Homebuyer Checklist: 5 Essential Steps Before Applying for a Mortgage

Buying a home can be one of the biggest decisions you’ll make, and preparing well can make a huge difference. Here’s a quick checklist to get your finances and documents ready before applying for a mortgage.

DALL·E 2024-11-05 15.19.42 - A clean, modern desk setup for mortgage planning, with items such as a small house model, a pen, financial documents, and

Step 1: Check and Improve Your Credit Score

Why It Matters: Your credit score is one of the biggest factors lenders consider when assessing your mortgage application. A higher score often leads to better rates and terms.
Action: Check your credit report for any errors, pay down high-interest debts, and avoid new credit applications in the months leading up to your mortgage application.

Step 2: Save for a Deposit (and Extra Costs!)

Why It Matters: The larger your deposit, the lower your Loan-to-Value (LTV) ratio, which can unlock more favourable rates and save on interest over time.
Action: Aim to save at least 5-10% of the property value for a minimum deposit. Don’t forget to budget for closing costs, which typically add 3-5% of the home’s price for things like legal fees, inspections, and moving expenses.

Step 3: Get Pre-Approved or Apply for a Mortgage-in-Principle

Why It Matters: A pre-approval or mortgage-in-principle confirms your budget, showing sellers you’re a serious buyer and helping you target properties within your price range.
Action: Gather your financial documents (proof of income, bank statements, ID, and employment history) and speak with a mortgage advisor to get pre-approved. This step gives you a head start and a clear budget as you start house-hunting.

Step 4: Calculate Affordability Beyond the Mortgage Payment

Why It Matters: Monthly mortgage payments are just one part of homeownership. Property taxes, maintenance, insurance, and utility bills can add up, so it’s essential to budget for these ongoing expenses.
Action: Use an affordability calculator or speak with your advisor to factor in these additional costs. Ensure you’ll be comfortable covering these monthly outgoings without stretching your budget too thin.

Step 5: Avoid Major Financial Changes

Why It Matters: Lenders prefer financial stability. Large deposits or withdrawals, new debts, or changes in income can raise red flags and affect your application.
Action: In the months before and during the mortgage process, try to keep your finances steady. Avoid major purchases, new credit applications, and significant changes to your income or spending patterns.

Final Note: Need Help Getting Mortgage-Ready?

Following these steps can help you feel confident and prepared as you apply for a mortgage. For personalised advice on how to boost your application, contact RS-Financial. Our team is here to guide you every step of the way!