VIP Mortgage Dos and Don’ts
Buying a house isn’t always an easy process – Here are some tips and tricks from an insider!
1. Seek professional help
Although it’s possible to do your own research about areas and property types that you may like, buying a home can be a complicated process. Calling on the help of a professional will ensure you haven’t missed out any options.
2. Borrow money
If you’ve never taken out a credit card or personal loan, it could actually be worth borrowing some money – so that you can pay it back and build up a good credit rating. This activity will prove you are a responsible borrower and a good credit rating will also give you access to the best mortgage deals. Recall 2 items of credit for 2 years for at least $2k is your minimum credit.
3. Organise your paperwork
Have on hand at least three months’ bank statements to show where your down payment funds are coming from. Before submitting a mortgage application also have on 2 years of income history usually backed up with tax returns. Identification documents are good to have on hand as well.
4. Fall for the headline rates
Be careful when just shopping rates around via the internet. Always check with your advisor.
“You get what you pay for” rings very true if you are out online interest rate shopping and are not aware of… “The fine print” What you are after is the best rate with all of the regular mortgage features and privileges. Prepayment privileges and portability quite often get cut with rock bottom rate advertisers.
5. Is it a good time to buy?
I can’t count the number of times over the past 16 years, “Should I buy now or wait for the market to drop more?” Generally what I have seen is that person waits and waits some more only to miss the bottom of the market and have to pay a higher price as the market rebounds back up again. Over the long term inflation and low interest rates are your friend.
6. Choose Variable Rates
If your monthly budget can not afford fluctuations then VRMs (Variable Rate Mortgage) wont be advisable right now. A few years ago I locked my own personal mortgage rate in for 5 years at 2.85% thinking this is fantastic. This can be compared to waiting for rates to rock bottom like we spoke about above. We saw a slight increase in fixed rates over the past 2 months. The financial post wrote an article recently stating that bonds around the world didn’t seem to be optimistic which leads me to believe we may see a pull back again next spring.
See below for some additional items that will make your life much easier as you go through your mortgage application process:
DO continue paying off debt – help keep your Income to debt ratio low
DO explain any credit blemishes and credit inquiries – put a spotlight on problems along with the explanations
DO authorize e-mail correspondence – ensures a smooth and efficient process that is timely
DO submit all items requested by your broker within 2 days – get your mortgage closed on time, lawyers will love you
DO keep originals of all pay stubs, bank statements and other financial documentation.
DO provide documentation for the sale of your current home. (i.e. sales contract, closing statements, etc.)
DO notify your broker if you plan to receive gift funds for your down payment – remember it must be from immediate family only
DO notify your broker of any changes in employment or marital status. (i.e. change of employer, recent raise, transfer, change of pay status, divorce, marriage, etc.)
DO research and choose an insurance company for fire insurance– obtain this no less than 5 days prior to closing. Review your insurance documents to insure your mailing address and property address are the same when purchasing/refinancing your primary residence.
DO notify your broker of any special circumstances with your closing. – (i.e. utilizing a Power of Attorney, sending closings docs to you at location other than the lawyer’s office.)
DO NOT make major purchases prior to closing (i.e. new car, furniture, appliances, electronics, etc.) – This may impact your ability to qualify
DO NOT attempt to open or increase any liabilities including credit cards, signature loans, etc. during the loan process. – This may impact your ability to qualify
DO NOT change jobs/employer without inquiring about the impact this change would have on the approval of your mortgage.
DO NOT obtain and/or deposit unusually large sums of money without proper explanation documentation within 90 days of closing – CMHC guidelines require documentation as to the source of these funds (i.e. copy of bonus check, copy of insurance payout, gift letter, etc.)
DO NOT close, open or transfer any asset accounts without acquiring the proper documentation required for your mortgage file – if you transfer all the funds in your stock account to your savings account, then documentation is required.
There are many many items a person should be aware of when they are applying for a mortgage. The items above are the ones that I see most often and should be reviewed while you are getting yourself set up and pre-approved.
Have a fantastic day!