Why your first mortgage deserves your full attention
Taking out your first mortgage is probably the biggest financial commitment you'll ever make, so getting the best deal matters. A lot.
The process isn't always quick or simple. The options available to you depend on your income, credit score, and any debts you're carrying — past or present.
1. Save up a larger down payment
In almost all cases, you'll need a substantial down payment to buy the home you want. The good news: a bigger down payment unlocks better interest rates and more borrowing options.
If you can put more down, lenders see you as less of a risk — and reward you for it.
2. Pick the right mortgage type for right now
There's a wide range of mortgage options out there, especially if you have a larger down payment and strong credit. The biggest choice you'll make is between fixed-rate and variable-rate.
Fixed-rate mortgages lock you into a specific interest rate for up to five years, which makes them a solid choice when interest rates are low across the board.
3. Factor in the extra costs
When you're figuring out how much you need to borrow, don't forget the additional costs — most of which you can't avoid.
These may include home inspections and real estate fees. They add up, so budget for them from the start.
4. Don't borrow more than you need
It might be tempting to borrow as much as you can when interest rates are low, but only do that if you have something to invest the money in. There's no point in having borrowed money sit in the bank while you're paying interest on it.
If the home you're buying needs significant work, get some estimates so you know exactly how much you need to borrow.
5. Check your credit score before you apply
Your credit score determines your borrowing power, and it's one of the first things lenders will look at when reviewing your application. You can check your credit score online for free using agencies like Equifax or Experian.
If you have a bad or neutral credit score, your options will be limited — or nonexistent. Work on improving it before you start house hunting.
6. Keep your job stable
Lenders get nervous when you've recently changed jobs. Apply for a mortgage only once you've been in the same role for at least six months.
If you're unemployed or still on probation, many lenders won't accept your application unless you have an excellent financial record. Once your application is approved, you're free to make your next move.
7. Clear your debts first
Existing debts can drag down your credit score, making it harder to get a good mortgage deal. They can also put you in a spot later where your debt load becomes too heavy to manage alongside your monthly mortgage payments.
Make sure your financial situation is stable and debt-free before you apply.
8. Bring proof of income
All mortgage lenders require proof of income so they can decide whether you can afford the monthly payments. Your monthly pay stubs should cover it.
If you're self-employed, things get more complicated — especially if you haven't been self-employed for long.
9. Overpay when you can
When you're choosing a mortgage, make sure you can not only afford the monthly payments but also have plenty left over. Since a mortgage is typically a very long-term commitment, overpay as much as you comfortably can to knock down the debt sooner.
Paying your mortgage off earlier will improve your credit score and strengthen your long-term finances.
10. Work with a mortgage broker
A mortgage broker's main job is finding funding for your mortgage. They know where the best rates are, and they know how to present your financing proposal to lenders in the best possible light.
That means a better shot at approval — and better terms.
You're not locked in forever
Spend time researching the best deal, but remember: you're not stuck with this mortgage for the entire term. You can always refinance later if a more attractive deal comes along.
There will be fees involved in transferring your mortgage, but the long-term savings can be substantial — and worth it.
