It can be daunting applying for your first mortgage, and the idea of sharing so much personal information with a real estate agency isn’t the easiest thing in the world. The situation becomes even scarier when faced with the prospects of being denied the ability to purchase your dream home.
To best fight the fear of obtaining your first loan, you should head to your appointment armed with as much knowledge as possible. This knowledge, consequently, will also allow you the best chance at being approved. If your ready to begin, check out these expert tips below.
The Pre-Approval Process
- Bring in all your information to have it verified for your preapproval. This includes pay stubs, bank information, and proof of any other sources of income.
- Ask for your credit history to be checked or bring in a copy yourself. Not all banks and brokers check credit in the beginning, but flaws on your report could cause your loan to be denied in the final stages.
- Don’t have any credit history? Start building it now. There are many different options available to do this, which can be looked at in the following section.
- Avoid any large purchased for a minimum of half a year prior to obtaining a mortgage. If you can avoid them for a full year, that is even better.
- Don’t switch jobs for a minimum of six months. The longer you’ve been at your current company, however, the better.
- Get together the largest down payment possible. More information on accumulating a little extra money in the final section.
Building Credit
When seeking a loan of any kind (but especially a large one like a mortgage) the idea is to make yourself as appealing as possible. This isn’t done through a nice interview process and backstory, however. You must look good on paper. In addition to maintaining a job for as long as possible – which allows you to appear very stable – you’ll want to build as much credit as possible. Here are a few ideas on how to do this if you have not already:
- Registered Retirement Savings Account (RRSA)
- Leasing a vehicle or home item (be wary, as not all “furniture leasing stores” report to credit bureaus)
- Getting a secured credit card
- Taking out a small personal loan and paying it off
Increasing Your Down Payment
Saving for your down payment is the most obvious way to accumulate these funds. If you have been denied a home loan, however, you may be able to get approval with a larger down payment. There are a few ways to do this in six months or less, which include:
- Asking friends or relatives to gift money towards the purchase of your home
- Taking a second job or endeavoring on a second source of income
- Sell a lot of small items, or a few big-ticket items
- Seek out a small person loan from your local banking institution or job
- Search for down payment assistance programs in your local area which you may apply for
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