At Canadian Mortgage Professionals we take pride in educating our first-time homebuyers of the process and all the ins and outs involved with reaching your dream. Here are a couple of points we’d like to bring to your attention when considering your dream.
THINKING YOU WON’T QUALIFY FOR A MORTGAGE
Not sure if you qualify for a mortgage? The best way to find out is to complete a no cost, no obligation application.
We’ll be able to let you know where you stand and how much you might target for a purchase price. A good credit rating can improve your ability to get loans and mortgages but even if your credit history is less than perfect there are solutions and our job is to find the one that best fits your situation.
Even if you are not ready to buy a home today there are steps that you can take now to make sure you qualify in the future. Most important is to always make at least the minimum payment on your credit cards, loans and other bills on time.
NOT KNOWING THE DOWN PAYMENT OPTIONS AVAILABLE
Depending on the amount you have available for a down payment determines the mortgage options available.
A conventional mortgage or a home equity line of credit (HELOC) requires a down payment of 20%. A high ratio mortgage is obtainable if you have the minimum 5% down payment. This mortgage and any with less than 20% down are subject to mortgage default insurance. This premium cost can be either paid up front or more commonly, be added to the amount of the mortgage.
It is good to know that RRSPs, up to $25,000, are eligible to be use for a down payment as well as a gift from an immediate family member. To learn more about these options check out these blogs Using your RRSPs to buy a home and Down payment required.
NOT OBTAINING A MORTGAGE PRE-APPROVAL
Many home-buyers under or over estimate how much they can afford to pay for a home. There are calculators available to give you a general idea but knowing the exact amount you will be approved for gives you the confidence to know you are looking for that perfect home, in your price range.
Having a mortgage approval guarantees a mortgage rate for a period of 120 days. If rates go up during this period you are protected. If rates go down you automatically get the lowest rate for the term selected.
FOCUSING TOO MUCH ON INTEREST RATES
All too often, first-time home-buyers give more thought to interest rates than the mortgage solution itself. While rates are a valid consideration, the different types of mortgages, payment structures, and flexibility will have a much greater bearing on the overall cost of home ownership.
- Fixed Rate Mortgages: Fixed rate mortgages offer the security of locking in your interest rate for the term of the mortgage, the payment amount stays the same providing ease of budgeting. The main advantage is that the interest rate stays the same during the term of the mortgage and that you know exactly how much of your payment is applied to principal and interest.
- Variable Rate Mortgages: Variable rate mortgages fluctuate based on the prime lending rate. If the rate goes down then more of your payment goes to pay the principal and less to interest, enabling you to pay off your mortgage sooner. When the rates go up the reverse happens, less payment goes toward the principal and more to interest, extending the amortization period. We believe the variable rate mortgage offers the greatest potential for long-term savings on interest costs.
FORGETTING ABOUT CLOSING COSTS
You’ve selected a house, determined your mortgage options and are getting ready to finalize everything. It helps to know what any associated costs may be up front to minimize any last minute complications. When calculating closing costs make sure you have set aside enough to cover:
- Home inspection
- Property insurance
- Moving costs
Once you have a better understanding of the process you will begin to see your goals are attainable. Any questions or concerns, feel free to contact us, anytime.