Purchasing your first home can be an exciting step, but it can be challenging for lenders and sellers to assess your affordability. If you’re looking for a mortgage, the lender you borrow funds from wants to make sure you’re financially capable of repaying the loan promptly.
All lenders in Toronto will figure out if you’re financially ready to own a home by asking questions and looking for proof. Although it can be tricky to prove your eligibility as a first-time homebuyer, you can take a few steps to convince them that you’re serious about buying a home.
1. Issue a Certified Cheque
A certified cheque is a personal cheque with the bank’s stamp of approval. It is proof from the financial institution that you have sufficient funds to cover the amount mentioned on the cheque. Providing a lender with a certified cheque assures them that the payment will go through without issues. It enables them to trust you to pay your dues.
Certified cheques boost the credibility of new homeowners and allow them to receive a mortgage or purchase a home without any hurdles. You can get a certified cheque at your bank by requesting the teller. Once the employee verifies your identity and other details, they will proceed with the process and stamp the cheque.
2. Get Pre-Approved for Mortgage
House hunting in a competitive city like Toronto can be challenging, especially in the current housing market. The pandemic pushed home sales to an overdrive, resulting in home shortages.
Getting pre-approved for a mortgage makes you a more attractive buyer in the eyes of a lender and can help you stand out among other buyers. It provides you with the option to bargain with mortgage specialists and ask for lower rates. When you get pre-approved, a lender recognizes your ability to pay off debt, which encourages them to trust you with their funds.
3. Gather Proof of Steady Income
One of the best ways to prove your eligibility is by showing lenders that you have a steady income source, allowing you to pay off your mortgage promptly. When lenders believe that your income is reliable and sufficient, they will trust you with their funds and view you as an eligible candidate for a loan.
Gather documents that display your work and income history and prove that your income will be consistent in the long term.
4. Use Assets as Collateral
It can be difficult to convince lenders that you’re eligible to pay off a loan as a first-time home buyer as they have no historical records of paying off a mortgage to refer to. You can still prove that you’re capable of repaying the loan by using your assets as collateral.
When you borrow money with collateral, your lender can take the asset if you fail to fulfill the repayment terms. When you pledge collateral, lenders face lower risks, which might help you attain a reasonable interest rate.
Navigating the housing market as a first-time buyer can be challenging when you don’t have the proper knowledge. Once you gather all the documents to prove your eligibility, you’ll be closer to purchasing your first home.