With the recent announcement of another mortgage rule change, we have been getting borrower inquiries about how this will affect potential financing options. The new minimum 10% downpayment requirement for properties with a purchase price of over $500,000 will not affect the majority of new borrowers unless you are buying in the higher priced property bracket.
For the majority of borrowers, financing a home is a process you will go through a few times in your life. We know from experience it isn’t easy to stay on top of all the of the ins and outs of the financing requirements with all of the changes being mandated by the government over the past few years. If you’re thinking about getting a new mortgage or making a change to the financing you already have in 2016, the 7 tips below should help you avoid costly mortgage mistakes.
Not reviewing your condo documents
Most condo buyers don’t understand all of the documentation provided by the seller and should defer to their real estate lawyer to explain the pertinent details. I might suggest starting off by reading through the minutes of the last year’s meetings of the condo association. These minutes provide not only details about the financial health of your condo fund, but also happenings around your complex such as what unit is hosting loud parties or who isn’t picking up after their dog. You should also learn if there are any upcoming renovations required or more importantly, whether there will be any special assessments due to limited funds accumulated in the condo reserve fund. A special assessment could result in cash out of your pocket, so do ensure you are clear on what is in your condo documents before committing to purchasing the property.
Choose the right professional for you
Your home will likely be one of the largest debts you will ever have so it’s important to ensure you are getting proper guidance about all of the products and services available to you before you make a commitment. Ask friends and family for referrals and if you are looking online; be sure to read any of the online reviews posted about that person. If you aren’t comfortable with the advice or opinions of any of the professionals involved in the home buying process, don’t be afraid to get a second opinion.
Paying attention to the wrong details
Rate is important, yes, but so are the payout penalties, the pre-payment privileges and the actual monthly payment amount. When it comes to borrowing a large amount, like a mortgage, it is imperative you read the fine print on all documents before you sign on the dotted line. Take the time to read through all of the details with your mortgage professional and ensure you have a thorough understanding of the commitment you’re making.
Ignoring your credit
I can’t stress enough how important a good credit rating is. Not only does it qualify you for best rates on everything from car loans, credit cards and mortgages, even landlords are looking at your credit before renting you a place. Ask for a credit consultation from a qualified professional, by that I mean, if you want to get a mortgage, talk to a mortgage professional about how your credit needs to look in order for you to qualify for a mortgage at best rates. If you are not there yet, ask what you need to do and make a plan that you can commit to. If your credit needs extensive rehabilitation, determine your end goal and talk to a professional that shares that vision. You can obtain your credit rating by visiting Equifax.ca.
Not getting a pre-approval
There’s nothing worse than putting in an offer on a home and then not qualifying for the financing. Avoid any disappointment by getting a pre-approval. Be advised; even if you are pre-approved, you still need to get the property and supporting documentation approved by your lender as well as the insurance company if you are putting down less than 20% of the purchase price and require a “high ratio” or insured mortgage.
Don’t throw out your important documents
If you plan on applying for any financing in 2016, be prepared to provide documentation confirming the details you stated on your credit application. Most importantly, income documents such as paystubs, tax returns and Notice of Assessments. Also important are any documents that have to do with your credit. If you’ve cleared up any derogatory credit such as collections or judgments, always keep the documents confirming that in case your credit report isn’t updated by the time you want to apply for any borrowings. By having these documents on hand and accessible, you avoid having to track the paperwork down at a later date.
Don’t hesitate to wait
Last but not least, 2016 may not be your year to get a mortgage. Don’t hesitate in putting off getting a mortgage for another year as I believe it’s better to wait than to rush into an unaffordable situation. When it comes to getting a mortgage of any type, nothing replaces an in-depth consultation with an experienced mortgage specialist about the mortgage process and the many financing options available to borrowers in 2016. Get a head start on a plan for the New Year by calling your favorite financial professional. And if you’re not ready to buy, a preliminary consultation allows you to get an understanding of any leg-work that may need to be completed before you can qualify.