If you’re considering buying a home, you’ve chosen a fantastic time to get in the game! The market has evened out, so it’s no longer a scary place to put your money. Yet housing prices will probably never rise to those unsustainable heights seen in the mid-2000’s. You can afford more house for your money these days, and mortgage rates are still pretty low and reasonable. Yet now that the ‘m’ word has been spoken, it’s time to consider the realities. Unless you are independently wealthy, you are going to need a mortgage in order to afford your new home. It’s a responsible approach to home buying, and can actually help your financial picture, by improving your credit rating and providing you with all sorts of tax benefits that renters never enjoy. But you must walk into the process with eyes wide open, or else risk serious economic hardship. So here are five things to consider before applying for a mortgage.
First of all, do you know your credit rating? If you’ve never checked out your credit report, now is the time to start. Every year you are given a free copy of your report from the three major credit bureaus, thanks to the federal government. Take the time to go over this report in detail before you ever contact a mortgage broker. You’ll want to take the time to clean up any mistakes on there that have negatively impacted your credit rating, as well as understand how your current credit picture could be improved before applying. Perhaps if you took the next six months and paid off some debt you’d receive a much improved loan and interest offer. That delay could certainly be worth it.
Next, make sure you take the time to assess your financial picture and decide how much home you can actually afford. A mortgage always boils down to a monthly payment, but it’s not exactly the same as a rent payment. You’ve got closing costs and property taxes to contend with as well, and it’s all too easy to end up in over your head quite quickly. Look online for a mortgage calculator, so you know that the loan you are applying for you can actually pay back in a timely manner.
Now you should look for any special values or plans available to you that could save you money. The largest benefits are for the first time home buyer. The federal laws change periodically, so ask your accountant or an attorney to understand the latest. But in general, a first time home buyer will receive a huge tax break, and that alone may change your calculations. Make sure you are familiar with all of the options out there, so you don’t miss anything that could simplify your situation.
You also should just go to whichever lender is closest geographically. Every lender is different, and choosing properly is one of the most important aspects of the process. You might want to start at your own bank, especially if you’ve been there a while and have a good relationship with the staff. Lending officers who already know you may work harder to get you the best rates. You should also consider a credit union. These are smaller and often regionally focused, but they will have different loan products that might fit your needs better than something from an international bank.
Finally, stay the course on all the details that might impact your credit worthiness. Don’t do anything erratic for at least six months before you apply for a loan. That means don’t apply for any new credit cards or lines of credit, don’t close any old accounts, don’t miss a single bill payment and definitely do not quit your job. You need to show stability, or you’ll end up needing something like www.ratesupermarket.ca in order to find any decent options. The mortgage officer is going to want to see consistency and responsibility, or else they may consider you a risky bet.