From Applying for First Time Home Buyer Assistance to Improving Your Credit Score
If you’re planning on applying for a mortgage, this ultimate guide will help.
It runs through the best points to know, like how you should apply for first time home buyer assistance, have a good credit score, and how you will need to make a security deposit if you want to get accepted. Read ahead to find out more.
1. Credit Score
Whenever applying for any type of loan, it’s important that you have a good credit score. Having bad credit would mean that lending to you would be a liability.
After all, your score would be low because you’ve been behind on payments.
There are multiple steps to the mortgage application process. If you are pre-approved (learn more), this means that your credit score checks out.
I’d recommend that you apply for a credit sheet month in advance. You’ll be able to work on paying bills off and improving your credit so that you pass the pre-approval stage.
2. Monthly Income
Your monthly income will affect how much you will be able to borrow. A lot of the time, it can affect whether you would even be able to apply – you might have too small of a salary.
You’ll need to provide the bank salary slips, as well as letters from your company with proof saying that you make the amount that you’ve mentioned.
If you want, you can apply for a mortgage with your partner so that you can borrow a larger amount. Making the payments would be easier as well, as the costs would be divided between two people.
3. Security Deposit
Most banks require that you make a security deposit. Now, this would be a percentage of the home’s asking price. It usually would be around 20%, but it can differ depending on where you live.
Although banks require that you have this 20%, they don’t question how you make this cash. The most common thing that users do is apply for personal loans.
But also, you can tap into your savings or borrow from friends and family.
If you’re finding it difficult to pay the deposit, think about going for a smaller mortgage. The deposit that you would have to pay would be lower.
4. Background Check
Quite a few banks offer first time home buyer assistance. You would have to hand in quite a few documents if you want to get accepted.
These aren’t anything too crazy, though, but standard documentation like proof of where you live and work, plus proof of your citizenship too.
There would even be legal checks done on you during the pre-approval stage.
FAQ
Answered below are some popular questions.
How Long Does It Take for a Mortgage to Be Approved?
The answer to this depends on the bank that you’re trying to borrow from, as well as the amount that you are trying to borrow. But the whole process will usually take around 2 to 6 weeks.
If you have been rejected, you would be informed (most of the time through a mail).
As mentioned, there are many factors that will affect whether you get accepted. The most important from them would be your credit score. Try and work on it before you apply for your mortgage.
How Many Years of Credit History Do Mortgage Lenders Look at?
Your credit history is so important that lenders will look at how it was for the past 6 years.
The minimum credit score that you would need differs depending on the country that you live in.
Most lenders in Canada require that you have a credit score of around 600 if you want to be approved.
Do Mortgage Lenders Look at Spending Habits?
Mortgage lenders do look at your spending habits. They do this to see if you are a responsible borrower.
They will do this by looking at your bank statements, but more importantly, by looking at your credit history.
As mentioned, the sheet would have information on whether you have been making any payments that are due.
Do Lenders See Your Affordability Score?
There is a special metric called the Clear Affordability score. It basically shows whether you would be able to afford a new loan in a metric form.
Lenders in Canada don’t look at it, regardless if they are private lenders or banks.
Final Thoughts
As you can see, there are many points to consider when applying for a mortgage as a newbie, like getting first time home buyer assistance, and improving your credit score.
Keep them in mind for the best results.
While at it, I also ran through some additional information that you might like.
Hopefully you found all of the points that were discussed useful.
