It can be fun and exciting to be buying your first house. However do realise that getting a favourable mortgage approval is not a god given right. It is possible that you have found your dream home and being unable to obtain a suitable mortgage to complete the purchase. To better prepare yourself on getting a suitable mortgage that will not strain you financially, these are some things to keep in mind.
Firstly, get a copy of your personal credit report. You really don’t know how it can look like. You might think that a past issue for a particular credit card is settled. However, your personal credit report may show otherwise. When these issues arise, you have to check with your issuer and credit bureau to find out why it is so. Lenders are particularly interested in a borrower’s credit conduct. Having bad personal credit can result in outright rejection of your housing bank loan application or being offered unfavourable terms on your housing bank loan. It is a good idea to promptly repay your financial obligations in the period before applying for your housing bank loan.
Secondly, lenders want to know how stable is your personal income to judge whether you can comfortably repay the mortgage. To judge the stability and consistency of your personal income, you are likely to be required to show your annual income for the last 2 years. Your personal income can also play a part in determining how big a loan quantum you can afford to borrow. A higher income will mean that you can afford a higher loan.
A common practice that new home buyers often make is to calculate how much a mortgage they can afford and maximize their affordability. However, do not forget that there are a number of costs that has to be taken into consideration when you buy a house. A mortgage payment is not all that you have to pay for. Things like utilities, insurance, maintenance costs, renovation loan, property taxes, etc, are costs that first time home buyers often fail to recognize. Calculate your monthly living costs and make an estimate of the amount of money you have to spend on miscellaneous stuff. Check with friends and relatives on their bills. It is better for your lifestyle to buy a house you can easily afford than to buy a dream house that you will struggle with just to make ends meet.
It is inevitable that a first time home buyer can be stressed out from the house search and the mortgage search. Being prepared and understanding important knowledge can help to significantly alleviate that.