Unless you’re independently wealthy, buying a home will likely be the largest financial transaction of your life. It’s not surprising, then, that most mortgage applicants feel anxious about meeting lender criteria and qualifying for financing. But with the right information and strategy, even individuals with average credit can secure firm mortgage approval. Reduced interest rates, waived fees, and other incentives are standard features of firm mortgages. While these advantages aren’t available with every lender, they can substantially reduce the cost of borrowing. Firm mortgage terms also tend to have shorter repayment periods and lower monthly payments than typical loans. As a result, firm mortgages are almost always cheaper over the long term compared to variable rate loans. Whether you’re currently renting or hoping to buy in the near future, learning more about firm mortgages could lead to an improved financial outlook for your future home purchase.
What is a Firm Mortgage?
A firm mortgage is a type of financing that offers a specific rate and term. Unlike an adjustable rate mortgage (ARM), the interest rate and monthly payment on a firm mortgage won’t fluctuate over time based on the fluctuations of an external index. A firm mortgage is often used as a term to describe a loan that has been approved based on a borrower’s financial strength, not necessarily a specific type of loan. In other words, a homeowner with a firm mortgage might have a 30-year fixed rate mortgage loan, a 15-year fixed rate mortgage loan, or maybe even an ARM.
Why Should You Care About a Firm Mortgage?
Fixed-rate mortgages tend to be more stable than adjustable rate mortgages (ARMs), making it easier to forecast future home loan payments. ARMs can have high upfront fees, long application timeframes, and unsure future interest rates that make them a less desirable option. In addition to the convenience of knowing your monthly payment will remain the same for the life of your loan, a firm mortgage could qualify you for lower interest rates and reduced closing costs. If you’re in the market for a home loan, it could be the easiest path to securing firm mortgage approval.
What Are the Requirements?
Lenders may vary, but all reputable firms will conduct a credit check and review your current debt-to-income ratio (DTI). Your credit score may also be considered, but it’s not guaranteed that you’ll meet the minimum requirements for a firm mortgage. If your credit score and debt-to-income ratio are below average, you may still be able to secure approval by putting a down payment of at least 20 percent. Many lenders will also consider factors like your employment and length of residence in your area, so be sure to review your options carefully.
Strategies to Earn Approval
If your credit score is low or if you have high debt-to-income ratios, you may need to improve your financial standing before a mortgage lender will offer you a firm mortgage. Fortunately, there are a number of ways you can boost your credit standing and strengthen your application. Reduce Debt – The most obvious way to improve your debt-to-income ratio is to pay off as much debt as possible. Paying off high-interest credit cards and other unsecured debts will lower your debt-to-income ratio and improve your credit score. Getting a firm mortgage approval increases the likelihood that you’ll be approved for a higher loan amount, too. Increase Your Income – Another way to strengthen your application is to increase your income. If you’re working steadily, it’s possible to increase your income by applying for a promotion, getting a raise at your current job, or starting a side hustle.
Bottom Line
If you have average credit or have struggled to improve your credit score, you may be able to get approved for a firm mortgage. It is often a better choice anyway since it’s less risky than a variable rate mortgage. While it may take some time to improve your credit score, you can take steps now to improve your chances of getting approved for a firm mortgage. In most cases, lenders will also require a down payment of at least 20 percent to secure a firm mortgage.
We here at Capital Mortgages in Ottawa look forward to assisting you with all your Ottawa mortgage needs. Contact us today by calling us at: 613-228-3888 or email us direct at: info@capitalmortgages.com
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