Applying for a mortgage can be daunting, but it doesn’t have to be. By following a few guidelines, you can make the mortgage application process go smoothly. We’ve compiled five simple tips to help you prepare to submit a successful mortgage application.
1. Know Your Credit Score
Your credit score is one of the most critical factors in determining whether or not you will be approved for a mortgage. Before you even begin the application process, request a copy of your credit report and check your score. If your score is low, take steps to improve it before you apply for a mortgage.
How can you improve your credit score? Pay your bills on time. Keep balances low on your credit cards. If possible, pay off your credit card debt completely. Avoid opening new lines of credit before applying for a mortgage. This could negatively reflect on your score because mortgage lenders could see you as a higher-risk borrower.
Check out more essential advice from Scotiabank on how to increase your credit score.
2. Get Pre-Approved For A Mortgage
Before you start shopping for a home, it’s a good idea to get pre-approved for a mortgage. This way, you’ll know exactly how much you can afford to spend on a home. To get pre-approved, simply submit a mortgage application with your lender of choice. You can apply with a financial advisor through your bank.
When you’re pre-approved for a mortgage, the lender will make a hard inquiry on your credit report. This may temporarily lower your credit score by a few points. However, as long as you’re not applying for multiple mortgages, the impact should be minimal.
3. Organize Your Documentation
The mortgage application process will go more smoothly if you have all of your documentation in order. Before you begin the application, gather up things like your tax returns, pay stubs, bank statements, and proof of any other income. You’ll also need to provide information about your debts and assets. Debts could include credit card balances, student loans, and car loans. An asset is anything that has value and can be converted into cash. Assets could include savings accounts, investments, and real estate properties.
4. Choose The Right Mortgage Program
Although there are many different mortgage programs available, choosing the one that’s right for your individual needs is best. If you’re a first-time homebuyer, you may want to look into programs like the First-Time Home Buyers’ Incentive. Mortgage programs are also available for people with bad credit, those looking to purchase a second home or investment property, or if you’re self-employed. If you’ve been documented as self-employed for two to three years, you will likely qualify for a mortgage.
5. Shop Around For The Best Mortgage Rate
Mortgage rates can vary significantly from one lender to the next. Shopping around and comparing mortgage rates before selecting a lender is important. Use a mortgage rate comparison tool like Ratehub to compare mortgage rates from different lenders.
Concluding Thoughts on Mortgage Applications
In conclusion, getting a mortgage does not have to be a giant, daunting task. Know your credit score and get pre-approved. Get your documents in order—Research the best mortgage program for your situation. Shop around to find the best deal. Don’t settle for the first rate you come across. By following these tips, you can make the mortgage application process easy and stress-free.