First Mortgages

A person or a couple that decides to buy a residential property for the first time will look for a first mortgage. They may approach a bank or a mortgage company to get a first mortgage. In almost all countries where people go to a financial institution the institution will look at their credit worthiness and then offer a mortgage. If a person has a good credit rating they may be able to get a 100% mortgage loan. In some countries there is a cap and the lending institutions will only give 70 to 80% of the property value as a mortgage loan. In USA people with a high credit score will be entertained by any bank or mortgage company that offers first mortgages and will not have a problem in securing a mortgage.

For first time mortgage the bank or mortgage company will look at the person’s income and other debts and will work out how much loan to value they are ready to give as a first mortgage and on what terms. Some banks may use a 1/3 ratio which is that the total monthly debts of a person including the mortgage payments should not exceed one third of the person’s income. Most banks and countries have their own rules of what percentage of a residential property are they ready to finance and on what terms? For first mortgages loan to value ratio is calculated by looking at the market price of the property and the mortgage loan that one has applied for. If a person or couple has any other debts or sources of income they will need to disclose these also as the bank will also take this into their calculations. Some banks may not give 100% financing for a first mortgage and the person may be required to make a part of the payment. This can vary from as low as 3% to as high as 20% and this payment is called ‘equity’ which means it’s the borrowers share in the property that they are purchasing.

If one is looking for a first time mortgage one should approach their own bank first and should also know all about mortgage costs, discount points, etc. so that they do not end up paying a lot of money in unknown charges. If one is going for a first time mortgage they should approach different banks and mortgage companies and get quotations for first mortgage loans from them. However one should not disclose their credit rating till they have decided which bank or mortgage company they want to deal with. In USA if one discloses their name and Social Security Number to a mortgage company or companies they will pull out their credit ratings and this will cause the credit rating of the person who is looking for a first mortgage to reduce as 10% points are deducted every time one gets their credit rating. So only after one has decided which bank or mortgage they want to go with should they approach them and give the necessary information.

Most first mortgages that are offered by banks and mortgage companies are fixed term and fixed interest rate. Term is the number of installments that one will pay to return the loan. These payments may be fortnightly or weekly payments. Secondly the interest that they will charge will be fixed. Different banks and mortgage companies have different interest rates that they may charge. For the first time mortgage seekers make sure to work all this out before looking for a property as finding a property first and then looking for a mortgage can delay the entire mortgage process. To get 1st home loan mortgage is not difficult and some people also get 1st 2nd loan mortgage refinance which they may use to pay off the first mortgage and get a better second mortgage. Getting a bad credit first mortgage can be difficult as some banks may reject the application straight away due to bad credit.