Securing a high-quality mortgage is an essential element of buying a home. The better mortgage you qualify for, the more flexibility and freedom you’ll have as you look for the perfect property.
With that in mind, applying (and getting approved) for a mortgage is a fairly significant financial process – one that requires careful planning and consideration. This is especially true in today’s market where interest rates are constantly fluctuating.
In this blog post, we’ll offer three key tips to help you secure a mortgage in any type of market condition.
1. Improve Your Credit
One of the most influential factors in what kind of mortgage you’ll be eligible for is your credit score. So, regardless of how far out you are from your home purchase or what your existing credit status is, you should always take steps to improve it before heading to the market.
Why does credit score matter? While every lender has their own process for determining your creditworthiness, a better credit score will usually lead to better interest rates. Even just a fraction of a point can potentially save you thousands of dollars over the life of your loan.
How Can You Improve Your Credit Score?
Improving your credit score takes time, so it’s best to start working on it as early as possible.
First off, it’s a good idea to take a look at your credit profile. Reach out to a credit bureau to obtain a copy of your credit report. Be sure to read it closely and be on the lookout for any inaccuracies or discrepancies. If you find any errors, dispute them promptly to have them corrected.
Another big part of having strong credit is managing your existing debt. If you’re like most Canadians, you likely have some form of existing debt that you pay off on a monthly basis. This could be a credit card, car payments, or even student loans.
High levels of debt can negatively impact your credit score. Before buying a home, focus on paying down credit balances as much as possible to reduce your overall debt load.
You’ll also want to be as punctual as possible with payments. Your payment history accounts for a significant portion of your credit score. Consider setting up automatic payments or reminders to avoid missing due dates.
Finally, don’t take on any new loans or credit accounts before you buy a home. Doing this can hurt your credit score – even if the amount(s) borrowed seem small or relatively insignificant.
2. Save Up As Much As You Can
While you’ll be relying on your mortgage to cover the majority of your home’s cost, it’s still a good idea to have as much money saved as possible. The more money you have saved, the higher the downpayment you can make. In turn, a larger down payment can reduce the amount you need to borrow and lower your monthly mortgage payments.
A great way to build savings as you approach your home purchase is to set a goal. You can determine how much you may need to save for a down payment based on the price range of homes you’re interested in.
Next, look at your income and expenses (along with anyone who will be buying with you) to identify areas where you can cut back and allocate more money toward your savings.
If you’re a first time home buyer, consider setting up a First Home Savings Account (FHSA). The FHSA is one of Canada’s best incentives for first time buyers. Just like a regular savings account it can help you keep your savings organized and prevent you from dipping into the funds for other purposes, however, there are a few add-on perks too. For instance, a FHSA allows you to make tax-deductible contributions to your home savings – helping you keep more money in your pocket as you work towards having enough for a down payment.
Looking for more tips on saving up for a home? Explore these other blog posts for helpful advice.
- Will I Ever Be Able to Afford a Home?
- How Much Do You Need to Make a Deposit & Down Payment?
- How Long Should You Plan Ahead Before Buying a Home?
3. Get Pre Approved
Lastly, it’s a good idea to get pre-approved for a mortgage before you begin looking for homes. When you apply for a mortgage pre-approval, the lender looks at your overall financial health – including your credit and existing savings. Once they have an idea of where you stand financially, they’ll provide tentative approval on a pre-determined loan amount. As a buyer, this is an easy and effective way to understand how much you can afford to spend.
Want to make the most of your home purchase? We can help. Give us a call at 416-322-8000 or email info@bosleyrealestate.com to get in touch.
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