Getting a mortgage is an important part of life and it's not as easy as it seems, especially in this day and age. As more millennials are beginning to enter the world of purchasing homes and applying for mortgages, it's a good opportunity to advise them on what works and what doesn't for getting approved for a mortgage. With the increasingly higher costs of buying a property, and the number of restrictions and safeguards in place to avoid giving mortgages to people who can't afford to pay them (a big reason for the financial collapse of 2008), it is increasingly important to understand what millennials need to do in order to prepare for getting approved. If you're unprepared, getting a mortgage is going to become next to impossible in this day and age.
Here are some of the most important tips to keep in mind when it's time to apply for a mortgage.
Keep an Eye on Your Credit Score
The most important tip is to know your numbers and understand the history behind your credit score. The average lender is going to have one eye on your credit history as it determines whether or not you're a risky client. If they don't like your credit score, it's going to be an uphill battle every step of the way.
This is why millennials should always keep an eye on their credit score. (I know, it is easier said than done).
If it needs improvement, you should be more than willing to start taking corrective measures. This means paying off debt, not missing payments, and restructuring your finances as best as you can. Don't allow the negative credit score to sit around because it will worsen over time. You have to make appropriate adjustments and this should happen well in advance of a mortgage application. You don't want to start scrambling when there's little time left to make changes!
Document Everything
This is the bare minimum when it comes to applying for a mortgage. If you don't have the right documentation in hand, how are you going to make adjustments along the way? It becomes difficult to know your financial history, pay stubs, and anything else associated with your accounts.By documenting these details, you're going to have more than enough information to apply with a smile on your face.
Budget Wisely
Budgeting is important because mortgage approvals aren't the only thing to worry about. You have to showcase a sense of organization when it comes to potential down payments, taxes, and other related expenses associated with buying a home. Without these funds, you are not going to be getting far along in the mortgage process.
The mortgage approval is just a part of the process and shouldn't take up all of your time.
Yes, it's important to get the approval but make sure to focus on the other details too. This will allow you to put forward a well-rounded, organized application when it's time to do so.
Save for a Down-Payment (More Than The Minimum)
By budgeting properly and saving up for a down payment (which is required anyways in most places), you will be able to show your mortgage broker or financial lending institution, that you are financially responsible and a good candidate for receiving lending support.
As mentioned, most mortgage lenders will require a minimum down payment to qualify, so by saving up MORE than the minimum required amount, you are showing them that you are extra serious about investing in the property and will increase your chance of being approved as well as lower your monthly mortgage payments!
Pre-approvals are Good
Millennials are going to deal with rigorous testing when it comes to mortgage applications.This is common with modern lenders as they want to avoid making risky bets on new clients. They want to go with someone that is less of a risk and this is why pre-approvals are good. You can go through different options, weigh the advantages, and make your choice without pressure. When there's a property involved, it becomes much harder to think with a clear mind. You end up panicking and that's a tough spot for any millennial to be in.
Be Selective When Choosing Your Mortgage Options
Most millennials assume the lender has all the power in the world. This is untrue! You have value as a client because you're bringing business to their front door. You want to make sure this is considered when it's time to sign on the dotted line.
Don't assume the first approval is the right way to go. It's always smart to look at different lenders, see what they have to offer, and then weigh your options before making a choice. This is going to ensure you end up with a solution that's worthwhile and isn't going to create issues later on in life.
Final Mortgage Thoughts
This advice will go a long way to simplifying the process for you.
Yes, being a millennial means there's going to be a lengthy learning curve while adjusting to the new market standards. However, the tips mentioned here can lay the groundwork for a world-class mortgage agreement. It's all about setting a strict checklist, understanding your numbers, and being able to negotiate when it's time to do so.
It's these subtle details that go a long way when it's time to seal the deal and apply for your mortgage.
By following these tips, you're going to get the deal of a lifetime and it won't take long!
Eitan Pinksy is the founder of Pinsky Mortgage, an award winning mortgage brokerage based in Vancouver, BC, Canada. Feel free to get in touch with Eitan for other mortgage advice and tips or check out his great mortgage education blog.
