Introduction to Financing
When you're looking to buy a home, it's important to understand the steps for getting a mortgage. The information provided in this section should always be verified by a mortgage professional. For a list of lenders that Kevin recommends, go to the Mortgage Professionals section. Any of the professionals listed will be happy to work with you on your mortgage.
Before approaching lenders, you should get to know some basic mortgage concepts. You can start by visiting the Glossary Section and read up on mortgage-related terms. Schedule a private Home Buyers Info Session with Kevin for a detailed description of the steps you will take as you get your mortgage.
Pre-approval of a mortgage is when your lender has reviews all your financial information and determines the maximum amount of money you can borrow. The advantages include that you:
- Know how much you can borrow, so you don not waste time looking at properties you can not afford
- Are protected from rising intereste rates. The lender that pre-approves you will guarantee rates for 60 to 90 days
- Are more confident when you write an offer.
- Save time when you apply for your loan because you've already assembled your paperwork
Where to Get Pre-Approved
Many banks and financial institutions are competing for your business so it makes sense to shop around for a mortgage. Most lenders will reduce their posted interest rate so don't be shy about bargaining. Your ability to bargain for a low rate and a flexible mortgage will often depend on how much business you have with the institution. You can contact banks and credit unions directly, or work with a mortgage broker. A broker will help you find a lender and the best mortgage package.
Once you have selected your lender, you will need to provide your financial information. Your lender will want:
- Personal information such as number of dependents and marital status
- Details of employment, including a letter from your employer verifying your salary
- Banking and investment information
- Details of your assets (i.e.- a car, other property)
- Information on loans and other liabilities
- Permission to do a credit check
After your application is complete, you will know how much you can borrow and you will be ready to start searching for a home.
Mortgage payment tips
Whether you're a first-time buyer or you've decided to refinance your home, consider the following money-saving steps when calculating your mortgage payments:
- By shortening your loan repayment or amortization period to 20 years from 25 years, you'll pay your mortgage off five years sooner. You'll pay higher monthly payments, but you'll build equity faster and you'll pay less in interest over the long term.
- Apply for a prepayment option. If you receive one, you can directly pay down some of your principal before it's due. Make sure to check for prepayment penalties.
- By paying biweekly instead of monthly, you'll make 26 payments in a year or 13 months instead of just 12 months and reduce your amortization to about 20 years from 25 years.