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New mortgages are still being granted every day, even with the global crisis in full swing. Many factors are used to calculate how much a lender is willing to loan you for the purchase of a new home. In general, these factors may be placed in one of three categories: your annual income, the valuation of the desired home, and how much the lender believes you can really afford.

How Much You Make
Each lender decides what formula to use when deciding on the loan amount. A general rule of thumb says that most lenders are willing to give you at least 3.5 times your annual salary. For example, if you earn £26,000 per year, most lenders would be comfortable lending you around £91,000. The actual amount may vary depending on other factors like credit history or outstanding debts.
 
Good credit and a skilled mortgage broker could increase this figure to between 4 and 5 times your average salary. The figures vary slightly for couples. In general, they will receive 2.5 times both annual salaries.  A couple where both people earn £26,000 per year would be eligible for a loan of around £130,000 using these formulas.

Since every case is different, lenders carefully way the unique aspects of each situation. For example, a couple with expensive cars and high insurance premiums will not be able to borrow as much as a couple who earns the same amount but has cheaper vehicles.

How Much the Property is Worth
Lenders use a specific “loan to value ratio” to determine how much they are willing to lend. This the ratio between the loan amount and the property’s value. For example, a loan to value ratio of 60% on a £100,000 property would mean that your mortgage loan would be £60,000. Some will lend up to 90 or 95% of the property’s value, but 75% is the standard rate. But, for these higher percentages, you’ll pay over the odds – ie a higher interest rate for this. You also probably be forced to buy mortgage indemnity insurance which is not advisable.ABCBED040212

Depending on the area you want to buy in, the lender may refuse a loan, for example if they feel the property isn’t expensive enough for the area. Though this is possible, most loan refusals are a result of a lender determining that the home is too expensive for the area.

What the Lender Thinks You Can Afford
Provide proof of rental agreements that match the amount of the intended mortgage if you are a first time buyer. A long rental history shows the lender that you can be trusted to pay the same amount on a mortgage, You must always keep in mind that how much you can borrow is not always necessarily what you can really afford.

You may be able to get a mortgage which stretches your budget to the limit but leaves you in trouble when you have to pay the other costs involved in buying your home and its future running costs. You should also take into account the future maintenance, taxes, insurance and other related costs when determining how much you can afford on your new home. 

Looking for qualified Estate Agents in Bedford? Follow the link to see how Estate Agents Bedford can help you find the best possible deal on your dream home.

Call Realtor Agata Grudzinski @ (850) 708-7724 for Property Details.