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Mortgage Questions to Ask Before Buying

Here are the Top Mortgage Questions to Ask Before Buying. When buying a home, particularly if you’re a first-time buyer, the home mortgage process can seem daunting. There are many things to consider, and if you haven’t got previous experience, it could get confusing.

We help you answer some of the most common mortgage questions.

How Much Down Payment Will You Need?

House hunting? You no longer need 20% down to be eligible for a mortgage loan, because you can get approved with just 5%. It’s still wise to save money though — putting a bigger amount as your initial payment might lead to lower interest rates and fewer fees. Not sure if you should break into those RSPs? Talk it through with your tax advisor first!

Do I Need Good Credit to Get a Mortgage?

Are you in the market for a mortgage but concerned your credit score might not be up to snuff? Don’t worry! Even if it isn’t as high as you’d like, there are still loan options available. However, if your number is above 620, then you’re likely looking at better terms with lower interest rates – which can easily save tons of money over the life of the loan. Before applying though, take time to increase that credit score so even more doors open and an array of great opportunities become accessible. Be careful by avoiding missed payments or consolidating debt – both could cause those scores to dip unexpectedly! A key ingredient of Mortgage Questions to Ask Before Buying.

How Much Will Closing Costs Be?

Closing costs can add quite a bit to your home purchase price — think between 1.5 and 2% of the total cost! Though it’s important for buyers to remember that this expense has be accounted for, typically paid on closing day via bank transfer or cashier’s check. Factor in these extra fees when budgeting as you begin your house-hunting journey so they don’t catch you by surprise at the end!

Is a Mortgage Preapproval and a Prequalification the Same Thing?

Thinking of buying a home? It’s important to know the difference between mortgage prequalification and preapproval. A basic review of your finances is what you’ll get with ‘prequalifying’. Think it as just scratching the surface – this doesn’t guarantee that you’ll be granted a loan, so don’t take off on house-hunting yet! Getting an actual ‘preapproval’ offers greater assurance; giving lenders detailed insight into how much they can lend out while indicating that yours is no casual inquiry. Unfortunately, even if everything looks good initially, unforeseeable changes during application processing could result in denial later down the line – so prepare yourself accordingly!

How Long Does it Take to Get a Mortgage?

It’s not uncommon for the mortgage application process to take a few days, though sometimes it can stretch out longer. Anything from high demand or additional paperwork could be putting an extra delay on your approval – so don’t forget to dot all those ‘i’s and cross all those ‘t’s!

Do I Need an Appraisal?

When you invest in a new home, it’s important to have the property appraised. After all, purchasing real estate is much different than buying other items–you need an accurate estimate of its true value! A professional appraisal will look at size and special features that affect valuation. Also, considering comparable sales prices from similar homes nearby. With an appraisal done right, you can rest easy knowing your purchase was worth every penny.

What Information Does the Lender Require?

Before you’re ready to take out a loan, we’ll need some financial info from you. We’ve got our eye on your earnings and debt – pay stubs, tax returns and credit history are all up for review. Plus, any funds that may be available as part of the down payment process. Get those documents together so you can get closer to making your dream purchase.

Final Thoughts

Buying a home can be an intimidating process and that’s why it pays to do your homework! Having all your ducks in a row will really pay off – from having enough saved for the downpayment, ensuring you maintain good credit score, or making sure any questions about real estate are answered. Take care of these important steps now so when it comes time to make what might seem like one of life’s biggest decisions—you’ll have plenty more confidence than if remained unprepared. A great summary of Mortgage Questions to Ask Before Buying.

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Insured and Uninsurable Mortgages?

Mortgage rate pricing is based much on insurance:

Insured and uninsurable mortgages will determine the rate that a lender will offer for your mortgage. This will depend heavily upon the lender’s ability to finance their own operation in the background. It’s important to understand the key aspects when your mortgage broker will discuss uninsurable and insurable mortgage products.

What is an Insured Mortgage?

Insured mortgages are covered by mortgage default insurance through one of three insurers – CMHC, Genworth or Canada Guaranty. A premium is added to the mortgage amount. The amount is a percentage of the loan based on the loan to value ratio with a down payment of less than 20%. These mortgages are most favored by the banks and are reflected by the best rate offers. The maximum amortization allowed for an insured mortgage is presently 25 years.

What is an Insurable Mortgage?

Insurable mortgages do not necessarily require an insurance premium when you are providing a down payment larger than 20%. However, if the insurers rules allow, the lender has the option to obtain insurance themselves. As a result, the borrower rarely knows if and when their mortgage is officially insurable. The maximum amortization will be limited to 25 years, similar as an insured mortgage would be.

Finally, Uninsurable Mortgages

Uninsurable mortgages do not meet the insurers rules; such as refinances and mortgages with amortization longer than 25 years. This is arguably the biggest difference between insured and uninsurable mortgages. As a result, no premium is paid by either the borrower of the lender to obtain default insurance. The risk with this type of mortgage is passed onto the borrower via higher interest rates. Having said that, uninsurable mortgages are often far more flexible in terms of borrowing guidelines. We are happy to discuss the distinct differences in those borrowing guidelines.

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Top 4 Tips for Being Prepared to Buy

1. Here is 1 of the Top 4 Tips for Being Prepared to Buy. Strengthen your credit rating. It’s pretty simple: the higher your credit score, the lower your mortgage rate will be. Spend the time now to improve your credit. Check your credit report. Many credit reports have errors, so you need to ensure that your credit bureau is current and correct. Always pay every single one of your bills on time. Set up automatic payments if you have had any late payments over the last couple of years. Spend only 30% of credit limits on credit cards.

2. Find a Mortgage Broker and figure out how much you can afford to spend. The home buyer’s mantra: Get a home that’s financially comfortable. Get Pre-Approved sooner than later!

3. How much home do you need? Buying a cheaper, smaller home might sound like a good place to start, but could end up costing you more if you need to move due to changes in your lifestyle, including a growing family. Then again, buying more house than you currently need will cost you more with higher mortgage payments, higher maintenance, energy and tax costs. Prioritize your housing wish list. The 3 most important things to think about when buying are home are location, location, location.

4. Closing costs #4 of Top 4 Tips for Being Prepared to Buy. While you’re saving your down payment, you need to save for closing costs too. They’re typically 1.5% of the purchase price and due on the completion date. Transfer Tax, Legal Fees, Insurance and Home Inspection are all considered part of Closing Costs.