How can I best prepare to apply for a mortgage?

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Applying for a mortgage loan can be a long, nerve-wracking process for potential borrowers. However, there are several things borrowers can do to put themselves in a strong position when applying for the loan. 

Create a Savings Account and Start Saving

It is very important that potential borrowers open up a savings account and start saving as soon as possible. Growing the funds needed for the deposit and closing costs can be difficult, so once you start thinking about buying a home, it is important that you start saving a little each month.

It may be necessary to cut back on monthly spending slightly so that you have money left at the end of the month to move to your savings account. Creating a budget and deciding what you feel comfortable sacrificing and/or cutting back on is important.

Monitor Your Credit

When applying for a mortgage loan, the lender will perform a hard inquiry of your credit. Therefore, potential borrowers should actively monitor their credit score and practice good credit. Making credit card payments on time, limiting outstanding debt, and ensuring all information is accurate and current are a few ways that potential borrowers can improve and/or maintain good credit.

Track Spending Habits

Lenders will have the ability to analyze your spending habits, because they want to see if you are likely to make your mortgage repayments. Potential borrowers who spend beyond their means will be less desirable to lenders than potential borrowers who have consistent, maintainable spending habits. Therefore, it is important that individuals who want to apply for a mortgage, begin budgeting and tracking their spending.

Meet with Multiple Lenders

Potential borrowers should not meet with a single lender and take out a mortgage loan without talking with other lenders. Different lenders may offer different interest rates, so it is advantageous for potential borrowers to shop around and compare interest rates. This will allow them to find the best rate available.  

Organize Your Documents

There is a lot of paperwork involved in the mortgage application process. Gathering and organizing your documents before applying can make the entire process a lot smoother and more efficient. Lenders will often ask for various financial documents including bank statements, proof of rental payments, pay slips, etc. Having copies of identification like a passport can also be useful.

Applying for a mortgage loan can be a long, confusing, and stressful process. However, following these tips may help the process run more smoothly.