Taking your first mortgage is likely to be your biggest financial commitment, and you have to be careful when making it. You should also shop around to ensure you get the best deal possible. But you need to bear in mind that getting a mortgage is not as easy as it may seem.
A lot goes into the assessment process before your lender declares you eligible. You should also be aware of several aspects that may affect your eligibility, including length of time in your current job, income, credit history, down payments, existing debts, etc. Here are some things to know when applying for a mortgage as a first-time home buyer Toronto.
Your Financial Sum is The Starting Point.
Before applying for a mortgage, work out your budget to determine how much you want to borrow. Ideally, you should borrow enough to cover the financial burden of the purchase. Still, you should also ensure you have enough to spare to cover the associated fees for mortgage approval. Your monthly payments will also depend on how much you borrow and the interest rates charged.
Your Credit Score Matters a Lot.
Mortgage lenders will assess your credit score and history when evaluating your eligibility for a mortgage. It is good to get a copy of your credit report and review it to see what the lenders will discover before they see it. You should check red flags such as missed payments, default payments, foreclosures, or late payments that may negatively impact your mortgage eligibility. That gives you a chance to improve your credit report before seeking a mortgage. Click here to learn more about what you can do to boost your credit score.
Remaining in The Same Job is Better.
Think twice about switching jobs if you intend to seek a mortgage. If you have changed jobs severally in the past few months, you may not be eligible for a mortgage since lenders want to see that you have been in your current job for at least six months before applying. It gives the idea that you have stable employment and a stable income. However, some lenders can consider such situations.
Reduce Your Debts First.
The last thing any prospective lender wants to see is that you owe a lot of debts on your credit cards or have outstanding loans when applying for a mortgage. Therefore you should try your best to reduce any loans you have before applying for any mortgage to improve your chances of eligibility. Little or no debts also mean that you can borrow more.
The Bigger Your Down Payment, The Better
Mortgage lenders always reserve their best rates for borrowers with hefty deposits. Therefore the more you can save to accumulate a bigger down payment, the better. Having a bigger down payment also means you will have lower monthly payments.
You Can Enlist an Expert.
If you find it challenging to get a mortgage, it is advisable to enlist the help of a mortgage broker. They can advise you, research the market for you and hook you up with a mortgage lender who can consider your needs.