Becoming a homeowner is a life-long dream for many Canadians. There are so many aspects of purchasing a home that I, as your Realtor, will take care of, from finding the home, making sure it is viable with home inspections
Even if you are not a first time home buyer, rules and requirements change. So, it’s imperative to seek the help of an excellent mortgage professional. To help you get the most out of the procees, Here are my dos and don’ts of securing a mortgage.
The mortgage pre-approval process isn’t rocket science, but it is very important. So, follow these tips and you’re likely to get a great deal on your mortgage.
I’m going to start with an important “Don’t”.
1. Don’t get pre-approved or view homes over your budget
Do your own calculations, figure out how much you can afford monthly (don’t forget the other costs associated with home ownership, such as taxes, any monthly fees, utilities, rentals, etc.). All your decisions moving forward will be based on this monthly amount. This will help you avoid buyer’s remorse or being what we call house poor.
Even if you are approved for more than the amount you predetermined. Stay within your comfort zone. This also means not viewing homes out of your price range. Even out of pure interest. When you fall in love with homes you can NOT afford, the homes in your price range can become less appealing by comparison. You could find yourself passing on a home in your price range that you would have loved if you had not been comparing to homes you cannot afford.
I’ll get back to more DON’Ts later but let’s get to the DO’s!
1. Prepare your documentation in advance
Collecting the documentation needed for a mortgage pre-approval can take time – so get started early. Ask your mortgage broker what documents are required to not only get pre approved, but also to finalize your mortgage. Get everything you can together.
Typical documentation can include:
- Proof of assets .
- Proof of income – pay stubs or a letter from your employer will do. A notice of assessment will be needed if you’re self-employed.
- Information about your debt – lenders have access to most of this information, but the more transparent you are, the easier the process.
2. Apply for a pre-approval first
Many buyers want to start looking at homes right away. While I don’t mind showing homes to buyers WHILE they are in the preapproval process, it’s ideal to have a mortgage pre-approval in hand, first, so we can avoid DON’T #1!, but also, if you find a home you like, you’ll want to move quickly. Being pre-approved for a mortgage makes it easier to fulfil a financing condition in time, or possible remove the condition from the offer all together if you are in competition for a home.
2. Shop around for a great pre-approval rate
Just as you’ll see several homes before settling on ‘the one’, you should shop around for your mortgage as well. Don’t just go to your local bank branch and expect to receive a great deal. Do your research. I highly recommend enlisting the help of a mortgage broker. I work with only the best brokers and I am happy to get you in touch with one. A mortgage broker will not only negotiate the best rate on your behalf, but will also make sure you are getting the right product for you. There is more to a mortgage than just the interest rates.
3. Read the fine print
Once you’ve been pre-approved, your loan officer will send through your pre-approval document. This document will outline the interest rate you’ll receive, the loan terms, and the mortgage amount you’ve been pre-approved for and any penalties or extra fees if you are to break the mortgage early. It may look like greek to you, but it’s important to read the fine print on every page carefully.
Ok, back to the DON’Ts
It could be a small oversight or an innocent mistake that can interfere with a smooth closing. So here are some actions to avoid after you have found your home and secured the financing.
2. Hold off on major purchases
Your financial situation must not change from pre-approval to loan finalization. even if you were initially pre-approved , the lender can reject your loan if your financial situation changes in any way. To avoid this, don’t make any major purchases that change your debt service ratios. This includes anything that requires financing, even the “don’t pay for 6 months” promotions affect your credit. Also, try to keep your assets the same, or higher. The lender will take another look at your finances just before closing.
3. Don’t do ANYTHING that could affect your credit
Similar to the previous point, don’t apply for new forms of credit, like a personal loan or credit card, and don’t co-sign a loan for a friend or family member. Your debt level and available credit are both factors in mortgage approval, so increasing them may risk your pre-approval. In fact, don’t make ANY changes to your credit status. Even simply closing accounts can adversely affect your credit score.
4. Don’t quit or change jobs
Finally, avoid changes to your employment status after you’ve been pre-approved. Steady and predictable income is crucial to finalizing a mortgage. Changing jobs or becoming self-employed could very well interfere with the final mortgage approval.
So, the bottom line is, before you have the keys to your new home in your hands, be careful to avoid these mistakes. When in doubt, ask your Realtor or Mortgage Broker first. Once you are in your home, you can breathe easy and enjoy the pride of ownership.
Of course, working with an Accredited Buyer Rep, like myself, will make sure you have all the information and help to make the transaction as smooth and stress free as possible.
I am always here to help and answer any questions you have. Remember, It’s All About You!