Shopping for a mortgage is still a tricky process, especially if you’re doing it for the first time. But don’t fret, these five tips that will help give you the best chance of being accepted for a home loan.
1. Save the biggest deposit you can
Mortgage providers reserve their lowest interest rates for people with large down payments.
That means most of the top deals on the market are limited to buyers who can put down between 35% and 40% of a property’s value, while those with only 10% to put down will have to pay a higher rate.
In other words, save up as much of a down payment as you possibly can.
2. Avoid surprises by knowing your credit score
You’ll need a good credit score to qualify for the best mortgage deals. So order a copy of yours from from the three major credit bureaus. Federal law allows you to request a free copy every 12 months from each credit reporting company.
This way you can be sure to avoid any surprises and it will also give you time to correct any inaccuracies, should you find any.
3. Pay off unsecured debts and close any unused accounts
When deciding whether or not to take you on as a customer, mortgage lenders will look at the total amount of credit available to you – as well as the amount you owe.
So clear as much of your debt as possible and close down any accounts you no longer use. Otherwise, lenders may be concerned about your ability to keep up with your mortgage repayments.
4. Be prepared with all documents
No mortgage lender will take you on as a client unless you can prove who you are, so make sure you have an up-to-date passport and that the address on your driving licence is correct.
Other documents you will need to provide include a recent letter – from say a bank or utility company – that proves your address.
Employed workers will also have to obtain their bank statements and payslips for the last three months, while those who receive a bonus must provide evidence of this too.
5. Know in advance the kind of mortgage you want
Mortgages come in all shapes and sizes.
Therefore, you need to decide whether you want the security of a fixed rate, for example – but that will also lock you in for the whole term – or opt for a tracker deal which may not come with tie-ins and could even start off cheaper, etc.
Mortgage lenders will factor in potential interest rate rises when working out your affordability, but if you have any concerns that you wouldn’t be able to manage an increase in repayments, a fixed rate deal is the safer option.
If you have any other questions or would like to speak with an agent of Innovative Realty Solutions, give us a call at 256-230-5950.