In this week’s post, I am going to list a few of the less talked about mortgage topic’s, the ones that don’t usually come up until you have already started into the mortgage process. Keep in mind, a good portion of this information is based on my own thoughts and experiences and should not replace the benefits of having a detailed conversation with an experienced mortgage professional about a custom mortgage solution that suits your individual financial circumstances.
Debt helps you build credit
Basically what I am saying is debt is a good thing if managed well. With regards to getting credit, you will have an easier time qualifying if you already have credit and it has been paid as agreed. Past satisfactory repayment habits that have been in place for around 2 years looks good as it generates a reasonably good credit score which is most important to lenders. The best way to build credit and maintain a high credit score is to have 2-3 revolving credit facilities with limits of $2,500 or higher which could be a line of credit or credit cards. Use the credit regularly, while keeping mindful to stay below 75% of your available limit at all times or better yet, pay it off in full each month.
While on the topic of credit, don’t ignore your credit report. Any derogatory credit that is on there should be cleaned up sooner than later. Bad credit with outstanding balances will negatively impact your credit score every month that they are not paid off in full.
It can take time to go through the mortgage process
Ideally, the mortgage process can go from the time you sign the offer to purchase to approval status, to lawyers office for final signing in 1-2 weeks, and that’s if you have all required documentation upfront. Though, most often it can take longer than that for a number of different reasons. An appraisal may be required and they cannot gain immediate access to the home or the lender may ask for more supporting paperwork from you that you don’t have handy.
It doesn’t always happen on the 1st try
If you have any doubts as to whether you will qualify for a mortgage or not, I suggest you speak to a mortgage professional sooner than later. If you can’t qualify for a mortgage now, it’s a good idea to consult an expert who will review your current finances and advise on what steps you can take to qualify sometime in the future.
Applying for a mortgage can be stressful
The most important suggestion I can offer in reducing stress is to work with a knowledgeable experienced mortgage professional that you may have been referred to. After reviewing your finances and any supporting documentation you are able to initially provide, this individual should be able to advise what the timeline is for an approval, all about their mortgage process and keep you well informed throughout the process. Keep in mind, many people are involved in the home buying process such as realtors, mortgage professionals, lenders, appraisers, inspectors, insurers and lawyers. This means the chances of running into some sort of glitch or two is quite high. Don’t sweat it, these people all know their part and based on my many years of experience it all seems to work out in the end.
Long- term employment looks good
Extended employment with the same company appeals to a lender as it shows income stability. When the lender is considering an applicant’s qualifications, they look at job type and length of time with the same employer or at least in the same industry. I am really trying to say if you are thinking of making a career change, may make sense to do it after you are living in your new home.
Pay your taxes
By taxes, I mean income taxes owed to Canada Revenue Agency. Depending on your type of employment there is a chance you may be asked to provide your Notice of Assessment in order to confirm your income or if there are any outstanding taxes owing. You receive this document after you’ve filed your taxes and the lender may require you to pay any outstanding balances as a condition of your financing approval. This is especially significant for any business-for-self borrowers.
Rate isn’t everything
Rate is important, however, should not overshadow the other important features of your mortgage financing. Pay attention to any payout penalties, pre-payment privileges or restrictions as well as post-funding customer service your lender is offering. This will ensure you’re not in for any unexpected surprises when it’s too late.
Home ownership isn’t for everyone
The cost of home ownership is not just the amount of the mortgage payment. There are property taxes, potential monthly condo fees, heating, cost of repairs and maintenance to take into account. Then you add in things like potential payout penalties should you break your term early due to a life change as well as any market fluctuations and renting may become more appealing to some people. Investing in property is not a decision to be entered into lightly. Be sure to educate yourself on exactly what you are getting into should you choose to buy instead of renting.