It’s not every day that you spend thousands of dollars buying a new home. Below are 5 important actions that every Homebuyer should be aware of. With this in mind I suggest starting with making a plan of exactly what you want, do your research and look into advice offered by several experts.
You may want to get in touch with an experienced Mortgage Broker who can help you with the initial construction of a plan of action before you even start looking for that perfect home.
- Make sure you know what your credit score is
Given recent mortgage rule changes, your credit score now more than ever has a huge impact on the interest rate and mortgage amount available to you. Anyone with a credit score of less than 680 may not have access to the best deal depending on what lender you are working with and what product you are being approved under.
Absolute worst thing to happen is to learn your credit score does not meet the guidelines required to purchase the home you want. Knowing your credit score beforehand gives you time to improve the number and address any errors that may appear on your report. You can easily check your score through Equifax or TransUnion, however, do be advised I have recently noticed the credit score released to the consumer is not always the same as the one provided to a mortgage lender.
- The lowest rate is not always the best rate
We all want the lowest rate and based on many years of experience, the lender offering that rate or the conditions that come with it are not always best suited to every borrower.
Does this low rate have a higher than normal payout penalty if you break the term early and/or do you have to sell your home to even be allowed to break the term early? Let’s get real here, historically, a large number of Canadians have made changes to either their mortgage and/or their residence at the 3.5 year mark. Makes you think if that small difference in the interest rate is that big of a deal if it is going to end up costing you many thousands of dollars which would negate any minor rate savings.
- Where is your down payment coming from?
Coming up with money for a down payment for a house for many seems like a daunting task. For those buying in markets where prices have sky rocketed, having enough money for even a small down payment may seem out of reach.
- Once you determine the purchase price you can qualify for, you then need to know how much is required to meet the minimum down payment requirements. Again, given recent government rule changes, the minimum down payment for an owner-occupied residence is 5% of purchase price up to $500,000 and 10% on any portion above that. Different rules apply for homes selling at $1 million plus.
- Where are you getting your down payment funds from? Family is gifting money that does not have to be paid back? Your own savings or are you using your RRSP’s under the first-time homebuyer program? Perhaps you may want to borrow all or a portion of the down payment from a line of credit or a new loan? Each of these types of down payments come with different supporting document requirements depending on the lender as well as mortgage product you are applying under. Good idea to check with your mortgage professional ahead of time to confirm exactly you need to do
- The most crucial part of the down payment requirement are the timelines for moving the money around. When and how much is required for the initial deposit? Is there a further deposit required when all conditions have been met which may be a week or two later? When are the remainder of the down payment funds as well as closing costs required to be at your lawyer’s office to close on time?
- Why setting a budget is important and sticking to it
For first time home buyers, this is an important tool to use especially when there are so many unknown expenses that may come along with home ownership. A few of our clients we spoke with several months after they moved in, commented about how there were so many unexpected expenses that they were not aware of. ***Watch for our next blog on exactly what closing costs are***
And further to this, as part of your budget planning for the future, have a buffer available for the possibility of renewing your mortgage at a higher rate with higher payments. Again, this is where going back to your Mortgage Broker will ensure you are getting the lowest rate available every time you are making a change to your mortgage.
- Find an experienced Mortgage Broker
When you are looking for a Mortgage Broker, call a few and talk to them about what you would like to do. An experienced Mortgage Broker will not only answer your questions but assist you in setting your plan in motion.
Just because a Mortgage Broker can get you the best rate doesn’t mean it is the best option for you. An experienced Mortgage Broker will explain all of the pros and cons so you can make an informed and sensible decision.
Contact Jackie Woodward with over 35 years as a Mortgage Professional. Former banker turned Mortgage Broker. #expertadvice #benefitfromexperience Contact her by phone 780-433-8412, email: firstname.lastname@example.org , Twitter, and Facebook. For more topics read her blog.