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Get your credit in order
The first step in the mortgage application process is to make sure your credit report is error-free, and your credit score is high enough to meet lender requirements. If your credit score is low, consider taking some extra time to work on building it up. A poor credit score can mean having to make a higher down payment, paying a higher interest rate, or even having your mortgage application denied.
Down payment Requirements
You have to make sure you have enough money for a down payment. For $500,000 or less you must have 5% of the purchase price, $500,000 to $999,999 you need 5% for the first $500,000 of the purchase price and 10% for the portion price above $500,000 and for $1 million or more you need 20% of the purchase price. If you are self-employed or have poor credit history your lender may require a larger down payment.
Get an idea of what you can afford
It’s best to figure out how much you can afford before putting in an offer on a house.
When determining mortgage affordability, you’ll have to consider:
- Your pre-tax income
- Your living expenses, including utilities
- Any existing debts
- The amount you borrow and the subsequent monthly payments
- The amortization period
- Closing and moving costs
Choose a mortgage type
Some of the main things to consider include:
- Term
- Amortization period
- Type of interest rate
- Payment frequency
- Open or closed mortgage
