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Need a Mortgage?
Looking for a Barrie property is easier when you’re pre-approved
Mortgage pre-approval has its advantages. When a potential mortgage provider preapproves, he calculates how much he is willing to lend you, and at what interest rate. With preapproval, you know exactly how much you can purchase for, what interest you will pay for the duration of the first term of the mortgage and what your monthly repayments will be. Most lenders will lock in the rate for one hundred and twenty days to one hundred and sixty days giving you time to find your dream home.
Be warned the preapproval amount is not a guarantee that you will receive a mortgage for that value since the mortgage value will depend on the value of the house that you choose. You should carefully consider whether you can afford the preapproved repayment amounts without making major lifestyle changes. If not look for something more affordable.
You will also need to ensure that your budget includes amounts for the closing cost, costs to move, and maintenance and utility costs at your new home.
Pre-approval is free and you are not committed to the lender. Getting pre-approval can save you time when looking for a house as you know exactly what price range you can look in. It also lets the seller know that you will not have any difficulty in finding finance leveraging your price negotiations allowing you to quickly close the deal.
Preparing for the pre-approval
Before you leap into the mortgage market check your credit score and ensure that there are no errors on it. A less than exemplary credit score can cost you in higher interest. It may result in a lower preapproved mortgage or higher down payment, or it may be turned down. It is also possible that you may have to find a co-signor for the mortgage if you look like an unacceptable risk to the lender.
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Debt service fees
To qualify for a mortgage your total household costs should not be more than the 32% of the gross household income. This is known as the Gross Debt Service and will include bond repayments, heating, condominium fees and property taxes.
In addition, your Total Debt Service fees cannot equal more than 40% of the gross household income. The TDS is a combination of all debts combined with the GDS. If your debt service ratios are too high to qualify you for a mortgage you will have to consider purchasing a cheaper home, reducing your debt or making a higher down payment.
Stress test now mandatory
All Canadians applying for a new mortgage must pass a stress test. This tests whether you can afford to make repayments at an interest rate that is typically higher than the rate that you will be negotiating. In Canada, there is a minimum down payment requirement of 5%. If you don’t have a down payment of at least twenty per cent of the cost of the property which you are purchasing, you will be expected to pay mortgage insurance for the full term. The size of the down payment that you can make will affect the size of the mortgage for which you will qualify.
The staff at Certified Mortgage Brokers in Barrie are qualified to help you to clear the hurdles of home ownership. Don’t have regrets. Speak to us.
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