Purchasing a home is one of the most important financial decisions you will ever make. When it comes to mortgages and how to finance, it can be confusing and overwhelming. To ensure your home purchase goes as smoothly as possible, here are six high-level steps you should consider/ follow.
- Start with a mortgage agent: Many think the best place to start is by scrolling Realtor.ca, finding a house and then contacting your Realtor to view properties… surprisingly, it’s not. Your first step should be contacting a licensed Mortgage Agent to determine what you can afford. By using a Mortgage Agent vs. a bank, you’ll be working with someone who has your best interest in mind and can offer a variety of options from several lenders, including the big banks. If you start with a single bank, you are greatly reducing your options and will only see options based on their product catalog.
- Put together your mortgage plan: Unless you have enough money saved to buy a home with cash, you’re going to need a mortgage. Mortgage financing can be challenging, and it is best to plan ahead. As part of your mortgage plan, you’ll want to figure out what you can afford on paper, review your credit score, run some financial scenarios, calculate mortgage payments, and have a clear picture of exactly how much money is required for a down payment and closing costs. You’ll also be able to discuss which mortgage product is best for you with your Mortgage Agent and can consider different mortgage terms, types, amortizations, and features. Not all mortgages are created equally and by focusing solely on rate, you may get yourself into a mortgage that doesn’t suit your needs.
- Build a budget: Now, what you qualify for doesn’t necessarily mean you can actually afford the payments. You need to consider your lifestyle, what you spend your money on and understanding your cash flow is key. By making a budget you’ll verify that you can actually afford your forecasted mortgage payment and you have enough funds to close on the mortgage. Excel has some great budget templates and it’s a good starting point – no one wants to be “house poor” or scrambling to come up with funds to close at the last minute.
- Receive your pre-approval: If everything looks good at this point, the next step will be to get a pre-approval in place. Now, a pre-approval is more than just typing some numbers into a form or online calculator; you need to complete a mortgage application and submit all the documents requested by your Mortgage Agent.
- Gather the necessary documents: Only proceed with seeing properties when you’ve been given the ok from your Mortgage Agent. When you’ve found a property to purchase, you’ll work closely with your Mortgage Agent to arrange financing in a short period of time. This is where being prepared pays off. However, remain flexible and provide any additional documentation required by the lender to secure mortgage financing.
- Sit tight and don’t change anything: Once you have firm lender approval and you’ve removed conditions on the purchase agreement, don’t change anything about your financial situation until you have the keys to your home in hand and the car parked in the driveway. Don’t quit your job, don’t take out a new loan, or don’t make a large withdrawal from your bank account and so on. Any changes can alter your financing approval and could put you back to square one. Put your life into a holding pattern until you take possession of your new home.
So there you have it, six steps to ensuring a smooth home purchase:
- Work with an Mortgage Agent
- Put together a mortgage plan.
- Figure out what you can actually afford.
- Get a pre-approval (backed by documents, job letters, pay stubs, T-Slips etc)
- Provide the necessary documentation.
- Don’t change anything about your financial situation until you have the keys in your hand and your car parked in the driveway.
If you are looking for a smooth home purchasing experience, I would love to work with you. On the flip side, if you aren’t happy with the service, you are currently receiving, then feel free to call to discuss.