So, when is the right time to apply for a mortgage loan? There is no perfect answer to this question. Applying for a home loan at the right time depends on your individual situation. However, there are a few guidelines you can follow to help determine when you should apply for a home loan.
You’ll want to choose a mortgage that fits into your long-term financial goals, and it’s best to do your homework and make sure you understand what you can afford before applying for a loan.
Some mortgages come with high fees, and while these fees may seem tiny when you’re paying them each month, they can add up if you stick with the same loan for 20 years or more.
The most popular types of mortgages are fixed-rate loans with 30-year terms. We consider these the safest option since your monthly payments won’t change over the life of the loan.
But remember that there are other options, including 15-year fixed-rate loans, adjustable-rate loans with several repayment terms, and reverse mortgages.
How Soon Should You Apply For a Mortgage Loan?
The best time to apply for a mortgage loan is when you have saved at least 20% of the total cost of your home. I recommend you wait until you have saved at least 20% of the total price of the home you are seeking before you apply for your loans. This ensures that you will have enough money saved up to cover all of your closing costs so that they will not come out of your pocket.
While it may seem that the sooner you apply for a mortgage loan, the better, this might not always be true.
1. Start with pre-qualification
The first step in the home buying process is to determine how much house you can afford. That’s where pre-qualification comes in.
Pre-qualification is a simple process that verifies you have enough income to afford mortgage payments without exceeding your monthly budget. Pre-qualification does not obligate you to buy a house or agree to purchase.
Good for you, some banks clearly state their mortgage banking requirements from their websites. One of the common prequalification steps to gain a mortgage is if you can afford 20% of the total property costs.
So if a property is N20,000,000, and you wished to take a mortgage, then you need to have saved N4,000,000 while the bank/lender upset the 80%.
Some other requirements include earning a minimum of N350,000 per month. Like some banks don’t really care how much is your monthly income but as far it can take not more than 50% of your monthly income to pay for your mortgage based on the loan tenor, you might be considered.
2. Understand the Process
Applying for a mortgage loan is simple. All it takes are some forms, a few documents, and a little patience on your part.
Many lenders will not issue loans that represent more than 80% of the value of the property. This 80% rule is referred to as “80/20” financing. The 20% down payment reduces the risk for both the lender and the borrower by ensuring that there will be enough equity in the property for the lender to foreclose and sell it if necessary.
3. Be prepared with all the documents you need
Be prepared with all the documents you need. Your lender will probably ask for proof of income, proof of assets and other documents. You may also need to provide proof that you have enough money to cover your down payment and closing costs.
The lender will also probably ask to see your credit report. If there are any major problems with it, like collection accounts or late payments that aren’t resolved, you might not get a mortgage.
If there is anything at all on your credit report that could keep you from getting approved, bring it up with your lender. Many lenders offer “second chance” mortgages to people who have experienced bankruptcy or foreclosure in the past few years.
Key Takeaways: There’s never a perfect time to apply for a mortgage loan. Each circumstance is unique. You should consider multiple factors when deciding the right time to apply for a mortgage loan. Applying for a home loan at the right time depends on your individual situation.