You are excited to buy your first home! But where to start? Your mortgage financing is one of the most critical aspects of your first purchase. And you want to get it right. But with so many choices, brands and products on the market, it can be a tough ride to homeownership. I have listed some mortgage mistakes you should avoid when trying to secure financing for your home. Avoiding them will also save you time and money.
Mistake #1: Not shopping around.
Try to choose the best product for you and your situation. If you don’t take the time to compare different loan products you’re doing yourself a major disservice. Make sure you find the right bank to work with and snag the best deal. Mortgages are complex and you don’t want to just take whatever product or term the bank is pushing.
There are many different types of loans out there. There are fixed- and variable-rate products, hybrid and no-frills mortgages, lines of credit, term options, amortization choices, and more. All have their pros and cons, and should be carefully considered before applying for a mortgage. Keep in mind, that there is no product that fits everybody. So if a certain product works for your neighbour, it does not necessarily mean that it works for you too.
The key is to get expert advice. Always explain your current situation and future goals in detail so that you get a product that best meets both your current and longer-term needs.
When renewal time rolls around you may feel an allegiance with the current financial institution that holds your loan. But they may not be able to offer you the best choices. Always shop the market for your best available option. That’s how you get the best mortgage rate and end up with terms customized to your unique situation.
Mistake #2: Not Reading Your Mortgage Documents
These are important documents to review and read as they contain all of the terms and conditions of the mortgage including your obligations, costs and privileges. Never sign documents without reading them. Make sure you understand everything. If you’re unsure about something, always ask for clarification. You need to understand and agree with that commitment, when signing the documents.
Mistake #3: Having a bad credit score
Make sure that your credit balances are in your favour when it comes to your mortgage application. Lenders are looking for an appropriate debt-to-income ratio. In other words, you need to have more income than you have debt. Avoid running up a balance on your credit cards and pay down existing debts as much as possible.
Regularly review your credit report to ensure there are no surprises long before you begin the mortgage process. A low credit score will lead to a much higher mortgage rate, and even disqualification if it drives your monthly mortgage payment high enough.
Don’t open new credit cards, take out new loans or use more of any existing credit lines before and during the application process. This can hurt your credit score, increase your debt load and could finally lead to disqualification.
Mistake #4: Not thinking about the future
Do get your credit report and score months before you apply for a mortgage so you can fix anything that might affect your loan approval!
Don’t make any purchases on your credit cards that you can’t pay off and if you carry a balance on your credit cards, start paying them down. You shouldn’t even make large purchases with cash, because lenders want to see that you have enough savings to keep paying your mortgage in an emergency. You can buy your new leather couch and big-screen TV once the loan is funded and closed.
Avoid job hopping. Lenders are looking for income stability and consistency. They want to see you in consistent employment. You must prove that you will continue to make the money you are currently making to obtain the mortgage. Lenders will verify it just before closing.
If you are planning to buy a house in Whitby, Brooklin or other areas within Durham Region, contact me. I can help you with the buying process and refer you to a mortgage specialist that can explain the products and help you choose the right mortgage product.
Randy Miller
Broker
Re/Max Rouge River Realty Ltd., Brokerage
905-668-1800 or 905-427-1400
randy@randymiller.ca
http://whitbybrooklinhomes.com
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