The Wizard of Oz got it right: “There’s no place like home. I mean, where else can you walk around and not break any rules? A home is the physical embodiment of the people who inhabit it, so it’s no wonder that it’s such a special place for so many. And for most, home has taken on an especially significant meaning over the last year. With more time spent at home than ever, it’s worth being grateful for the space that’s been through it all with you. Celebrate the feeling of being home by buying it at the right time before you get too exhausted on how to spend your finances. A mortgage might help you purchase your dream home.
Mortgage Corp North Bay is a group of trained professionals who deal primarily in mortgage financing. As a member of the Canadian Institute of Mortgage Brokers and Lenders they are committed to the highest standards of professional conduct. North Bay Mortgage Broker can provide you assistance in providing you financial knowledge regarding types of mortgages and helping you with the best mortgage type according to your financial situation.
Let’s learn how to prepare yourself for Mortgage.Before you start shopping for a mortgage, assess your financial situation. There are actions you can take to make sure you’re financially ready to buy a home. Have you checked your credit and decided the time is right to buy? Check these ten steps before you venture out to your North Bay Mortgage Broker and you’ll be ahead of the game!
1. Checking your credit report
A potential lender will look at your credit report before approving you for a mortgage. Before you start shopping around for a mortgage, order a copy of your credit report. Make sure it doesn’t contain any errors.
If you don’t have a good credit score, the mortgage lender may:
- refuse to approve your mortgage
- decide to approve your mortgage for a lower amount or at a higher interest rate
- only consider your application if you have a large down payment
- require that someone cosign with you on the mortgage
- require that you get mortgage loan insurance even if you have a down payment of 20% or more
The first thing lenders will probably do when you apply for a mortgage loan is to check your credit; you should, too. There’s no better time for regular credit monitoring than when you’re trying to prove your creditworthiness to a lender so you can get the best possible rates. You want to make sure that your credit report is as accurate as possible, your scores are where you want them to be, and no one else is getting access to your credit, possibly harming your scores.
If you have a good credit score, you could get a lower interest rate. Improve your credit score by promptly paying your outstanding dues in full, not applying for too many credit products within a short period, not utilising more than 30% of your credit card limit and correcting credit report errors, if any.
2. Seek Mortgage professional assistance to prepare the best possible documents. The better documents one has the stronger the case
To qualify for a mortgage, you have to prove to your lender that you can afford the amount you’re asking for.
Mortgage lenders and North Bay mortgage broker use your financial information to calculate your monthly housing costs and total debt load. They use this information to determine what you can afford.
Lenders and brokers consider information such as:
- your income (before taxes)
- your expenses (including utilities and living costs)
- the amount you’re borrowing
- your debts
- your credit report and score
- the amortization period
One has to keep the above documents stronger to prove their credit worthiness.
3. Total debt load
Your total debt load should not be more than 44% of your gross income. This includes your total monthly housing costs plus all of your other debts. This percentage is also known as the total debt service (TDS) ratio.
You may still qualify for a mortgage even if your TDS ratio is slightly higher. A higher TDS ratio means you’re increasing the risk of taking on more debt than you can afford.
Other debts may include your monthly payments for your:
- credit card balances
- car loans
- lines of credit
- student loans
- child or spousal support
- any other debts
4. Get a mortgage pre-approval
In order to get mortgage approval, you will need to consider your financial situation. Mortgage brokers will leave no stone unturned when it comes to your credit history and other information. To make sure that this stage goes well, take a look at the requirements and gather all your documents ahead of time.
5. Understand how lenders operate
Your credit score, on which lenders base much of their decision about your loan amounts and rates, is a reflection of their confidence in your ability to repay them. In a nutshell, the higher your credit score is, the easier it will be to get the amount and rate you want.
6. Decide how you’ll finance it
Once you research the types of financing available, determine which is best for your financial situation when buying a home: 15-year mortgage or 30, adjustable or fixed. If you are looking for security and a guarantee that payments won’t increase, a fixed rate mortgage might be the way to go. If you believe mortgage rates could still fluctuate and you want more flexibility, consider an adjustable rate mortgage.
7. The larger your down payment, the wider your options
It’s important to be realistic. So within a realistic framework of what you can afford, the more you put down, the better your terms. The days of zero down payments, especially on a mortgage, seem to be winding down. Putting more money down up front will help ensure you pay less each month.
8. Check on pre-payment penalties
Something else to keep in mind when finding your perfect mortgage is whether or not you’ll be penalized for paying the mortgage off early. Some homeowners double up on payments to reach the end of their term sooner—regularly or when they experience a cash windfall. Check and make sure you won’t be dinged for actually getting to your goal sooner!
9. Take a targeted, rather than shotgun approach to mortgage applications
Remember that whenever you apply for a loan, including a mortgage, the “hard inquiry” the lenders make shows up on your credit report and temporarily lowers your score. Applying for several mortgages in a two week period only counts as one inquiry, but if you drag it out and canvas as many lenders over a longer period, you’ll end up doing damage to your score, which could result in a lower rate than you were hoping for.
10. “Not now” doesn’t mean “never”
Home ownership is just not a realistic option for everyone right now, despite what may look like once-in-lifetime mortgage rates. If you fall into this category, don’t despair. Your financial circumstances could change, the economy is still very much in flux, and remember that the current mortgage crisis involved a lot of home buyers getting in over their heads. When it comes to a major purchase like a home, timing is critical.
Now that you know more about how to prepare for a mortgage, get your Credit Report and Score.
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