7 Helpful Tips that Ensure Your Mortgage Process Goes Smoothly
The mortgage process can be a stressful and sometimes frustrating process. The idea is to make the entire process go as smoothly as possible. What is most important? Be prepared before you sit down with your mortgage agent.
Here are some things you can do to help ensure successful results, as well as give you some control over your own loan process.
1. Take time to Straighten out your finances:
If you don’t have a grip on what’s coming in and what’s going out (and where, and why), you may be in for a rough time when you apply for a home loan.
2. Make sure to check your credit record:
Everyone’s heard the horror stories: Your best friend, your sister, neighbor, goes to buy a home only to discover the worst… that the credit report contains negative or inaccurate credit information. Instead of having a clean record, he or she has an $80,000 outstanding bill, that is not their own. The loan officer looks at the outstanding bill and gives you a choice: Clean up the credit problem or no loan. Some choice. And you’ve probably heard how difficult it is going to be to get your credit history cleaned up. Maybe so, but it’s important to try nonetheless.
Here’s what to do: First, order a credit report on yourself. You can contact Equifax By phone: (1 800 465-7166 ), or online at: www.equifax.ca
For less than $10, Equifax will send you your credit report. This is the same information lenders will receive. By getting a copy of your credit report before you apply for a loan, you’ll get a first look at any problems or discrepancies that have sprung up.
3. Gather The Information You Need Ahead of Time:
It’s a great idea to gather information ahead of time and organize it so that it’s easily accessible for you to review and have corrected. Now, you’ll also need complete copies of your past two or three tax returns plus a current pay stub, or a current profit and loss if you’re self-employed, you’ll be able to have that information on hand when you sit down with your mortgage agent.
4. Know The Current Lending Guidelines:
Get a current copy of the lending guidelines. If you are applying for a high ratio Mortgage, the federal Canada Mortgage and Housing Corp. (CMHC) must insure these loans. The protection is for the lender, not for you. Mortgage insurance can be expensive: it can range up to 2.5 per cent of the value of the loan. You have to insure the entire loan, not just the amount that is above 80 per cent of the purchase price. That means the insurance premium for a $140,000 mortgage would be $3,500. Most lenders will let you roll the insurance premium into your mortgage. If you do, though, you’ll end up paying a good deal of interest on the insurance fee as well.
One advantage to this type of financing is that CMHC-insured mortgages become open after three years. All that’s required to pay off your mortgage at that point is to pay a penalty of three months’ interest. (An open mortgage means you can pay it off or refinance at current rates at any point.)
5. CMHC’s 5 Per Cent Down Program:
If you are a first-time buyer, you can put as little as 5 per cent down with an insured mortgage — provided you earn enough income to qualify. The amount of money you can borrow under this plan depends on where the house is located. Contact CMHC for more information about your specific situation and location.
These loans must be insured, and while you can choose any term you wish, your income must be able to meet the payments required under a three-year term.
6. Choose a Conventional Mortgage:
Conventional mortgages require a down payment of 20 per cent of the home’s appraised value. If you’re looking at a house with a price tag of $200,000, that means you need to come up with $50,000 of your own money. But if you don’t have that much saved, you may still be able to purchase that property.
Although it may seem that the lender’s primary job is disqualifying mortgage applicants, the reverse is true: The lender wants to qualify as many applicants as possible (lenders make their money by approving loans) but are restricted by the rules and regulations of a larger, more powerful body.
If you understand up front what your lender is going through, it may help smooth the process.
7. Qualify your lender:
Just as you shop for a real estate broker and a new home, it’s very important to shop for a lender, your Mortgage Agent can help you. Loan products, services, style, and personal attention vary greatly. Look for a lender that is best qualified to meet your needs.
For example, if you’re self-employed, and you’ve only been self-employed for a year, you may find it more difficult, even though you may have paid every bill on time in your life. The reason for that is that lenders need to see that you’ve been self-employed, maintaining an income for at least two years, and have the tax returns to prove it. At this point, your choices would be to wait until you’ve been self-employed for two years, or go with a sub-par loan (also known as a B or C loan in the lending industry).
