Canadian Mortgage Updates

It is an exciting time when a family prepares to buy their first home. Everyone knows what the house will look like and what features they cannot live without. And finally, they will own something of their own. They found their dream house and now the family looks for a way to finance their most important investment. After searching through banks and mortgage brokers, the family finds they must scrape a larger down payment to get their dream home financed, or they must return to house hunting and find a less desirable piece of property.

Avoid disappointment by obtaining pre-approval from a lender

Anyone in the market for real estate, who cannot pay cash, is going to need a mortgage, it is best to shop for a lender and get pre-approved before searching for the home. The process is simple; take income and credit information to a lender and the lender will determine how much they would loan and mortgage rate before shopping for the property. The pre-approval is valid for at least 60 days but some lenders will go as long as 120 days. When the time comes for the final approval, there will be another check of the buyer’s credit and employment to verify the final amount.

Another condition to be aware of is the fluctuation of interest rates. If the rate pre-approved is lower than the current rate, it could decrease the mortgage amount; requiring a larger down payment or the buyer may be sent back to find another home. Many lenders will guarantee (lock-in rate) the pre-approved rate or the current mortgage rate which ever is lowest; thereby, alleviating another concern for the buyer.

Pre-approval signifies to the seller the buyer is serious and the lender is serious about giving up the money. The things the pre-approval does not do is cover closing costs, inspections, appraisals, legal fees, land surveys, title insurance, land transfer taxes or the cost of moving, nor is the process binding.

The buyer’s credit or income situation may change causing a denial or change in the amount or mortgage rate. The property being purchased is the collateral for the mortgage so if a deficiency is found that decreases the value of the home the lender can still approve the buyer but deny the property. The same scenario holds if the property is priced higher than the appraisal for the area where it is located. Be sure to sign the financing contingency to be covered in case the lender does decide to deny financing the property.

The pre-approval is good for other financing as well, but to the first time home buyer who is excited, nervous, etc about the whole process; the pre-approval is a tool to help control the stress. The buyer and the real estate agent will know what the buyer can afford and the agent will better know how to serve the buyer’s needs. The seller and the seller’s agent will know that buyer and lender are sincere, and may even work with the buyer more than a buyer with out a pre-approval. This is the best choice if for no other reason than less stress!

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Information shared here does not constitute financial, legal, or other professional advice, and no adviser-client or confidential relationship is or should be formed by use of the site. This article is intended to provide general information only and does not give advice which relates to your specific individual circumstances. Information in this document is subject to change without notice. Any link-listing or ad-listing on this site does not constitute any type of endorsement.

Gurmit loves traveling, he has been over 70 countries. He speaks fluent Cantonese, Polish, Hindi, Punjabi and English. Gurmit is an author, writer, insurance and mortgage expert. He frequently writes on various topics of interest to his readers. Gurmit Singh is a licensed mortgage broker with Dominion Lending Centres Mortgage Village.

Gurmit Singh, MBA

Mortgage Broker

Dominion Lending Centres Mortgage Village (#11934)

Email:gurmit@gurmitsingh.ca

www.gurmitsingh.ca

Dir: 647-408-6929