Whether you are buying your first home or a vacation house, you must have cash on hand to make the purchase or finance the deal through a home loan. Most home buyers obtain a first or second mortgage to cover this type of expense. You might wonder how you to qualify for such a large loan, especially if you don’t have the financial means to make the purchase in the first place. Here’s a look at the key factors you need to know about securing a mortgage for your home purchase.
Putting up Collateral
Borrowers must provide collateral in order to obtain a mortgage. It provides security for the lenders offering to loan money through a loan. If the borrower defaults on the loan, the lender can seize the collateral to recoup his financial loss.
What Can You Use as Collateral?
Lenders accept several items as collateral against a home loan, including:
- Value of the land, home, and accompanying outbuildings, such as pool cabanas, sheds, and in-law suites
- Home equity created by your down payment
- Personal savings in the form of bonds, stocks, and retirement accounts
- Expensive possessions such as antiques and jewelry
Additional Factors Affecting Your Ability to Get a Loan
In addition to putting up collateral, borrowers must be able to show a steady source of income, such as employment, validating their ability to pay back the debt. They should also have a good-to-excellent credit score.
Acquiring a home is an exciting yet stressful process from beginning to end. From running around to look at dozens of homes to the need to find the money to purchase it with, home buyers are faced with a wide variety of necessary tasks. Fortunately, securing the loan is one of the simpler tasks, particularly if you have good credit, a job, and personal savings.