5 Things to Do Before You Apply for a Mortgage Loan
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Now that you’ve decided that the time is right to buy your first home, there are some things that you will want to do before you actually apply for a bad credit mortgage in Ottawa. These things not only improve your chances of being approved for the loan in the first place, but they also directly influence your interest rates.
#1 – Start Saving for Your Down Payment
If you haven’t already, start saving as much as you possibly can to go toward your down payment. When you apply for private home loans in Ottawa, you will often need to provide about 15% to 20% of the value of that loan in the form of a down payment. This proves to your lender that you have the financial responsibility required to save that sum of money, which helps reduce some of that lender’s risk. Even if you cannot save the full 15%, do what you can to save as much as you can. It’ll help in the long run.
#2 – Take Care of Credit Report Inaccuracies
You should contact the major credit agencies throughout Canada - Equifax and TransUnion - for a free copy of your credit report. These companies will mail you your entire report for free, which allows you to go through it with a fine-tooth comb for inaccuracies. Almost everyone finds at least one or two things on their credit report that are no longer accurate. For example, your old cable provider may have forgotten to send information that you paid off your last bill back in 2011. If that’s the case, simply contact that company and politely ask them to update your credit information. You might be surprised by the difference it makes.
#3 – Shop Around for the Best Rates
Remember that actually applying for bad credit mortgages in Ottawa has an effect on your credit score, too. Each time a lender asks about your credit, it puts a “hard hit” on your record. Multiple inquiries can reduce your credit score, which looks bad to lenders. Rather than applying for several loans, ask these lenders about preapproval. Take a copy of your credit report with you, make a note of the inaccuracies, and ask the lender to give you an estimate. Then, you can decide which loans to apply for and which to avoid.
#4 – Reduce Your Debt-to-Income Ratio
When it comes to private home loans in Ottawa, lenders are much more likely to look at your debt-to-income ratio over your actual score. This ratio defines the difference between the amount of money you earn and the amount you spend on debts like credit cards, auto loans, and personal loans. The more income and the less debt you have, the lower your debt to income ratio. Lowering this number gives you a better shot at getting approved, so consider cutting back on the number of credit cards you use or even paying off that car loan early.
#5 – Keep Your Employment Stable
Finally, it is important to keep your employment stable for as long as possible before you apply for a bad credit mortgage in Ottawa - especially if you will go through a private lender. Your employment means a lot to these lenders since the longer you have worked for a particular company, the more responsible you seem. Although it is wonderful if you have been with the same employer for 15 years, most lenders find that more than a year of stable employment is sufficient for a poor credit mortgage in Ottawa.
Although you might be incredibly excited about starting the process leading to homeownership, it is important to remember that getting the loan and a great interest rate requires some work and preparation on your part. Make sure you obtain your credit report, save money for a down payment, and stick with your current employer as long as possible for the best results.