5 Steps to Get Your First-Time Mortgage
Obtaining a first-time mortgage can be a stressful experience if you don't know where to begin. To help you navigate the first-time home buying process, we've put together these five steps to get you approved for your first home loan.
Save Up for a Minimum Down Payment
The first step in getting a first-time mortgage is to figure out a down payment. In Canada, the minimum down payment required for first time home buyers is 5% of the purchase price for homes priced under $500,000. There are flexible options for the 5% such as borrowing it from a line of credit.
Review Your Credit Report
Before applying for a first-time mortgage, it's important to take some time to review your credit history. To secure a first-time mortgage at the best possible interest rate, you'll need to have a credit score of at least 600. While there are lenders who will approve financing for borrowers with lower credit scores, they typically charge higher rates and have stricter borrowing terms. If you have blemishes on your credit report, there are a few simple ways to improve your score such as paying your bills on time, correcting any errors you find in the report, and paying off any outstanding credit card balances.
Get a Pre-Approval
The next step in obtaining a first-time mortgage is to get a mortgage pre-approval. The maximum mortgage amount you can qualify for will depend your Total Debt Service (TDS) ratio, which measures your total liabilities (i.e. car payments, credit cards, loans) against your gross monthly income. To get pre-approved for a first-time mortgage, your liabilities should be no more than 42% of your gross monthly income. If you have a really high credit score, there is more flexibility on your debt ratio.
Consider Your Budget
Pre-approval tells you how much the bank is willing to lend you based on your credit history and income, but it doesn't tell you how much home you can afford. Before obtaining a first-time mortgage, take some time to review your budget and determine what size monthly mortgage payments will work well within your lifestyle.
Factor in Closing Costs
When seeking a first-time mortgage, it's important to factor in legal fees and closing costs (such as appraisal fees, inspections, lawyer fees, property transfer tax, and title insurance). These extra expenses will be over and above the down payment that you have saved up.
Our lending specialists can guide you through the mortgage application process and help you purchase the home of your dreams. Contact us for assistance in obtaining a first-time mortgage.Request Mortgage Info