When Should I Apply For a Mortgage?
When Should I Apply For a Mortgage?
Mortgages are an invaluable form of debt that enable homebuyers to purchase properties by paying less than the full purchase price upfront. They typically require personal information, income verification and assets verification before approval is given.
Know when is best to apply for a mortgage; every application leaves an impactful footprint on your credit report.
1. Once you’ve found a property
Lenders consider many factors when assessing whether a mortgage is affordable for you, including your income and employment history, credit score and debt-to-income ratio. Therefore, it's wise not to make any significant financial moves before applying for a mortgage – any decisions which might affect these factors could delay processing or result in its rejection.
As part of your homebuying search process, preapproval can provide an idea of the amount you are eligible to borrow. This helps give an accurate picture of what is feasible from the outset and makes comparison shopping simpler.
Save now for closing costs as these typically range between 2% and 6% of the purchase price, covering items such as appraisal fees, attorneys' fees, credit report fees and title insurance charges.
2. Once you’ve been accepted on the property
Once your offer on a property has been accepted, your conveyancing solicitor will pass on the details to your mortgage lender so they can begin mortgage underwriting – an in-depth version of pre-approval that examines all aspects of your financial life and the property itself – including requesting many documents such as bank statements, paystubs and tax returns.
There are a few steps you can take to increase your chances of securing a mortgage, such as correcting any credit reporting errors and paying down debt. Making even one mistake could reduce the amount you can borrow, increase interest rates or delay closing date – mistakes which cost time and money!
Your lender will also arrange to conduct a survey of your property, which may result in requests to renegotiate or agree to repairs – therefore it would be beneficial for you to hire an RICS surveyor to conduct your own survey.
3. Once you’ve been pre-approved
Preapproval lenders take several factors into consideration during their preapproval process, including your income, job history, credit score and debt-to-income ratio. Any change to any of these could impact whether or not your approval is granted; to prevent this happening to you make sure to comply with any requirements set by your lender.
Increase your savings or pay down debt as needed, avoid major financial transactions (like taking out a new loan, withdrawing large sums from your bank or changing jobs), provide all documentation requested as soon as it becomes necessary, and find an agent familiar with mortgage approval processes who can keep you on track.
Make sure to monitor your credit regularly – errors on credit reports are an all-too-common problem, and left uncorrected, they could damage your score significantly. NerdWallet suggests using a free service like Credit Karma as part of this plan for monitoring.
4. Once you’ve signed the mortgage agreement
A mortgage agreement is a legally-binding document that details your commitment to repay your loan and defines your responsibilities as a borrower, such as how to handle defaults or foreclosure proceedings. Be sure to read it thoroughly to make sure it matches with what you expected it to be.
Lenders take many factors into account when assessing your ability to repay a mortgage loan, including income and job history, credit score and debt-to-income ratio. Therefore, it's wise to avoid major changes that might alter these numbers; such as switching jobs too close together could raise questions about employment stability or increase debt-to-income ratio and reduce mortgage eligibility.
Orefice advises applying for your mortgage as soon as you know you can qualify, in order to lower costs by getting personalized attention from lenders. She adds that beginning early each month could prove even more advantageous, since many lenders are eager for new business then.
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When Should I Apply For a Mortgage? Mortgages are an invaluable form of debt that enable homebuyers to purchase properties by paying less than the full purchase price upfront. They typically require personal information, income verification and assets verification before approval is given. Know when is best to apply for a mortgage; every application leaves…