Before deciding to buy any property, make sure your credit is in good condition. Being financially prepared goes a long way and helps prevent future scenarios that are difficult to overcome. Below we list down 6 basic mortgage tips to help you get ahead of the pack and establish a mutually beneficial relationship with your mortgage broker or real estate agent.
1. Polish your credit report
When you first apply for a mortgage loan, lenders’ top priority is to assess your credit history and overall financial capacity. For a successful loan application, monitor your credit months or years before you apply. If you can prove your creditworthiness to the bank or mortgage firm, you can enjoy rates suitable to your budget. Check for accuracy when submitting your credit report, be disciplined with your finances to achieve the credit score you aim for, and do not give unauthorised personnel access to your credit data for safety purposes.
2. Get organised
After carefully monitoring your credit report and maintaining a good score, you will have a better understanding of your own financial situation. There may be inaccuracies once you submit your report to credit bureaus for assessment, but if you organise your data, it will be easy to resolve them. Your score may change over time if you end up having a high debt-to-credit ratio. Be vigilant in checking for fraud or suspicious accounts and activities as these could hinder your application and endanger future mortgage applications and financial transactions.
3. Do your research
Forewarned is better than forearmed when it comes to mortgage. Obtaining crucial information about lending firms, rates, brokers and agents helps you avoid the worst case scenarios. This is not only a matter of buying property, but it is also a financial obligation you need to commit to for several years. You need all the information you can get to land on the best deal possible. If you want to enjoy reasonable rates and terms, do your research and be informed before signing contracts or making financial commitments.
4. Know your limits
Home ownership is a dream for many, but keep yourself grounded so you do not lose your way. Have a good grasp of your finances and do not bite off more than you can chew. If you are only capable of paying 5 percent upfront, then refrain from choosing properties that require a downpayment beyond what you can pay. Go for a mortgage payment plan that accommodates your financial capacity instead.
5. Meet lenders half-way
Your credit score reflects your ability to repay lenders, who will then determine a loan amount and rate based on your credit history and perceived payment behaviour. Having a high credit score will easily earn you the trust of mortgage firms and banks, leading to win-win arrangements. Those with a checkered credit history may want to avoid applying for a loan until their score improves. Otherwise, they will have to opt for a lenient lender and settle with a lower amount and rate.
6. Carefully select your financing
There are different types of mortgage financing available, so pick in accordance with your capacity, preference and priority. Will an adjustable or fixed mortgage be suitable to your situation? Do you plan to pay in 15 or 30 years? A fixed rate mortgage might be the best solution if you prefer security and a stable payment plan. But in the face of volatile rates, a flexible or adjustable mortgage package may be the best option for you.
Now that you know the basics of mortgage application, there is no better time to improve on your credit score and make a fresh start with your credit history. Remember that your plan is only as good as your financial capabilities. Keep these mortgage tips in mind so that once your chosen lender approves your application, you are more than ready to start your investment property journey.