The one question that most people ask when it comes to mortgage is: how much can I borrow in affordability? This question is not as easy to answer as most people think. No matter how great the offered policies are from the lending companies, there are several issues to consider first and foremost. And yes, you might want to skip the online mortgage calculators too (the ones that are supposed to compute mortgage affordability) until you resolve these issues.
The primary issue here is the value of the property that you are submitting as collateral or security versus the loan. The rule of thumb is: the higher the value of the property, the higher the affordability in the mortgage policy. Properties can be in a form of a home (and any kind of home for that matter,) a vacant structure with you as the title holder, or even a business establishment like a boarding house also under your name.
There are some homeowners who spend a lot of money “improving” their properties so as to increase its value. However, a representative from the lending companies will have to come over and give your property his or her own appraisal. The appraiser will be looking into the soundness of the structure, the piping, and improvements previously done, etc. Naturally enough, they will be looking into the legal ownership of the property especially if the said property has shared or joint ownership.
Some homeowners hire their own property appraiser to see whether or not the lending company’s representative’s estimate coincides with one another. Other homeowners allow a good number of appraisers from different lending companies to run different estimates so as to know the value range of the property in question. The only good thing about asking for various opinions when it comes to home value is that some appraisers will be willing to give you advice on what improvements you can do to raise the mortgage worth of your property. In the end though, only one appraiser’s estimate plays out – and that would belong to the lending company you will patronize.
The second issue to consider is the actual policy being given by the lending company. Depending on the home loan you are taking out and the company policy for lending, you can get between 95% and 125% in mortgage affordability. These, in turn, are dependent on the interest rate of the policies and the actual type of home loan you are trying to get. As a rule, home loans like bad credit mortgages or non-conforming home loans have the highest interest rates in the market. The rates also differ for fixed rate and variable rate loans.
The third issue relies more on you as a borrower. Your borrowing limit is based on many factors like: credit ranking, you current earning power, your outgoing expenditure, etc. Again, we will take the example of bad credit mortgages. These sub-prime lending schemes are higher in rates as compared to prime lending schemes. These are but a few of the issues you need to resolve (or provide documentation for) before you can actually know how much you can borrow in affordability.