You’ve found your dream home, you’re fantasizing about walking around that new neighborhood, and you’ve already spotted out your local café. Home buying can be an exhilarating affair, and by all means, it should be!
But how do you make your dream a reality? Here are 5 easy steps that will guide you through the process of getting a mortgage.
Step 1: Meet with a Mortgage Specialist
The first thing you need to ask yourself is: Can you afford what you want?
Your Mortgage Specialist will let you know:
If you qualify for a mortgage, considering: income, credit, and down payment
The maximum amount the bank is willing to lend you
Your interest rate amount based on the loan, down payment and type of rate
Here’s a tip: When applying for a mortgage, your total debts shouldn’t be more than 40% of your gross income.
Here’s another tip: Your total monthly costs (50% of your condo fees, insurance, property tax, heating, mortgage) shouldn’t be more than 32% of your gross household income.
Step 2: Shop Around
Now that you know how much you need (roughly) as a down payment, how much your bank is willing to lend you, and offer as an interest rate, shop around!
There’s no harm in finding out if other banks or financial institutions can offer you a lower interest rate and a better deal.
Here is what you can negotiate:
The amount they are willing to lend you
How often you'll make payments
Your interest rate
If it's an open or closed mortgage
Step 3: Go with your best offer!
After shopping around, go with your lowest interest rate and the financial provider that best fits your needs. It is, after all, one of the biggest purchases of your life!
Step 4: Getting Pre-Approved: Being Ahead of the Game!
While not all home sellers will require a pre-approved mortgage, you’ll want to do it anyway! Having a pre-approved mortgage will put you ahead of the game and it’ll guarantee that you can put your money where your mouth is!
A pre-approval is when the mortgage lender that you’ve chosen:
Presents the maximum amount of a mortgage you could qualify for
Estimate your mortgage payments (how much, how often)
Locks in an interest rate for 60 to 120 days, depending on the lender
You’ll need to provide:
Proof of employment
Proof you can pay for the down payment and closing costs
Information about your other assets, such as a car, cottage or boat
Information about your debts or financial obligations
Remember that you’ll also need money for:
Step 5: Mortgage Acceptance: Worth a Glass of Champagne!
After you’ve sealed the deal on your new home and have chosen your move-in date, your financial provider (or mortgage lender) will release your loan for payments to begin.
Voilà! Here are the 5 steps to guide you through getting a mortgage. Now, go plan your housewarming party, but first, enjoy that glass of champagne—you deserve it!