Essential Requirements To Buy Your First Home
Whether you’re browsing Toronto real estate to buy a small starter home or your dream forever home, chances are you’ll need to rely on a mortgage loan to buy your first property.
With this, you’ll need a few things to secure a mortgage loan. A mortgage loan is a type of financial loan used to purchase a property.
To ensure your application is approved the first time around, we’ve listed the six essential requirements you’ll need to buy your first home with financial assistance from a lender.
First, one of the requirements to buy your first home is to have a 20% down payment.
First, you’ll need to save at least 20% of the mortgage loan total as a down payment or loan deposit.
Otherwise, you’ll need to save 10% of the loan total and opt for private mortgage insurance.
Second, another of the requirements to buy your first home is to find a great lender.
Next, you’ll need to shop around and choose a lender.
Just as you would shop around for a personal loan to get the best interest rates, it’s wise to use a mortgage loan comparison platform to find the best lenders offering the best deals on interest.
Third, another of the requirements to buy your first home is a good credit score.
You’ll need a suitable credit score to receive mortgage loan pre-approval with your chosen lender.
The ideal credit score to obtain is 620. If your credit score isn’t 620, you’ll need to work towards improvement before applying.
Be sure to pay bills on time, wipe out debts, use credit carefully, and opt for credit-boosting programs. Moreover, be sure to monitor your credit score.
Fourth, another of the requirements to buy your first home is to consider affordability.
Once your credit score is high enough, you can start budgeting for a home. With this, consider your debt-to-income ratio to ensure your mortgage loan repayments can comfortably fit into your budget.
Your debt-to-income ratio must not exceed 43% in meeting the criteria for a mortgage loan. So, be sure to eliminate as many debts as possible before applying.
Fifth, another of the requirements to buy your first home is closing costs.
You’ll also need to afford closing costs when applying for a mortgage loan.
These costs include credit report fees, application fees, recording fees, title insurance costs, underwriting or processing costs, escrow fees, originating fees, prepaid interest, and a few others.
You can budget for a maximum estimate of 5% of the mortgage loan total to cover the closing costs.
Finally, one of the requirements to buy your first home is great documentation.
Lastly, you’ll also need to prepare the right documentation to apply for a mortgage loan. This documentation includes your pay stubs, tax returns, identification, credit report, and proof of assets.
Without the right documentation, your loan application will be rejected, so be sure to gather up all the right paperwork when applying.
Before you can start house hunting for your dream home or a suitable starter home, it’s essential to obtain pre-approval from a lender.
When you receive pre-approval, the lender will offer a mortgage loan amount that you can afford, which will enable you to house hunt for homes in a certain price range.
Even though you’re probably anxiously anticipating the chance to secure your home and move, it’s best to take your time house hunting and avoid settling for a property that doesn’t meet your criteria.
Were you encouraged by what you read?
Then, would you share this article with a friend, co-worker, or family member?
Or, maybe you can send it to a friend or family member?
This blog occasionally uses affiliate links and may contain affiliate links. Additionally, Melanie Redd is a participant in the Amazon Services LLC Associates Program. This is an affiliate advertising program designed to provide a means for sites to earn advertising fees. These are earned by advertising and linking to amazon.com. Also, for more on my disclosure policy, click HERE.
© Melanie Redd and Hope Ministry, 2022. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Further, excerpts and links may be used, provided that full and clear credit is given to Melanie Redd and Hope Ministry, LLC. Please give appropriate and specific directions to the original content.
This article was shared with permission from Hope Ministry, LLC and Melanie Redd.