Applying for a mortgage for your home can be stressful. Buying a new home is one of the largest purchases you will make especially if you’re a first-time home buyer. We have made a list of the things that first – time home buyers worry about when getting a mortgage.

Having enough saved up for the Down Payment

The higher your down payment, the lower will your monthly payments be. For example, if you buy a home for $400,000 and put 20% down, you will pay $80,000. You will therefore need a mortgage of $320,000. If you put more than $80,000 down, you will end up borrowing a lower amount. If you choose to put less than 20% down of the purchase price of the house, you are required to have a mortgage insurance, which gets added onto your mortgage. Therefore, not having a large enough down payment means you will have higher carrying costs, which can lead to difficulties with getting approved.

When to Apply for a Mortgage

If you bought a new condo, there could be a chance that you may be moving into your new home before the building registers, at which time you will be paying the developer an interim occupancy fee. You are basically paying rent to the developer until the building is registered, because you cannot apply for a mortgage until the building is registered with the municipality. It can take from a month to nearly six months for the condo building to be registered. So, when do you apply for the mortgage?

Most builders will give you a notice usually a month before stating when your final closing is approaching. It is recommended that you get all your paperwork together right after you take occupancy. You should start shopping around and ensure you get the best rate possible, so when the time comes you will be ready to make your decision.

Mortgage Stress Test

Over the requirement of having a large enough down payment, the next concern will be the mortgage stress test. The stress test is applied to both insured and uninsured mortgages. You basically need to qualify at a rate approximately 2% above your contracted rate in order to prove that you can afford your mortgage. In some market year review reports, it was discovered that buyers who applied for a mortgage had to qualify at an average of approximately $700 more that what they needed to pay per month in payments due to the stress test. If you’re already pushing it (like if your projected monthly shelter costs equal substantially more than 30% of your before-tax income), then the stress test could be the thing that pushes you over the edge, preventing you from qualifying.

Self-Employed

When you apply for a mortgage, you will need to provide a reliable source of income to prove that you make sufficient money to afford the mortgage payments. However, what happens if you are self employed?

Major banks and lenders will likely request to see two years of business financials. They would want to see that your business makes money so they feel more confident that you can steadily pay yourself. If you have a low salary but a lot of money in the business, that could be a red flag. It could also be a red flag if you have a high salary and not much money in the business. It is a delicate balancing act. If you are self employed it is recommended that you book an appointment with a mortgage professional in order to learn about how your business financials may affect you when it comes time to apply for a mortgage.

That goes for all the above worries and concerns. If you are planning on buying your first home, we will be more than happy to discuss your options and give you an idea of how you could get your finances in order to apply for a mortgage.