Buying your first house may be a thrilling as well as a daunting procedure, especially if you’re a first-time home buyer. Before you start looking for a new house, there are a number of things to take into account, from budgeting to handling the mortgage closing process and beyond.
The three biggest variables influencing your chances of getting approved for a mortgage are your income, credit score, and the amount of your down payment. Your lender will see strong, consistent income as proof that you have the financial flexibility to make on-time monthly mortgage payments. A high credit score also shows that you have a track record of making debt repayments, which gives your lender more confidence that you will be able to pay back your mortgage.
To effectively prepare for your mortgage application, consider the following steps:
- Create a budget
Before starting the house-hunting process, assess your financial status and create a reasonable budget. Consider your current income and expenses, as well as any anticipated adjustments. Determine how much you can comfortably spend on a down payment, monthly mortgage payments, and other homeownership expenses.
- Save for a down payment
Save carefully for a down payment of at least 20% of the home’s purchasing price. While there are choices for smaller down payments, a bigger down payment can reduce your monthly mortgage payments and possibly eliminate the requirement for private mortgage insurance (PMI).
- Improve your credit score
A strong credit score is required to obtain a favorable mortgage rate. In Canada, credit scores range from 300 to 900, but you must have a minimum score of 620 to qualify with any AAA lender. Improve your credit score by paying payments on time, decreasing debt, and addressing any inaccuracies on your credit record. This improves your chances of qualifying for a mortgage with reasonable terms.
- Get pre-approved for a mortgage
Before starting your house hunt, be pre-approved for a mortgage from a reliable lender. Pre-approval boosts your stance as a serious buyer and allows you to better understand your target price range.
- Review closing documents
After your offer is accepted, you will begin the mortgage closing procedure. Take the time to thoroughly analyze all loan documentation issued by your lender. Understand the terms, conditions, and any applicable costs or fees. For additional information, see our guide to interpreting your closing documents.
- Secure homeowners’ insurance
Prior to closing, you must obtain homeowners’ insurance to protect your investment. Shop around for insurance companies, compare policy options, and make sure you have enough coverage for your new house.
- Work with a professional
Because this is your first time going through the closing process, it may be more convenient to consult a professional mortgage broker in Abbotsford with years of closing experience. By working with a professional, you can guarantee that the terms mentioned in your closing documents are fair and favorable, allowing the process to flow as smoothly as possible.
Want to know more about first time homebuyers mortgage in Abbotsford? Feel free to contact our mortgage brokers at Sandhu & Sran Mortgages.