Important Mortgage & Finance Information For Buying A Home

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 nothing else but a loan that is issued by a bank or a similar financial institution. The difference between this and an ordinary loan is that a mortgage is a secured loan - the property which you buy is used as collateral. This has some implications for you: if you get in arrears with the monthly repayments and you can't make a satisfactory arrangement with the bank, they will sell the house to a third party and evict you.
The housing market is currently in quite a bad state and banks have lost a lot of money through bad home loans. You are therefore unlikely to get a 100% mortgage loan if you're a first-time buyer. This means you will have to put down a deposit. The size of this deposit will depend on a variety of things, amongst others on whether you have any investments, your monthly income as well as 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.
It's very frustrating and demoralizing to spend ages finding that special house, and then the bank turns down your mortgage application. Fortunately there is a way to prevent this form happening: you can apply for pre-approval. The bank will ask you for copies of your salary slips for the past couple of months and proof of other assets you have. They will also do a credit check on you. Based on this they will grant you provisional approval for a certain amount. You can then go out and start looking for a house to buy. Of course the value of this house still has to be at least equal to the amount of the loan you want to take up.
It's always good to err on the side of caution. You need to have a savings account not only to cover a possible deposit, but also for legal costs, transfer costs as well as possible alterations you would want to make at your new house. Banks often have special investment accounts with favorable interest rates for this purpose. This will also help you a lot when eventually applying for a mortgage.
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.