Desmystifying The Process Of Buying Mortgage Homes
For most people owning a home is a dream come true and falls within the purview of their goals in life. It tickles the luxury fancy of some while others are in constant glow like a lit chandelier over the mere reputational regard of being tagged as a ‘homeowner’.
When the prestige and accolades tied to the housewarming and congratulatory note dies down, the true reality of what it actually means to be a homeowner come baring its fangs beyond the smile. Some had to break the back of their savings to purchase their homes, others had to rely and negotiate some financial terms with their banks to work out a payment model to offset the loans. When you find yourself in the latter category, your thoughts are bound to be besieged with hard questions and brooding on whether or not you made the right choice by purchasing your house under such conditions.
RIGHT PROCEDURAL PATH TO MORTGAGE QUALIFICATION
Without a shred of doubt, acquiring a new home can be quite an exciting venture but then again, it has its own relatively dark clouds particularly when it boils down to navigating the mortgage process, it can be overwhelming for some. Knowing the right procedural steps to take can put the rest of the mortgage stairway to perspective and further expedite your journey faster to acquiring a new home.
Like Biblical scriptures endears us to “count the cost” in our endeavours, the same pertains to homeownership via a loan payment plan. From the word go, a prospect needs to have a fair idea of the working amount they can readily give out by estimating their budget. In other words, how much really can you afford when it comes to owning a home?
Here, it’s important to take certain steps before kicking off the mortgage loan process. Your credit history compels the lender to determine the likelihood that you can pay back the loan. The lender will take the time to carefully analyse your credit history, and establish your reliability profile. They will consider how your current credit cards and loans are paid back, whether the payments were made on time and if the loan was re-paid in full. All of these factors play a part in determining your credit rating or credit score. Your credit score establishes your qualification for a mortgage, and helps in determining the interest rate that you receive.
Far more importantly, you go through the estimate of the house, and this allows you to set a more realistic expectation for house hunting and choosing a mortgage loan. Following this, one needs to have a thoroughly comprehensive dossier as most lenders in various financial institutions require information surrounding your debts and assets, credit history and proof of employment and income. It is much safer to bear in mind that albeit not all the information in the document will have your loan preapproved, it goes a long way in furnishing your lender with apt information which in turn builds a stronger argument for the facilitation and a stronger argument for your preapproval loan.
Some information which must be sacrosanct in your document and you must prepare in your mortgage loan application are your bank account statements, recent statements from your investment portfolio, including retirement, stock and bonds accounts; information provided will invariably help assess your debts and assets. Also, documentation of your current mortgage and verification of other outstanding debts, such as auto loans or student loans will be paramount in the document presented. Once that is out of the way, home hunting is the next thing to look at as you already have a budget in mind.
Home hunting is touted as the fun part of the entire mortgage process as you literally get to imagine what your life would be like in each house you walk through. Based on your budget, it is likely you might chance on a home with the features you adore, but slightly out of your budget. That notwithstanding, you can still get something close to what you’re looking for. Priorities must be the highlight when in search of a home and helps you save time during your house hunt.
Moving on from feasting your eyes on the aesthetics of the house you desire; it will also be prudent on your part to have it inspected. Typically, purchase offers are contingent on a home inspection of the property to check for signs of structural damage or things that may need fixing. To achieve this, the onus falls on your real estate agent to help arrange for an inspection within a few days of your offer being accepted by the seller. This contingency protects you by giving you a chance to renegotiate your offer or withdraw it without penalty if the inspection reveals significant material damage. Once inspection is undertaken, both you and the seller will receive a report on the home inspector’s findings. From there, you can then decide if you want to ask the seller to fix anything on the property before closing the sale.
Having decided on your home choice, the next stage is to finalize the loan application. It is imperative at this stage to consider the types of mortgages you qualify for, compare their respective rates, settle on a down payment amount and choose a term length. Although you performed some detailed paperwork at the preapproval stage, you will need to essentially gather some final documentation before you’re cleared to close. Information you might have omitted during the preapproval stage will be required by the financial institutions. Once you have that settled, your lender will provide you with a loan estimate. This document doesn’t mean that you’ve been approved, but it will lay out the details of your mortgage arrangement, such as the total amount of the loan and the estimated value of the property you want to buy.
CHALLENGES IN ACCESSING LOAN FACILITY
The mortgage home buying experience for most people has proven to be quite a conundrum and also both an emotional and financial rollercoaster as the posturing of banks have always been one ready to hack home owners down to size with payment plans and ‘unrealistic’ demands. True to form, Ghana is experiencing high rates of urbanization, resulting in the increase of unplanned settlements particularly in the urban and the peri-urban areas. These unplanned settlements provide homes for both the poor and the middle-class, as affordable housing is arguably non-existent. The middle-income earners are mostly the public and civil servants who have government guarantees for quasi-mortgage available to high-net worth clients through a number of banks.
Over the years there have been efforts to introduce mortgage financing in Ghana. The Home Finance Company initiated the entire move on mortgage financing in Ghana and it has currently caught on with mainstream and traditional commercial banks. In spite of the dotting of the financial landscape with such financial outlets for most homeowners, the mortgage system, is bedevilled with its own challenges. The request of a secure land title document posed by banks makes it impossible for prospects to access mortgage finance. Also, the sky rocketing demand of interest rates and limited long term financing options are some real-life threats which impedes financial institutions from equally engaging in mortgage financing.
ALLEVIATING THE PLIGHT OF PROSPECTIVE HOME BUYERS
Mortgage financing is crucial to every economy because it accounts for an appreciable part of a country’s productive activity. Since it is inseparably connected to a country’s economic development in the areas of solidifying financial institutions and improving the quality of people’s lives, the sector should have by now witnessed some enormous growth, which will invariably trickle down to affordable housing for Ghanaians.
In October last year however, during the official commissioning of National Housing and Mortgage Fund, President Nana Addo Dankwa Akufo Addo gave indication of his government’s keen interest in fixing the demand-side challenges in home ownership. He regretted that, the nation had done very little to promote house ownership in an organized and equitable manner. The land tenure system, legal framework had together worked against that very important sector of our economy. According to him, the evidence suggests that Ghanaians spend a considerable part of their income on rent, especially those living in regional capitals and urban cities. As a result, the cost of houses on the market exceeded the means of many ordinary workers who had no hope of ever owning their own homes during their working lifetime and added that many people acquired lands in the outskirts of the cities and used an average of seven to 10 years to put up their own houses.
The President further noted that, the housing sector deficit was as a result of our inability to deal with the high population growth, rising rural-urban migration, multiple sales of land, struggles and intimidation from land guards, among others. To combat these challenges, Government, as part of the financial sector policy initiatives in the 2018 Budget Statement and Economic Policy, approved the National Housing and Mortgage Financing initiative to address the demand-side changes of home ownership in Ghana. To operationalize the policy initiative, the Ministry of Finance established the National Housing and Mortgage Fund (NHMF) to pilot two Schemes which are the National Mortgage Scheme with participating banks and Affordable Housing Real Estate Investment Trusts (REITs), Rent-to own scheme. Presumably, this portends some level of respite for potential homeowners looking to engage some loan facility in purchasing their dream home.