Buying your first home can be one of the most exciting challenges you’ll ever face. As stressful as the process can be, it’s no secret that you’ll undoubtedly feel better by going into the situation with a positive attitude – and the knowledge that can only come with proper preparation.
So, what can you do to make sure that you’re ready for this new adventure?
What Can You Afford to Borrow?
The majority of people will need to turn to a lender for help with the cost of their new home, and there’s really nothing wrong with that. But there’s a huge difference between someone that wants to take out a home loan way beyond what they can afford, and someone that understands what their income could allow them to borrow. By understanding the amount that you could comfortably pay back without straining your finances, you’ll be in a much better position to apply for your mortgage (and much more likely to be approved, too).
Preparation is Key
Banks won’t care so much about your fashion sense, they’ll simply want to focus on your finances; namely if you have the income and assets to cover what it is that you’re planning to borrow. By preparing your finances ahead of time (such as by checking your credit and taking steps to improve your score), you could go on to become what a lender considers a ‘viable investment’.
It’s not just your score to consider either; in fact, if you’re buying with your partner, they’ll be evaluated as well. An effective way to tidy your credit score could be by taking out a small loan and repaying it consistently for a year or two before applying for a mortgage, which should improve it somewhat.
Save Now, Benefit Later
Borrowers will typically have one thing in common, and that’s the need for a deposit. Most lenders will calculate this amount based on what you plan on borrowing, and this can range from anywhere between 3% and 20% of the total value of your loan. Saving doesn’t have to be difficult; you could start by putting a couple of hundred dollars a month aside, or by opening a dedicated saver’s account to ensure that your savings only go up and up.
Your Documents are Very Important
All lenders will need to see formal documentation relating to your identity, your income, and other important statements relating to your tax and so on. The more transparent you are when applying the less your chosen bank will have to worry about, so getting your documents in order should be an important step in the mortgage application process.
No Two Mortgages are the Same
The final piece of advice that we have to offer relates to home loans themselves. Different banks offer varying interest rates and features, so although you’ll likely be keen to receive approval from any of them, don’t rush into a decision. You might end up signing up to a deal that isn’t as rewarding as another.