Buying a Home? 10 Tips to Get Mortgage Financing

Jared Dreyer
June 23, 2014

The Vancouver lifestyle is simply unmatched and with it comes a hefty price tag. Whether just entering the housing market, or moving up to a larger residence, Greater Vancouver home buyers know they need to be sharp-witted when it comes to financing the dream. In addition, ongoing changes in Canadian mortgage lending guidelines mean that now, more than ever, borrowers need to seek expert advice and work with an independent mortgage broker specializing in the mortgage-lending field. Here are some top things to keep in mind as you apply to get a mortgage:

Know the difference between what you can afford and what you qualify for. The pre-approval is designed to provide you and your Real Estate Agent with a maximum home purchase price, based on your individual financial situation. It does not take into consideration the overall costs of homeownership. Therefore, it is crucial to create a budget to determine what monthly payment you can reasonably afford. Pay close attention to the actual overall cost of home ownership including other monthly expenses such as insurance and utilities.

Part of the mortgage process is making sure that you have a competitive rate held for you. Rate holds can be valid for up to 120 days depending on the lender. Having a rate held will give you peace of mind should rates increase during the time of your house hunt. A mortgage broker can also continue to shop the mortgage rate up to 10 days before the funding of the mortgage, should rates decrease.

Being pre-approved for a mortgage amount does not mean you are fully approved. A full approval is confirmed once the lender's conditions are met, for example employment is verified, credit is checked and in the case of a purchase, the property has been appraised and approved by the lender.

"Subject to financing" is a very important clause to have in your purchase agreement. Do not enter a contract without it, and make sure that there is sufficient time, normally seven business days, for all documents to be submitted, verified and signed off on. The property also has to be approved and typically will include an appraisal. This subject should not be removed until your mortgage financing is in place and you have verified approval from a lender.

Home buyers, particularly first time home buyers in Vancouver,need to be aware of all the costs associated with purchasing a home. Direct costs that a borrower should account for include down payment, property transfer tax, legal and conveyance fees, property inspection, and home insurance. In addition, funds need to be set aside for moving, home improvements and for utility hookups. There are mortgages called Purchase Plus Improvement Mortgages, which allow you to add home improvement costs into the mortgage financing.

Do not be solely focused on getting the lowest mortgage rate. Many of the low-rate, "no frill" mortgages have restrictions; for instance you have to sell the property to get out of the mortgage or there may be a higher penalty to break the mortgage. It is critical to know all the terms of the mortgage, front end and back end. For example, lenders can offer annual prepayment privileges of 15 to 20 per cent (based on the original amount of the mortgage principal), as well as the ability to increase the mortgage payment to pay down the mortgage even faster. Also, be sure to check your ability and costs of getting out of the mortgage.

Are you planning on fixing up your home and selling it? Are you wanting to upgrade from a condo to a house with a yard? Whether you are a first-time home buyer or are already a home owner, what are your short-term and long-term goals for this property? Consider where you want to be in the next five years. Your answers to these questions can affect what financing is right for you. Your mortgage should fit with an overall financial plan that is tailored to the unique needs of you and your family.

There should be no fees paid for working with an independent mortgage broker whose fees are paid by the lender the mortgage is placed with. In a few rare instances there may be an up-front fee, but typically that is if an applicant has very poor credit or the financing must be secured through an alternative lender (usually private). Any fee must then be fully and clearly disclosed up front and would be charged during the closing process.

The starting point to successful mortgage financing is to seek the advice of an expert who specializes in home financing. Look for an independent mortgage professional who has preferred access to a wide range of banks, trust companies and credit unions an expert who understands all the various mortgage products, keeps abreast of current legislation, meets provincial mortgage licensing and education requirements, and is aware of market trends and the interest rate landscape.

There's a lot to know and keep track of when house hunting and applying for a mortgage. An independent mortgage broker can introduce you to a team of experienced professionals such as Real Estate Agents, home inspectors, home appraisers and real estate lawyers to assist in your transaction. These professionals work together to provide the very best advice and make your home purchase as smooth and stress-free as possible.

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