The purchase of a home is one of the biggest decisions and significant financial investments you will make, and understanding each step of the mortgage process is key to ensuring this investment is right for you.
There is no substitute for being prepared. Educate yourself and get the facts you need to make the right mortgage decision and increase your home buying confidence. Different consumers are at different stages in their lives. They have different mortgage needs and there are many mortgage products to choose from. The best result will occur when you work with a mortgage professional who can offer sound, professional advice and a mortgage solution that matches your needs and circumstances. Above all, you need to be comfortable with your mortgage choice.
The site simplifies the process by providing you with the resources you need to find the right mortgage solution and the right mortgage professional for you.
KEY QUESTIONS TO ASK BEFORE YOU BEGIN
When connecting with a mortgage professional to help with your purchase, there are a number of key questions you must ask to ensure you are a) dealing with the right professional and b) they are transparent about their business and dealings to ensure they are committed to you and getting you the best deal. Being informed and getting more information always protects you as a homebuyer.
Here are some of the questions you should ask:
- What is your role in helping me buy a house?
- What products do you offer?
- Why are you recommending this particular mortgage?
- What is your relationship between you and the lender?
- How are you compensated?
- How long have you been in business?
- May I see some references?
- How long will it take to process my application?
- What documents do I need to provide?
A credit score is a summary of your credit history and how consistently you pay your financial obligations. It includes credit account information, employment and personal financial information.
Having good credit history and a good credit score are very important when purchasing a home. A good credit score may help you borrow the money you require to purchase your home. A poor credit score may determine whether you have to pay a higher interest rate. Basically, your credit score indicates how likely you are to repay future debts and can speed up or slow down your mortgage approval process.
More than one credit report bureau keeps records on you. Equifax and TransUnion are the two principal credit bureaus in Canada. Use the links below to obtain additional information on what a credit history and credit score are, why it’s important to check your credit report, how to obtain a copy of your credit report and how you can improve your credit score if necessary.
PRE-APPROVAL / PRE-QUALIFICATION
It is important to obtain a pre-approval or a pre-qualification for the amount of money you can borrow from a lender and avoid looking at homes that may be out of your price range. The pre-approval process usually guarantees a rate for a period of 90 days while a pre-qualification will not provide a rate guarantee . In some cases, a lender may ask for a guarantor to provide additional security for the lender. A Guarantor is a party who signs the mortgage documents along with the borrower, but who does not have any interest in the ownership of the property.
UNDERSTANDING THE ELEMENTS OF A MORTGAGE
Few people can come up with the entire amount of money required to pay for the cost of a home and require a loan to finance the purchase their home. The lender will require the property as security in order for the borrower to obtain the loan. The security of land is referred to as a mortgage. A mortgage loan allows individuals to buy property without paying the full value all at once. The mortgagor is the person borrowing money, the mortgagee is the lender of the money.
Here are some elements to consider when getting a mortgage:
- When negotiating the amount of your mortgage loan, you should be aware that you will most likely be required to provide a down payment, which is the money you put towards the purchase price of your home. The amount of your mortgage loan is determined by the purchase price of the home less the amount of your down payment. As with all loans, a mortgage loan must be repaid by the borrower with interest. There are different types of repayment methods which make up the different kinds of mortgages available.
- Like all loans, regular payments made over time go towards paying down the mortgage. These payments are made up of two parts – one part goes towards paying the principal (the amount of money borrowed) and other part goes towards paying the interest (the fee charged for borrowing the money.)
- The more money you can put down, the less you will have to borrow, and the less interest you will have to pay over the length of the mortgage.
- If you have a down payment equivalent to 20% or more of the purchase price, you will have what is called a conventional mortgage.
- If your down payment is less than 20% of the purchase price, you will have what is called a high-ratio mortgage. A high-ratio mortgage must be insured to protect the lender. This insurance is called mortgage default insurance. It protects the lender in case the borrower isn’t able to repay the loan.
- Canada Guaranty, Canada Mortgage and Housing Corporation (CMHC) and Genworth Canada offer assistance to first-time home buyers who do not have a lot of disposable funds for a down payment. Ask your mortgage professional for more details.