Credit / Debts / Documents / First Time Home Buyer / Income / Pre-Payment / Purchase / Qualifying

8 Mortgage tidbits you might not know

This week I want to share a few of the less talked about mortgage topics, 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 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 for new credit if you already have credit and it has been paid as agreed. Past satisfactory repayment habits that have been in place for over 2 years looks good to lenders.

The best way to build credit and maintain a high credit score is to have varied credit facilities with limits such as a line of credit and/or credit cards. Be sure to use the credit regularly, while keeping mindful to stay below 50-75% of your available limit at all times. Better yet, pay it off in full each month. I have to give estimates because credit scores are not an exact science yet.

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

The mortgage qualification process can take about 2 weeks from the time you have a fully accepted signed offer to purchase, to a mortgage approval status, to the lawyer’s office for final signing of the mortgage instructions. It is then in the hands of the lawyers as they have a significant amount of work to do before the mortgage can be funded by the lender. This is if you have all required documentation into your lenders hands in a timely manner as sometimes it can take even longer than 2 weeks for a number of different reasons. Reasons including, but not limited to; an appraisal may be required and perhaps the appraiser is not able to gain immediate access to the home, or the lender is asking for more supporting paperwork from you that is not readily available.

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. While you can garner some information from the web or talking to friends and family, don’t limit your options by being embarrassed of your situation.

Applying for a mortgage can be stressful

The most important suggestion I can offer in reducing stress is to work with a knowledgeable and experienced mortgage professional that you 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. They should also be able to tell you all about their mortgage process and keep you well informed throughout each step of the way. 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 there is a chance of running into some sort of glitch or two. Don’t sweat it, these people all know their part and ideally, they will be communicating with each other so everyone is in the loop.

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 job change, it 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, utilities, as well as any required repairs and maintenance to take into account. You add in additional expenses such as 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.

These are just a few financing tips that I can think of mentioning. I suggest you check out all the resources available to you about mortgage financing, online, in person and through those who have done it before. When it comes to a large debt like a mortgage and a large asset such as a home it is important to be fully informed with your decision before you make it.

Do you have mortgage questions? Contact the Mortgagegirl at 780.433.8412 or info@mortgagegirl.ca. Stay in the loop by following on Twitter @mortgagegirlca.

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