For most of us a house or a condo will be our most expensive investment. This is what we call our home. This is what we come home to, this is where we can relax, feel like ourselves and not have to answer to anyone! This is where we make our own
rules. Our home. So knowing how to achieve this dream, and own the home of our dreams is essential.
Many of us cannot purchase a house or a condo with cash therefore a mortgage is required. Getting approved for a mortgage is not difficult as long as you meet the following 3 criteria.
1. Down payment
A downpayment is needed to purchase a home. The downpayment requirements vary by state or province. The minimum downpayment is usually 5% of the purchase price. It may take a few years to save for a downpayment but always remember to think long term, it is for an investment which will likely appreciate in value. Another great analogy is thinking of it as putting your money from one pocket to another, rather than having the money sit in a bank account it is, instead, invested into property.
2. Income Confirmation
When applying for a mortgage the bank needs to know that you have sufficient income to support the mortgage payments. Proof of income must be provided through the most recent pay stubs if you’re employed or the tax return documents if you’re self-employed. The income must be high enough to support the monthly mortgage payment, the property tax, the maintenance costs (if applicable) and any of your existing debts.
3. Existing Debt + Credit Score
During a mortgage application the bank will look at your existing debt, meaning your credit cards, any outstanding loans, lines of credit etc. If you’re owing on credit cards this may reduce your chances of being approved for a mortgage. Depending on how much outstanding debt you have, it can cause to leave no room to afford the monthly mortgage payment. Attempt to pay off your debt or keep you credit balances to a minimum before applying for a mortgage. Existing debt also ties into your credit rating, the bank will look for a good credit score of 650+.