If you’re working towards the point where you are hoping to secure your mortgage approval, there are a few tips you can try to improve the process. Your pre-qualification, income, and down payment are just some of the items you should focus on in order to secure the right mortgage product. Here’s what we recommend!
Wait until you’re ready to be a homeowner
First things first, you shouldn’t enter the market until you’re ready to become a homeowner. While you might feel pressure to buy a home, perhaps because other friends or family members are doing so, it’s important to move at your own pace. It will be much easier to secure a mortgage when you are in the right financial position and headspace to do so. Otherwise, you may not have the amount of savings you desire, the time to fully commit to the process, or the income to maintain mortgage payments in the future. All of this can result in becoming house poor, which is one of the top homeownership issues you should try to avoid.
Get a pre-qualification
A pre-qualification is one of the most important steps of securing a mortgage. When you get pre-qualified, it means your mortgage broker is providing you with an estimate of what you might qualify for in mortgage financing. Of course, this is only based on your financial situation at the time, so it could change if your financial position alters. This means a pre-qualification doesn’t guarantee you a mortgage. It’s only a rough estimate so you can know where you stand in the market as a buyer. However, it’s still important because it lets you understand what changes you may need to make to secure your mortgage in the future.
Do not add any new debt
As we mentioned, a pre-qualification doesn’t promise you a mortgage because your finances could change by the time you apply for your mortgage. So, do your best to not add onto your existing debts. This will help your financial situation remain steady, and your chances of a mortgage approval will remain in good standing. Part of your mortgage approval, of course, takes your debts into consideration. This includes credit cards, auto payments, lines of credit, and other loans. The more debt you have, the less income you have to contribute to mortgage payments. Lenders want assurance that you can handle your mortgage, so large amounts of debt can impact your mortgage approval. Once you are pre-qualified, try to reduce your debts. At the very least, don’t add new ones!
Keep your income and employment steady
Another item lenders examine is your income. This, of course, will largely depend on your employment. Lenders want to know you have a secure job with a steady income stream, and you are in a position where you can afford a mortgage. For this reason, it’s best not to change your employment during the mortgage process. If your income decreases, this might make lenders more wary about your ability to make your mortgage payments. Even if you take a new job with higher pay, if the new position has less job security, this may also pose an issue. If you can, the best way to help secure your mortgage approval is to maintain your current employment and income.
Save for your down payment
Finally, you will need to save up for your down payment to buy a home! Depending on the home’s purchase price, your down payment requirement will vary. Homes up to $500,000 need a down payment of five per cent. Homes between $500,000 and $1 million require five per cent on the first $500,000, and 10 per cent on the rest. Finally, homes over $1 million need a full 20 per cent for the entire amount. However, down payments below 20 per cent mean you need to purchase mortgage default insurance. This is an extra fee that is often added onto your mortgage payments. Saving for a full 20 per cent allows you to avoid this cost. If you can, saving up for a larger down payment is often a good option.
While buying a home is exciting and is something to look forward to, make sure you take every step to make the process simpler for yourself! Saving for your down payment and managing your finances properly will help you secure your mortgage with ease. If you need any guidance getting started, feel free to reach out to a mortgage broker! We can work with you from start to finish to ensure you get the product and rate you need.
If you have any questions about your mortgage, get in touch with me!