Major Mortgage Mistakes to Avoid
The real estate market never sleeps. It doesn’t matter if its spring, summer, fall or winter; every day, new “For Sale” signs pop up all over the country. With the Canadian housing market robust, many first-time homebuyers are excited about getting onto the property ladder.
But purchasing a home can be a stressful. For many, the most difficult part of the process is getting your mortgage and financing in order. Thanks to Canada’s tighter lending rules, there are a lot of different changes and regulations you need to be aware of. That can be a tall order. And it might explain why so many homebuyers make mistakes when applying for a mortgage or when looking to refinance an existing mortgage.
Below is a list of 9 common mortgage mistakes you should avoid.
Ignoring Your Credit Score
A good credit rating helps you qualify for the best rates—and not just on a mortgage. A good credit score helps you qualify for the best rates if you need a loan from the bank, car loan, or apply for a credit card. A good credit history is important because it shows lenders you can reliably repay the loan. Having bad credit could mean you don’t qualify for a mortgage, or it can mean paying a higher interest rate.
Opening New Credit Cards
Opening new credit cards or making big purchases on existing credit lines before and during the loan application process can hurt your credit score. If you want to buy a new TV or furniture for your home, wait until after the loan is closed.
Not Getting Pre-Approved
For first-time homebuyers, there’s nothing more disappointing than putting an offer in on a property and then finding out you don’t qualify for financing. Avoid the disappointment and get pre-approved. Getting pre-approved shows you what cost of house you can afford; it also means you can put an offer on the table ASAP! Getting pre-approved also locks in the interest rate for up to 120 days. Getting pre-approved can save homebuyers thousands of dollars in interest charges.
Not Shopping Around
Another big mortgage mistake is failing to shop around. Canada’s big banks will only tell you about the financial products they provide, even if they’re not right for you. Make sure to shop around and see what kind of mortgage you can get with banks, trust companies, and mortgage brokers. A mortgage broker can have access to hundreds of different lenders, many of whom specialise in lending to those who have bruised credit, have filed for bankruptcy, are self-employed, have unreliable pay, or earn a lot from commission. Comparison shop or let a mortgage broker do it for you.
Not “Seasoning” Your Assets
Lenders want to know that you can pay your mortgage, not that you just have a lot of money in the bank. Seasoned assets are deposits that have been in your bank account for at least a couple of months. Having a relative transfer money into your account right before applying for a loan is a red flag. Plus, the lender will want to know where the money came from and why.
Ignoring the True Cost of Home Ownership
Ignoring the true cost of home ownership is mortgage mistake to avoid! There’s more to home ownership than just monthly mortgage payments. If you’re buying a home, you need to take property taxes, maintenance, home insurance, condo fees, utility bills, and home furnishings into the total monthly cost. Inflating your income or ignoring monthly costs can mean falling behind on mortgage payments or bills. This can lead to bankruptcy or foreclosure.
A home is most likely the biggest purchase you’ll ever make. And getting the mortgage is the most important part of the process. Don’t rush a big commitment or feel pressured into make a decision that is going to impact your finances and lifestyle. Talk to your mortgage professional and make sure you leave enough time to remove financing conditions and set a realistic closing date.
Not Reading the Loan Documents and Fine Print
Mortgage papers are not fun to read. Neither is the fine print. But they’re legal documents, and it’s your responsibility to know the terms of your mortgage. Failing to do so could cost you thousands of dollars in penalties and fines. Take the time to fully understand what you are agreeing to. Most homebuyers only pay attention to the rate and amortization period, which are important but so too are payout penalties and pre-payment privileges. Talk to your mortgage broker and go through all the loan documents to make sure you understand everything in detail.
Not Choosing the Right Mortgage Professionals
The right mortgage professional will be looking out for your best interest not that of the lending institution. That’s why it’s important to look for a mortgage professional who is both licensed and independent. A private mortgage broker will help you find a lender who offers you the best financial products with the best rates and terms.
Canadalend.com, Helping Canadians Refinance and Save
If you’re a first-time homebuyer and looking to step onto the property ladder, contact the independent, licensed mortgage experts at Canadalend.com. We will help you figure out what kind of mortgage you qualify for and get you pre-approved.
And once you’ve found your dream home, your Canadalend.com agent will negotiate on your behalf, getting you the best mortgage rate possible. We will also help you find the best way to pay off your loan quickly and reduce interest payments.
To see what kind of mortgage you qualify for, contact Canadalend.com today to set up a free consultation, or apply online and one of our private mortgage specialists will help you set up an appointment at your earliest convenience.