First Time Mortgage Process

Are you looking to apply for your first mortgage? Looking for mortgage rates in Canada or in the US? Are you finally ready to purchase a home? The first time mortgage applicants have come to the right place. We had the obtaining a mortgage series here many months ago. Now were back with a comprehensive post on the topic.

Step 1: Make sure that you’re ready for that first time mortgage.

Work.

Those curious about a first time mortgage need to understand that you work will play a heavy role in where you decide to live. Your location of work will allow you to decide what part of town you live in depending on how close to work you want to be. In the city that I live in the hot properties are those close to the subway line because public transportation allows for cheap travel to and from work.

Savings.

How are your savings? Have you dealt with that credit card debt yet? Before you go in for the first time mortgage application you must be realistic with your savings and where you stand financially. Sometimes the best investment is the one you don’t make.

State of mind.

Are you single? Are you enjoying the bachelor life? Are you getting married any time soon? Your state of mind will play a major role in your first mortgage and how much money you end up borrowing.

Location.

You need to decide where you want to live and what area you can afford a property in. You may choose to buy a condo downtown because you want to be close to the centre of town. You could also decide to purchase a bigger property out of town and drive in to work.

Step 2: Get all of your mortgage documents together.

This is the critical stage for those searching for how to get a mortgage. The first time mortgage application process can seem very daunting at first. It doesn’t have to be like this though. If you’re organize and have your stuff together then this process can be dealt with fairly easily.

Your documents for your income.

The mortgage loans/banking industry has really tightened up since the economic crash in late 2008. A few years ago the rules weren’t too strict. These days you really have to go out of your way to prove your income. There are two types of situations:

  1. Self-employed. My friend that works as a Mortgage Broker told me that the banks often hesitate on loaning huge sums of money to the various entrepreneurs that come in. As a self-employed individual you’re going to have to prove your income somehow.
  2. Standard. If you have a traditional job then you’ll have to simply show your year end income forms (name varies depending on where you’re reading this, T4 in Canada).

The next set of documents will revolve around your current financial picture. The bank or company loaning you the money will want to know for sure that you’ll be able to make the mortgage payments. These individuals also understand that you could lose your job at any point in time.

Assets/Savings.

This is where the bank finds out exactly how much money you have. It doesn’t look good when you spend all of your money on the home purchase. The bank will want to know that you have some cash on reserve in case anything were to happen. When it comes to this section please make sure that you list all major assets (usually a car) and savings (investments, stocks, savings accounts) so that the bank sees your financial situation is strong.

Liabilities.

This is where your debt or the debt of your partner can really hurt you. The more money you currently owe the more the bank will think twice. They don’t want to loan money to someone that owes many creditors money already.

Step 3: Learn about the first time mortgage fees.

For the first time mortgage application the fees may be very surprising. A friend of mine purchased a property many years ago with only the thought of mortgage payments in mind. He totally forgot to consider the plethora of other fees that come with a new home.

The basic fees that you need to consider with your first mortgage include:

  • Lawyer costs.
  • Closing costs/taxes.
  • Mortgage payments.
  • Property taxes.
  • Home insurance.

There you have it. A look at how you can obtain a mortgage in 3 easy steps. The steps will take a long period of time but you shouldn’t be shocked by anything after reading this post.

Check out the obtaining a mortgage series for more details:

Part 1: Are you ready to purchase a home?
Part 2: Get your documents together.
Part 3: Get ready for all of the fees.
Part 4: How-to not lose your pants on your first mortgage.

(photo credit: Paulswansen)