If you are securing a mortgage for the first time, things can be very confusing and challenging. But fear not, these seven tips can help you in getting started on the right foot. Without further adieu, here are the tips:
1. Clean Up Existing Debts
Most commonly, a mortgage will be the biggest debt you and your family have ever taken on. If you have existing debts or loans, these should be paid back first. This will not only ease the financial burden on you, but it will also make it more likely that you get approved for a mortgage.
Mortgage providers don’t like lending to those with large, additional debts. Thus, car loans, school loans, credit card debt and personal loans should all be eliminated before applying.
2. Consider your Credit History
While many experts agree that credit scores and histories are not the only deciding factor in a mortgage decision, they are still important. Banks and lending institutions want to know if you have a good repayment history and can be trusted to pay back the amount lent with interest.
Credit history is a great indication of not only on-time payment but also of financial responsibility. With something as important as a mortgage, credit history can help make a better impression. If your credit is bad, consider taking a few months, at least, to repair it before applying.
3. Be Realistic
As much as we can all fall in love with a home, it is important to be realistic. With smart financial planning, you can afford a nice house. If you aren’t a high paid executive, however, don’t expect to afford a multi-million-dollar mansion. It isn’t going to happen.
There are several tools and calculators that can help you determine what the maximum amount of money that you can spend on a mortgage payment is. Even this may be too much. Consider your capacity and needs, and then try to make a fiscally responsible decision from there.
A lending firm will look at your employment. If you are newly employed or unemployed, this could severely impact your ability to get a mortgage. Banks want to know that you have steady pay cheques coming in and that you will continue to have pay coming in. If you have no documented form of income or are at risk for losing that income, you could be refused a mortgage offer.
If you are new to your job, consider waiting a few months and building stability within your position before applying, as this will greatly increase your chances of a successful application.
Savings are always important. During a home buying process, however, they are doubly important. If you can pay 20% of the mortgage cost upfront, you don’t have to add the cost of Lender’s insurance to your loan. This is a massive benefit and can save a significant amount of money over time.
Savings are also important because once you begin making mortgage payments, you will likely have less disposable income. This means that any emergencies that occur could end up hurting your bank account. Thus, a healthy savings account can help you avoid any unforeseeable headaches and emergencies following the purchase of your home.
6. Ask for Help
Even if this isn’t your first home purchase, you likely aren’t an expert. Australian housing markets can be complicated, and it takes years of experience to become an expert in them. The No1 Property Guide and other similar guides can be incredibly useful to those looking to buy a house. Guides like these provide region-based buying information, such as legal knowledge and general area trends. They can also provide tips on how to get mortgage ready, even based on your specific circumstances. Seeking out specialised and local information can be one of the most useful actions that you take.
7. Shop Around
If you are a decently attractive mortgage candidate (or better) you will likely get multiple mortgage offers. If you only applied at one bank, apply for others, too. Not all mortgages are made and treated equally. Each one will have different terms, conditions and interest rates. Find the one with the best terms and conditions for your needs, as well as the lowest interest rate. This can potentially save you thousands of dollars over the course of your mortgage. These savings may even allow you to pay a mortgage off sooner!