interests for people saving for a deposit on their first house. When you apply for a mortgage, being able to put down a decent deposit will certainly also raise your credit-worthiness in the eyes of the bank.

As is clear from the above information, the mortgage & finance industry is not all that involved. To make sure you get that sought after mortgage, make sure you handle your financial affairs responsibly for a couple of years. Live below your income and built up an investment account to be used for a deposit and other expenses.

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