Buying your first home is always an exciting time and exciting experience. It’s one that certainly shouldn’t be undertaken lightly however. Applying for your first mortgage is a process fraught with complications. There are many mistakes that can be made if you’re not being careful.
Today, we’re going to take a look at some of the ways in which you can prepare for your first mortgage application and achieve the best possible outcomes from that application. So read on now and find out what it takes to apply for a mortgage for the first time in a way that’s going to reward you most moving forward. Don’t assume the process is simple and straightforward.
Check Your Credit Score
First of all, you should take the time to assess your credit score. This is one of the first things that the bank or creditor is going to look at when you make an application for a mortgage. If you don’t have a good credit score, it’s immediately going to limit your options and make life a little more difficult for you and that’s obviously not what you want. It all starts with understanding what your credit score is and what that means for you, so that’s the first step to take here.
Take Steps to Improve It
Once you know what your credit score is and the impact it might have on your finances in terms of borrowing opportunities, the next step is to think about how that credit score might be improved moving forwards. Ensuring your personal information is correct is the first step to take. Credit agencies can reduce your credit score based on bad information sometimes. It’s also important to pay all of your bills on time and not miss any loan repayments.
Save as Big a Deposit as Possible
Saving a deposit that’s as big as it possibly can be is going to be important if you’re going to get the mortgage you want. Banks will find it much easier to lend you the money you’re looking for if you have a big deposit to offer them. It’s simply less of a risk for them if you’re able to put up more money. So you should make sure that this is a top priority; save up as much money as you possibly can in advance of submitting your home loan application to the bank.
Reduce Your Existing Debt
If you have less debt on your shoulders at the time of applying for a mortgage, you’ll immediately look like a much better proposition to banks and lenders. You can’t ignore that fact. So if you want to make sure your application is as strong as it can be, you should try to reduce and pay off your debts as quickly as you can. This won’t always be possible and you might have to apply while still having some debt, and that’s fine, but try to reduce it as much as possible.
Take a Break from Applying for Any Credit
In the months leading up to you making your mortgage application, you should definitely avoid making applications for other forms of credit. If you’re constantly making applications for loans and credit, you’ll damage your credit score and it’ll be a red flag for the bank when they’re assessing your application. So take a break from doing that and don’t give the bank any reason to be concerned about your credit history if possible.
Use a Home Loan Calculator
It’s always a good idea to get a clear idea of how much you can afford to borrow and how much the bank is likely to be willing to lend you. Use this calculator home loan to get a good idea of where you’re at and how a lender is likely to assess your application. Of course, these things are impacted by a wide variety of variables, so it’s not 100% accurate but it will give you a basic overview of things before you go ahead and make your first application.
Consider Meeting with a Broker
If you’re not sure how much money you’re going to be able to borrow and you’re not sure how the different options might shape up, it’s best to talk to a broker. You don’t want to make a dozen applications and find out that way about the variety of offers out there. Instead, you can talk to a mortgage broker who deals with this stuff professionally and who’ll be able to let you know what kinds of options are out there and which ones might be most beneficial for you.
Budget for Legal Fees and Extra Costs
There are lots of other costs and fees that you’ll need to take into account when buying a home. That’s why it’s important to budget for things like legal fees and other extra costs associated with moving. You don’t want to submit a mortgage application to the bank that involves paying all of your money in the form of the deposit because then you’ll have none left over to cover the other costs that you’ll incur throughout the buying process.
Don’t Place Any Offers Until You Have a Mortgage in Principle
It’s important not to take any further steps regarding the purchase of the home until you first have a mortgage agreed in principle. When you have a mortgage in principle, that’s when you’ll have a clear idea of what your mortgage is likely to be and clarity regarding how much you can actually afford to bid on a property. So it doesn’t make sense to start placing offers until you know for sure what your bank is willing to lend.
Now that you understand all of the things that have to go into making your first mortgage application, all that’s left for you to do is start preparing and taking the steps discussed above. Doing so will improve your financial outlook and get you the best possible deal on your very first mortgage.