Why now might be a good time to get a mortgage

Deciding if getting on the property ladder is the right thing to do in these confusing economic circumstances can be a stressful time, particularly if you are a first time buyer.

Lenders have been reluctant to give out mortgages to the extent they did during the housing boom, making it difficult to obtain finance to get started on the property ladder.

The housing market has stalled, yet house prices are still predicted to fall further during 2011, making this year an appealing time to try and make those first steps.

If you are unsure what you are able to borrow given your personal circumstances, a mortgage calculator will help you work out what you can afford to borrow and comfortably pay off.

Deciding to buy is always a risk and you will have to make the decision to buy now and risk further price falls, although if you plan to live in the house for a long time, falling prices will pose less of a risk.

Predicting the right time to buy is only part of the equation. You still need to find out if you will
be able to secure a mortgage and this will depend on both the current market and your personal financial circumstances.

Before you start contacting lenders, check out a mortgage calculator to help you decide what size and type of mortgage is affordable for you and then what type of house you can purchase for that price.

Mortgage lending has been at an all time low in the last year as lenders have become much more conservative and risk adverse, but if you are able to meet some strict criteria, you may be able to secure a mortgage.

A good credit history and a substantial deposit, of at least 10%, but ideally up to 25%, will go along way to making you more attractive to mortgage lenders.

The tricky decisions don’t stop there. If you are fortunate enough to secure a mortgage with a combination of a good deposit and positive credit history, you then need to decide whether a fixed rate or tracker mortgage is right for you. A mortgage calculator will help you compare repayments.

Even though the base rate is currently at an all time low of 0.5%, making a tracker mortgage seem attractive, these low rates are not likely to remain forever. You will need to consider at what point a rising interest rate make it a struggle for you to pay off your mortgage.

It may be a more financially comfortable option for you to opt for a fixed rate mortgage and be certain of what your monthly repayments are going to be.

You will pay more, but it may be the difference between being able to keep up repayments, or defaulting on your mortgage should interest rates soar in the future.

The credit crunch has made mortgage lenders much more conservative than during boom times when you could get a mortgage with no deposit.

Criteria are much stricter, but if you are in a good financial position, it should not be impossible to find a good deal on today’s market.

Of course everyone’s circumstances are different, so good independent financial advice is crucial to ensuring you embark on a mortgage you can realistically afford.

How much can you afford to pay for a house?

Today’s housing market may not be going well for those looking to sell, but buyers have an opportunity to find all kinds of deals that make home-ownership affordable. If you are interested in a comparison of loans that you might apply for, see here. There are several different factors that you should take into consideration when you attempt to make a home purchase.

The House Payment
The amount that you are going to pay every month for your home is the most critical number when it comes to finding out how much you can afford to pay for a house. This number comes from several other figures all working together to give you the monthly payment. As you work with mortgage calculators, take a close look at this figure to determine whether or not home-ownership is a possibility.

The Cost of the House
Whether you have retained the services of a realtor or plan to look around yourself, the overall amount that a home costs will figure into whether or not you can afford it. The more you research, the more you will find that there is a range in price that you can afford.

The Down Payment Amount
Do you have money set aside for a down payment? The down payment will reduce the amount of money that you need to finance for home-ownership. You will need at least a part of the down payment to be used as interest money when you place an offer on a home.

The Loan Terms
Financing a home is a critical part to the ownership process. Think about whether or not you are going to set up a loan for fifteen or thirty years. The payment will be higher with a fifteen year loan, but you will be able to pay it off sooner. Most people choose to finance for thirty years in order to be able to afford a bigger home.

Private Mortgage Insurance
If you don’t have at least twenty percent of the cost of the home as a down payment, you typically need to pay private mortgage insurance. This is something that will be added into your mortgage payment, so be sure to take it into consideration when planning.

Other Loans
Do you have other loans that you are currently paying on? When you decide how much you can afford to pay for a house, you want take into consideration the other amounts that you owe and how much you pay for them each month. Over committing when it comes to a house payment can put you in a difficult situation, so be aware of other expenses.

Projected Utilities
Remember that a home purchase comes with the cost of maintaining the residence. This includes electricity, gas, taxes, homeowner’s association fees and even the cost of garbage collection. Each of these payments needs to be included in how much you can afford when it comes to a home. You don’t want to be able to afford the payment but not be able to live there because of the overall cost of running the home.
Take all of these expenses and numbers into consideration when you begin the search for a home that you can afford. This is usually a lengthy process, but the final results are well worth the effort!

Problem 3: Not Looking at All Sides of a Problem

This problem is usually having a point of view on an investment situation where you may have taken someone else’s word on it or never really given the question serious thought. One common financial example of this the use of a financial advisor to assist you in buying and selling stocks, mutual funds, or other investments. Whenever I consider that advice from this kind of source, I ask several questions about the source of the advice. Some basic ones may include the following:

- Does this advisor have anything to gain or lose by my decision?

- Is this advice based on the advisors own expertise or on someone else’s?

- Is this person following their on advice on that issue?

- Is the advice based on a fair analysis or a biased analysis?

- Is it to my advantage to even consider taking this advice?

- If the advisor makes any performance claim, can the claim be backed up?

- Does the advice make sense?

- After further investigation and research on my part, does the advice still make sense?

- Does not following the advice make better sense?

The current rash of mortgage problems in the US, issues like short sales because of underwater mortgages and foreclosures, is one example of this kind of decision problem in action. Many people got into this situation because they didn’t think about the consequences of taking out a home equity loan to buy expensive toys, or the possible negative consequences of an adjustable rate loan.

There are many more questions that one can ask, but the basic point is that every decision can be looked at in more than one way. It is to your advantage to ask a few questions and do at least a little work to understand what may be behind a piece of advice.

Next Lesson: Being Overconfident In Your Predictions

Jobs to go at HBOS mortgage sector

This is a guest post.

With the mortgage drought in the UK continuing since the onset of the global credit crunch last year, it is not only consumers who are suffering. Many people that work within the mortgage industry have also suffered as a result of the turmoil in the mortgage sector, and recently HBOS has announced that there are to be job losses in its mortgage loan sector. The closure of a specialist mortgage branch by HBOS is to result in the loss of 325 jobs by the end of March next year.

The Mortgage Business, which is an arm of HBOS, will be closing to new custom later this month, and the bank will also close a mortgage processing centre. The job losses have been described as a blow by union officials, who have said that the number job losses is actually larger than the bank has cared to admit. In the first six months of the year HBOS announced that pre-tax profits fell by around 72%.

The bank said that it hoped the jobs could be cut through voluntary redundancies and turnover of staff. It added that the bank had to focus on streamlining the business. Union officials have said that the closure of the processing centre will affect jobs in Livinston, Chester, and Cardiff. One union official stated: "This is a further blow for jobs in the UK financial services sector which is being brought about by the credit crunch and the changing economic climate." 

Another union official said: "We are never happy about any reduction in roles in HBOS even if we understand the commercial logic for the changes."