Taking out a mortgage for the first time can be a daunting prospect. Finding the home you want and saving for the deposit are big steps to take, so it’s important to prepare and make sure you get the right mortgage.
When you apply for a mortgage, lenders will have a detailed look at your credit report to assess whether they think you have your finances in good enough order to manage taking on mortgage repayments. Making sure the information is correct and up-to-date will mean you’re putting your best financial foot forward and up your chances of being accepted for the best mortgage deals out there.
Often you need to secure a mortgage preapproval letter before estate agents will show you properties. This is to give them the peace of mind that you are able to borrow the amount you will need to actually make a purchase. To apply for a mortgage preapproval you will need to gather income, financial account and personal information for yourself and your co-borrower (if you have one), then contact lenders to get started.
Comparing offers from multiple lenders can help you compare rates and fees and save you thousands of dollars over the life of your mortgage.
Being stable and having a steady income is important when you’re applying for a mortgage. Most lenders will want to see what you have been with your employer for a decent period of time. So if you’re considering a job switch it’s better to wait until your mortgage is in place. If you’ve recently switched jobs, it’s best to wait until you’ve passed any probationary periods and have 6 months of tenure under your belt before applying.
Mortgage brokers will always tell you the maximum that you can borrow - but just because you can do something, doesn’t mean you should. When looking at a mortgage and buying a house, you need to factor in a variety of other costs to ensure you can afford all of this in addition to your mortgage repayments including property taxes, insurance, utilities, and maintenance fees.
It can be a stressful time so the key to keeping a level head throughout is understanding the full mortgage application process. It is usually split into two stages:
Step 1: the lender will go through all the information you've provided in your application to assess whether or not you're ready for the commitments that come with a mortgage.
Step 2: assuming this step 1 goes to plan, the lender will kick off a series of background checks to verify your employment and review the information available on your credit report.
There are a lot of moving pieces when you are buying a home for the first time. Make sure you are working with a trusted real estate agent, real estate attorney, and mortgage broker throughout the process, and don't hesitate to ask them questions if you are unsure.