Purchasing a home is a very exciting time!
Before meeting with a lender, it is a good idea for you and anyone who will share in the ownership of the home to discuss your financial objectives in this purchase. How much of your savings can you spend up front? What is a comfortable monthly payment for you? What closing costs do you anticipate? Remember, there can be a big difference between what a lender will qualify you for and what you can comfortably afford based on your lifestyle.
DOWN PAYMENT. If you are considering purchasing a home with less than 25% down payment, your mortgage application is required by law to be insured by CMHC (Canada Mortgage & Housing Corporation) or Genworth Financial Canada. Mortgage insurance makes it possible for you to purchase a home using a lower down payment. It allows the lender to approve your mortgage with as little as 5% down. Generally, a higher down payment means better loan terms and a lower interest expense on the mortgage.
QUALIFYING FOR A LOAN. During the early stages, you would like to become prequalified for a mortgage loan. This ascertains the amount that you can afford. This gives you the flexibility to search for the right home, particularly when there are so many keen buyers. The seller also realizes that you are sincere in purchasing the property and can afford it. But remember, just because the lender says you can afford one price doesn’t mean that’s what you should spend. Be wise and thoroughly examine how much you should spend on a home.
Be prepared to provide the lender with; down payment information, bad debts, past credit history, current & employment history, letter from employer, assets, liabilities, credit scores, for those self-‐employed recent tax returns, etc.
If you shop around wisely for mortgage rates and terms, you can get a rate that can really help you save a substantial amount throughout the span of a loan. A small variation of 0.5% can also become significant, as can the terms of the loan.
If pre-‐approved the lender provides you with a letter of commitment, telling you how much money they would be willing to loan you’re for the home purchase. However, keep in mind that even a pre-‐approval is not a guarantee that you will be approved for a mortgage loan, the home must still qualify.
A preapproval can guarantee the rate, save time, and shows you are serious about your home buying intentions which may provide leverage in the negotiation process!