Planning for a mortgage.
Understand your credit
Understanding your credit score is crucial for successful home ownership and qualifying for a mortgage at the best rate. Aim for a credit score of 680 for one borrower (or guarantor), especially with less than 20% down payment. If you make a larger down payment, a score of 680 is not mandatory.
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Check your credit score through Equifax Canada or TransUnion Canada, ensuring accuracy and disputing any errors. To improve your credit score and financial future, pay bills on time, clear debts promptly, maintain low credit card balances, and minimize credit applications. If your credit score falls below the minimum requirements, work on debt management, or explore options with an Alternative Lender. We can assist by reviewing your credit score and offering suitable mortgage solutions.
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Determine your budget
Considering your budget is crucial in the home-buying process. It involves two aspects: the purchase price budget and your cash flow budget. It's essential to find a balance between affordability and qualifying for a suitable home.
Having a budget helps you understand your price range, identify affordable homes, and spot gaps or savings opportunities for the future. This preparation is vital when taking on mortgage payments.
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To determine your budget and mortgage details, use the My Mortgage Toolbox app available on Google Play and the Apple iStore. This consumer-friendly tool calculates mortgage payments, affordability, income requirements, and even closing costs to aid your decision-making process.
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Secure your down payment
The down payment is a crucial aspect of buying a new home. For most cases, the ideal down payment is 20%, but it's not always feasible in today's market. Buyers with less than 20% down payment must purchase default insurance and have a minimum of 5% down.
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If the budget exceeds $500,000, the minimum down payment is 5% for the first $500,000 and 10% for the remainder. For homes over $1 million, a 20% down payment is required. The down payment can come from personal savings, RRSPs (utilizing the Home Buyers' Plan), or a gifted amount from immediate relatives. Closing costs, ranging from 1-4% of the purchase price, should also be considered. Consult a Mortgage Professional to ensure your down payment source qualifies and to address any queries about closing costs.
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Understand your mortgage options
When it comes to mortgages, there are various factors to consider. Choosing between fixed-rate and variable-rate mortgages, understanding the terms and penalties, and deciding on the best payment frequency can be overwhelming with numerous lender options available. To navigate this complexity, we can assist you.
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Interest rate is just one aspect of selecting the right mortgage product for your financial goals. Dominion Lending Centres Mortgage Professionals have access to a wide range of mortgage products, enabling us to find the ideal mortgage for your needs. Unlike banks, mortgage agents prioritize your requirements, providing unbiased advice and the best rates without any cost to you. Their goal is to help you achieve your dream of home ownership.
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Have your paperwork ready
When applying for a mortgage, you will typically need to provide a standard package of documents, including government-issued personal identification, one month of recent pay stubs from all applicants, a letter of employment, two years' worth of personal CRA tax filings (or financials if incorporated), three months of bank account statements, and your down payment (minimum 5%). Additionally, you may need to provide documentation to explain any unusual large deposits or withdrawals not related to payroll.
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Get Pre-Approved
To increase your chances of mortgage success, it's highly recommended to get pre-approved through your Mortgage Professional. Pre-approval not only helps you find the best mortgage product tailored to your needs, including rates and terms, but it also offers several benefits for your home search. By being pre-approved, you can verify your budget and allow your real estate agent to find homes within your price range. Don't forget to factor in closing costs, typically ranging from 1 to 4% of the purchase price, when setting your budget.
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Pre-approval guarantees the offered rate and locks it in for up to 120 days, protecting you from potential interest rate increases while you're house hunting. Additionally, it signals to sellers that securing financing won't be an issue, making it advantageous in competitive markets. To safeguard your pre-approval and ensure the guaranteed rates and terms during final financing, avoid having additional credit reports pulled, applying for new credit, closing credit accounts, or making significant purchases until after the sale is complete. Be prepared to provide a paper trail for any unusual deposits in your bank account to maintain your pre-approved status.
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Find Your Home!
Now that you're pre-approved for that mortgage, find an experienced realtor that has knowledge of your preferred area. They will be one of your most valuable assets. For one of the top real estate teams in the GTA and Central Ontario, contact the Chateau Real Estate Team!