When Is the Best Time to Apply For a Mortgage?

Posted by Justin Havre on Wednesday, October 12th, 2022 at 10:27am.

Is January the Best Time to Apply For a Mortgage?Buying a home is the project of a lifetime for many people. It pays to be well-prepared and well-coordinated in terms of timing. Of course, you are free to start this process whenever you want, but some times are better than others to get a home loan. In this article, learn why January and the beginning of winter months are great times to apply and qualify for a mortgage.

For informational purposes only. Always consult with a licensed mortgage or home loan professional before proceeding with any real estate transaction.

January Is One of the Best Months to Apply For a Mortgage

Generally speaking, winter months represent a valuable opportunity for real estate buyers. Real estate is a seasonal industry, and the market tends to slow down during this season. This is called stage four in the annual real estate market cycle. Because of slower demand, home sellers are more reluctant to put their property on the market, and the price of properties already on the market can trend downwards, playing in favour of homebuyers who face less competition.

For all these reasons, organizing your steps so that the purchase of your property takes place during these months is a good option. To accelerate this process and buy a property at an attractive price, consider lining up a pre-approved mortgage before you even begin your real estate search.

And one thing led to another, as real estate buyers and borrowers are more scarce during this period, mortgage lenders may be more aggressive about securing customers, which can help buyers get a more favourable mortgage offer. In this context, the most attractive loans of the year with low mortgage rates, such as a discount of about 20 basis points off mortgages may be offered in January to attract new buyers compared to June to October, the least attractive period of the year for mortgage rates.

Which Stage of the Month Is Best For Mortgages?

If you want to stack all the odds in your favour for your mortgage application, you should pay attention not only to the time of the year when you apply for your mortgage but also to the time of the month. Generally, mortgage lenders follow a 3-phase monthly business pattern.

Beginning of the Month. Near the beginning of the month, lenders are trying to get as many mortgage applications as possible. They may be most receptive to your expectations and needs to offer you the loan and terms option.

Middle of the Month. Generally, they are gathering required documents for existing customers to get loans ready for their final approval.

End of the Month. This is usually their rush period when they are tying up loose ends for applications and closing on mortgages. This means that at this time, they may have less time to consider your new mortgage application.

However, all this information above can play to your mortgage application's favour only if you made sure you have enough for a down payment and the necessary income to finance your mortgage. In addition to paying attention to when you start your mortgage application, you should also consider a few more factors that can increase the chance of your application being accepted.

How to Improve Your Mortgage Application at Any Time

Boost Your Credit Score. Lenders usually offer the best loans with low mortgage rates to borrowers that have the best credit score. Lenders rely heavily on the influence of credit on homebuying. They may perceive your application as a risk if your credit score is too low. They might offer a loan with less attractive terms or even reject the application.

Pad Your Savings & Increase Income. As mentioned above, ensure that you can provide a down payment and finance your mortgage. Traditionally lenders have wanted 20% of the house price for the down payment, but that's not a requirement for having your mortgage accepted. Speak with multiple mortgage lenders to see which one is best for you in terms of the required down payment.

Minimize Your Debt-to-Income Ratio. Make sure that your current debt-to-income ratio is not too high. Lenders will examine your current ratio (the balance between the monthly amount you earn and what you pay for paying off your loans). Your debt-to-income ratio must be below a 43% threshold.

Check Property Taxes in Your Area. Finally, a final factor that you should pay particular attention to is the property tax rate in your new area. It can significantly influence your monthly payments. You may decide it is best to buy a less expensive house if buying in an area with high property taxes. On the other hand, you could increase your home budget if property taxes are relatively low.

Apply For a Mortgage When the Time Is Right

If you're considering applying for a mortgage, January may be the best time to do it. Demand for mortgages is typically lower in January, so you may have a better chance of getting approved. Plus, many lenders offer special promotions at the beginning of the year. That said, if you're diligent with savings and optimzing your credit score, you can apply whenever the timing feels best for you.

For informational purposes only. Always consult with a licensed mortgage or home loan professional before proceeding with any real estate transaction.

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