Understand And Choose The Right Mortgage
There are Fixed, Variable, Open, Closed and Line of Credit borrowing facilities.
You need to understand what types of real estate Mortgages are available for your purchase or refinance. You are accountable for choosing the right Mortgage for you and your family. It’s not as complicated as it seems, you only need a professional Mortgage Specialist who will review your existing scenario, understand your current and future needs and suggest which Mortgage product is best for you. This is important so that you are not stuck in the wrong Mortgage at the wrong time that may potentially cost you thousands of dollars when and if you need to make any changes.
Obtain A Pre-Approval Prior To Buying
A professional Mortgage Specialist will review your income and liability documentation and clearly provide you with an educated understanding of what you can afford. Do not fall into the trap of overextending yourself because when the interest rates are back on the upswing, which will be soon, that Mortgage payment will increase to reflect the current rate.
You don’t want to be in a home you simply cannot afford. This process takes 30 minutes with a Specialist and 2-3 days with the lender. After review you will have a conditional Mortgage approval certificate that every Real Estate Agent appreciates and is your green light to go home shopping!
Organize Your Financials And Keep It That Way
Your Mortgage Specialist will require the basic documents in order to set up your mortgage.
These are documents you should keep current, organized neatly and always kept secure.
– Income Documents
– Current Asset Statements (Down Payment)
– Credit Card and Loan Statements
– Income Tax Returns (2 Years Required)
– All Other Bank Statements
Once you own your property you should set up a Mortgage account file so that you can refer to this at any time and always know what you have. This is easy and very important and keeps you in control not the banks!
Renew Your Mortgage In The Driver’s Seat
If you have an existing Mortgage the time will come when you need to renew. This is when you have options to stay with your current lender or move at usually no cost to you. Your Mortgage Specialist will advise what is best for you after a short meeting. The most important tip for this is starting the process 6 months prior to your renewal date. No credit check is required if your Mortgage Specialist knows what he/she is doing. Moving to a different lender is a simple process with a professional Specialist and could save you thousands of dollars both in the short and long term.
New Build vs Resale Real Estate
What is important to remember is that a newly built home usually does come with a new home limited warranty but it is never truly free from unforeseen surprises. A resale property is usually a mature property, trees and gardens are grown, sidewalks are in, and neighbours have been there and are enjoying their homes. You know what the neighbourhood is and where it may he headed. A new build is like starting a new school. Everyone is new and no one is quite established. The important thing to remember is the bones of the home should be strong and the location should suit your needs for years.
Take Great Care Of Your Credit
Your credit history is what the lenders will always consider first when you apply for a Mortgage. Debt load, repayment history and your balances carried as well as how established your credit is will be under scrutiny. Lenders typically like to see a minimum of two trade lines established for at least two years and in good standing. In other words, pay your bills on time and try to always double or triple your monthly minimum payments. Always keep your credit cards and lines of credit balances no more than 50% of the limit. If you have a 10K credit card, try to keep your balance at 5K maximum at any time. This is the number 1 simple rule of thumb for keeping your credit clean and under control.
Self Employed Is A Different Type Of Applicant
If you are self-employed and looking for a Mortgage your profile may not fit within the traditional banks guidelines. Alternative lenders specialize in business-for-self clients. Be prepared to provide other documents outside the traditional income docs. Some lenders will need to review your bank activity statements and also needs to understand your business.
Your income may not be reflected accurately for tax savings purposes so a true professional Mortgage Specialist will understand what expenses can be added back to your bottom line. If you are self-employed you should definitely know where you stand with the lenders prior to looking for your home. You don’t want to find what you thought was the right one only to realize the lender won’t lend what you need. Pre-Approval is key!
Investment VS Owner Occupied Properties
If you are purchasing real estate as a principle residence then the lenders typically will work within your means and can provide you with what you need especially if you are insuring the Mortgage with CMHC, Canada Guarantee or Genworth. When purchasing an investment or rental property the lenders use different policies for this type of property. They typically will require more of a down payment and usually will only use 50% of the rental income as a debt servicing tool. This means if 50% of the rent does not service the Mortgage, property taxes and maintenance then they will, in addition, use your personal income surplus and add back to the application. Sounds a bit technical but a professional Mortgage Specialist will guide you accordingly.
Alternative And Private Mortgage Lenders
As banks continue to tighten their policies and sharpen their pencils, alternative and private lenders are becoming more popular among real estate transactions. With lighter policies, more lenient guidelines and lower documents requirements, the higher interest rate and fees charged can be chalked up to the cost of doing business today. Private lenders typically offer a 1 year term at a higher rate with a lender fee but this is not a long term solution. In fact it’s usually accepted as a short term band aid solution enabling the client to get the home they want and providing them with a year to get their financials in order. The additional cost of borrowing may be offset by the equity built within that year. Thinking this way means it’s not such a hard pill to swallow.
Your Mortgage Specialist Should Be On Speed Dial
A true Mortgage professional usually clearly understands this ever-changing world of real estate financing policies and should always be available. This market place can be scary for first time buyers so it is imperative your Mortgage Specialist is always there for you 24/7. A good Mortgage Specialist will understand all facets of the transaction and should be your go to person for just about any advice you need. We understand banks, builders and lawyers.