Mortgages can be a lifelong commitment which is why choosing the right mortgage is so important. There is no such thing as a one-size-fits-all loan. There are various types of commercial and residential mortgages to choose from, each with their own set of terms and conditions. Not to mention, picking a lender isn’t simple either. There are many banks and private lenders to choose from, all with different lending criteria, risk preferences and target market.
To ensure you make the right decision, all of these variables need to be considered. This can be a challenging task for first time homebuyers or individuals in high stress financial situations. This is where the experience and industry knowledge of an expert comes in handy.
But before you meet a mortgage agent, you’ll need to do some homework. So, if you’re ready to start travelling down a path to homeownership, be sure to consider my list of the top seven things you need to think about before applying for a mortgage.
1. Beef Up Your Credit Score
Don’t underestimate the power of a good credit score. When it comes to getting approved for a mortgage your credit score can make it extremely easy or very difficult. And, when it comes to homeownership, the higher your credit score, the better chance you have of qualifying for a low mortgage rate with preferential terms. This may also equate to lower mortgage payments!
If you have a good or even great credit score, congratulations! You’re in the clear. If your credit score is poor, then you have some work to do. Improving your credit score isn’t an easy process, but it can be done.
I recommend having your credit score pulled and current financial situation assessed. Now is the time to set realistic financial goals, devise a payment plan for tackling outstanding debt and determine a timeline for repayment.
2. Get Realistic About Your Budget
Once you determine the status of your credit rating, it’s time to get real about your budget. If you don’t know how much you can afford to spend on a house, refrain from house hunting right away. There’s nothing worse than falling in love with a house that you can’t afford.
The best way to figure out your budget is to use an online mortgage calculator like this one here. As a rule of thumb, your mortgage payment plus your total monthly expenses should not exceed 42% of your gross monthly income. Using the mortgage calculator you will be able to determine the range of house prices and down payments that fit within your budget. If you find this confusing please feel free to reach out to me and I can help you through this process.
MORTGAGE CALCULATOR
3. Get to Know the Lingo
Not everyone is a mortgage agent or experienced homeowner. Becoming familiar with the approval process takes time, effort and research. You’ll need to do some homework and learn the difference between a variable and a fixed rate mortgage, renewals and refinancing. Don’t be afraid to ask questions – give me a call and we can discuss the fundamentals that you need to know. Looking for a great reference guide of need-to-know terminology? Check out this article.
4. Have a Down Payment in Hand
In order to qualify for a mortgage you are going to require a down payment. The size of your down payment is contingent on the price of the house you want to buy, however as a rule of thumb you should aim to have at least a 5% down payment. A down payment of 5% may be possible however qualifying for a mortgage may be more difficult. Depending on your credit score, type of mortgage and risk profile you may require a down payment for 20% or more. If you are looking for some advice on how large your down payment needs to be please give me a call and I can give you an estimate.
5. Shop Around for the Best Offer
This is where a mortgage agent like me comes in handy. Shopping around and comparing lenders, mortgage options and their associated terms and conditions can be time consuming and confusing. As an experienced mortgage agent, I have developed relationships with lenders and can easily compile all of the necessary information, while also accounting for your unique financial situation.
If you plan ahead, obtaining a mortgage doesn’t have to be difficult. Although there is a lot to consider, I am here to provide you with the professional help you need to minimize confusion, reduce stress and get you the best mortgage possible. If you would like to explore your mortgage options, contact me today.
