While there is some advice for buying a home that can be applied to almost everyone, for some groups of buyers, such as singles, the self-employed and parents-to-be, the challenges and obstacles they face are different, and require a unique set of mortgage tips and guidance:
Mortgage tips for singles/divorcees
It’s undoubtedly harder to qualify for a mortgage when you’re on a single income, but while tricky, it isn’t impossible.
It can be helpful to have a parent or other relative co-sign to help you get a bigger mortgage, as lenders determine your borrowing eligibility on the total income of all applicants, but it goes without saying that the co-signer must be willing and able to make the payments if you’re unable to.
Another tip is to try and keep your borrowing in check when on a single income, and make sure that your total debt service ratio doesn’t exceed 40% of your annual earnings.
Lastly, but by no means least, if you can afford to make a large down payment, you’ll be looked upon more favorably by lenders.
Mortgage tips for the self-employed
With the earnings associated with being self-employed typically unpredictable, it can be hard as a self-employed individual to show banks two to three years of solid and consistent income. If you’re newly self-employed, it can be even tougher.
As with trying to qualify for a mortgage as a single person, having a co-signer can be immensely helpful, and you might even be able to remove them from it as soon as you can provide the lender with the requisite tax returns.
Another alternative is to seek a mortgage with a private lender, and while the private market can be risky, working with a mortgage broker can make it more secure, as they’ll only match you with verified and reputable private lenders.
Because self-employed individuals also face different down payment requirements, it can be helpful to speak with a mortgage professional such as a broker anyway, to help you negotiate the lenders and meet all of the requirements.
Mortgage tips for parents-to-be
With the high cost of childcare and low parental leave benefits, most dual-income couples planning to start a family, typically face a decrease in earnings, and must ensure they don’t become house poor. Lenders never take the personal expenses associated with a new baby into account when considering couples for a mortgage, such as daycare, gas and diapers, so expectant parents must take extra care of their money.
One tip recommended by mortgage experts, is for young couples and families to create a budget that incorporates all of the extra costs associated with a baby, to help them see if they can manage mortgage payments for the type of property they desire.
It also pays to remember that the first home you buy as young parents-to-be, may not be the home you spend the rest of your life in.
For more detailed advice and guidance on applying for a mortgage - whether you fall into one of the above groups or not - schedule a free, non-obligatory initial consultation with a mortgage professional such as an advisor or broker, to get answers to all your questions and concerns.