Tips for First Time Home Buyers Applying for a Mortgage
So, you are ready to buy your first home. Choosing a dream home is easy, but the next steps can be daunting. Getting a mortgage can be a stressful situation because it will require a lot of paperwork and patience. Although getting approved depends on the lender, the steps to improve your odds, however, depends on you.
We have rounded up some of the best tips to make sure that your first application for a mortgage goes smoothly.
Tip #1 Know what you can afford
Before you even begin house-hunting, you must know how much you can afford. Your application for a mortgage will be rejected if you cannot afford your mortgage repayments. Another reason is that if you can make a higher deposit on the house, you will buy the amount you need to borrow will be less. The interest rates will also be lower. The lender will also consider how much you can pay by reviewing your current expenses and income.
Tip #2 Check your credit score
Aside from the ability to pay the lender, they also want to know your creditworthiness by checking your credit score. This is affected by many factors, including the way you pay your bills and the amount of your monthly spending on your credit card. To avoid surprises when you are applying for a mortgage, make sure that you know your credit score beforehand. If it doesn’t look good, you need to spend more time building up a good credit history before buying a house.
Tip #3 Apply for a “mortgage in principle”
A mortgage in principle is an agreement from the lender that they will give you a set amount but only in theory. It is a way to show that you can secure financing for the property you are interested in. When the property is hot, the chance of getting it will be high if you can show the seller the agreement. Once you have made a deal with the seller, you still need to apply for a mortgage and the lender will consider this property.
Tip #4 Check your eligibility for schemes
Lenders can have different schemes that can help first-time home buyers. While they are offering this to you, make sure that you understand the exceptions. Check what is the requirement and see if you qualify on any of these schemes.
Tip #5 Stay within your price range
During the process of house-hunting, you may be up against the competition and get tempted to offer more, especially if this is your dream home. You need to stay within the range of your mortgage in principle or the range that you can afford. Make sure that you are not overpaying. The lender used this home as security against the amount of the loan.
Tip #6 Update all your details
Application for a mortgage requires much paperwork, which the lender is painstakingly checking one by one down to the very last detail. If there is any discrepancy in your application, it could mean rejection if not a delay. To avoid this consequence, you need to check every supporting document that you are submitting are all correct and updated.
Tip #7 Provide evidence of your deposit
One of the requirements of lenders is proof of deposit and evidence where this money is coming from. If you tell them that you are saving up, they will ask for evidence of these savings like your last months’ bank statement. If you tell them that this is a loan from your parents, they will add this as a factor for your affordability.
If you are a first-time buyer who is a bit lost in applying for a mortgage, we advise you to hire a mortgage broker. They can help you arrange all the documents and will help you improve your chance of getting your loan approved.