For most people, home shopping or buying a house can be a tiresome exercise but buying a house can also be beautiful and smooth experience with the help of homebuyer assistance programs.
One time you’re getting swept up and excited about owning your dream house then nervous about all the expenses you’ll have to make. Before you go far, it can be good to pause and consider a few things only.
It’s true, home shopping can be both exciting and frustrating – even for small business owners. Some have the misconception that owning a business gives you an edge when applying for a home loan. The reality is that applying for a home can be trickier if you’re a self-employed individual.
To increase your chances of mortgage approval, Here are some things you should know before going home shopping.
Know the right time
Don’t buy a house because you think it’s about time you settle down, or you need investment. No. Think hard and do a bit of soul searching first. Make sure that you want to buy a house. Purchasing a home requires a lot of money, time and energy especially when it comes to maintaining it. If you want to love your home, you should know when the time is right, so you don’t regret your decisions.
Review your credit score
At least once a year, request a copy of your credit report. Review it properly, so you know if there are any disputes or inaccuracies. Start earlier and fix any significant issues or errors.
Address any credit issues or improve your score
If you find that you have a low credit score, take the time to improve it. Pay off any outstanding consumer debt. If you don’t have any debt, start to establish a solid credit record. If you want to buy a house now, don’t apply for a new credit card or credit yet. Mortgage lenders check your track record to see if you have any red flags.
Save, save, and save
When buying a house, you’ll need to save a lot of money for a down payment. The more you are going to save on your down payment, the better mortgage terms you’ll have. You should also save your home’s closing costs. A lot of first-time homebuyers are not prepared and usually get surprised at the amount they have to provide primarily for the closing table. The closing costs typically vary, but the average amount you’ll have to spend is around two to as much as five percent of your house’s purchase price.
Recognize your responsibilities
From renting an apartment to owning a home, you can expect that your living costs will increase. Plus, you will have to pay the repair, and fix things. Not only that but you’ll also have to buy significant appliances such as electrical, heat, air conditioning, or plumbing systems.
Do your research
Before you go and look at houses, it’s best to do your research and educate yourself on what the buying process is like. Read articles online about home buying.
Buying a house is going to be one of your significant purchases so it’s essential that you find real estate professionals who are highly skilled and who can represent you during your transaction. Choose someone who has your best interests in mind and who is quite knowledgeable.
Verify Your Employment
For a W-2 employee, verifying your employment is easy. One only needs to provide two years’ worth of tax return. Your mortgage lender will verify this, give your employer a call, and you’re good to go. However, for self-employed individuals, it can be a lot trickier to prove you have steady employment for the last two years. You need to provide all the necessary paperwork to verify your work.
Build Good Credit
Your personal credit and business credit score both need to be good enough to qualify for a mortgage loan. Work on improving your credit, and you’ll enjoy better interest rates and terms. Be responsible when it comes to your financial obligations by paying your credit dues on time. Pay off your debts and avoid opening new credit lines.
Save For A Bigger Down Payment
When it comes to mortgages, don’t settle for the minimum down payment. Just because your Broker told you that the lowest down payment required is 3.5%, it already means you should stick to the 3.5% down payment. By putting down a larger deposit, your lender will think you can afford the loan, giving them the confidence that it is worth approving your mortgage application. You also get to enjoy better terms and rates with a larger down payment.
Talk To A Mortgage Broker
When applying for a mortgage, for example in Vancouver, you won’t only need to save enough down payment, but prepare funds for the closing costs. Your Sparo Mortgage Broker Vancouver or lender should be able to tell you how much the closing costs will be. Don’t hesitate to ask them all of your questions before signing any papers.
Know The Minimum Requirements For Each Home Loan
The thing about mortgage loans is that while they have just about the same criteria, they differ in the minimum requirement. Take credit scores, for example. Conventional loans require their borrowers to have at least 620 FICO scores while FHA loans accept those with 500-580 scores.
In Vancouver Canada, the minimum requirements will also depend on your Sparo Mortgage Broker Vancouver. Different lenders have varying minimum requirements. Make sure to shop for lenders and check what their minimum requirements are when planning on your mortgage application.
Declare Income Accurately
Much like your employment status, proving your income requires more scrutiny from the lenders. The problem with some entrepreneurs is that some opt not to declare their actual income. When applying for a mortgage, you’ll provide tax documents to prove how much income you get monthly and yearly.
Understating your income can lead to lower chances of getting approved for a mortgage. Make sure to declare your income accurately, and you can provide your lender with evidence that you can afford the home loan.
And that’s about it for some of the essential things you need to know before purchasing a house.