ANSWERS TO SOME FREQUENTLY ASKED HOME FINANCING QUESTIONS
HOW LONG DOES IT TAKE TO PROCESS A MORTGAGE APPLICATION?
Usually about five days. The actual time depends on how quickly the lender can get an appraisal of the property, a credit report and verification of employment and bank accounts.
WHAT DOCUMENTS WILL I HAVE TO PROVIDE?
Be prepared to provide verification of income(including a pay stub and recent tax returns),bank account numbers and details on your long-term debt (credit cards, auto loans, child support, etc.) If you’re self-employed you may also be required to provide financial statements for your business.In recent years, lenders have been required to obtain more specific information from borrowers in order to package and sell loans to lender's. If you were lending someone such a large amount of money, you’d want detailed financial information.
COULD ANYTHING DELAY APPROVAL OF MY LOAN?
If you provide the lender with complete,accurate information, everything should go smoothly.You may face a delay if the lender discovers a credit problem - a history of late payments or non-payment of debts, or a tax lien. You may then be required to submit additional written explanations or clarifications.
You should also be sure to notify your lender if your personal or financial status changes between the time you submit an application and the time it’s funded. If you change jobs,get an increase (or decrease) in salary, incur additional debt or change your marital status,let the lender know promptly.
WHAT DO THE CLOSING COSTS INCLUDE?
Closing costs cover processing and administration of your loan. In addition to a loan fee, you’ll usually be asked to prepay interest charges, to cover the partial month in which you close .You may be asked to pay an appraisal fee and if your mortgage is a high ratio mortgage involving Canada Mortgage and Housing Corp.with additional fees and percentages being involved.Whether you’re using a mortgage broker or dealing directly with a financial institution it is imperative that you ask for an accounting of all fees and disbursements prior to signing anything !
WHEN DO MY MORTGAGE PAYMENTS START?
Usually about 30 days after closing. The actual date of your first payment will be included in your closing documents.
WHAT’S INCLUDED IN MY HOUSE PAYMENT?
Principal and interest on your loan.
Depending on the terms of your loan, the payment also may include property taxes.
CAN I PAY THOSE OTHER THINGS SEPARATELY?
Not if it’s CMHC-insured. With most other loans, you can pay your own taxes and insurance if you borrowed no more that 75% of the purchase price or appraised value of your home. Check with your lender to be sure.
Before You Buy
Get the Right Information
Whether you are about to buy your first home, or are planning to make a move to your next home, it is critical that you inform yourself about the factors involved.
1. Get pre-approved for a mortgage before you go looking for a home Pre-approval is easy, and can give you complete peace-of-mind when shopping for your home. Your local lending institution can provide you with written pre-approval for you at no cost and no obligation, and it can all be done quite easily over-the-phone. More than just a verbal approval from your lending institution, a written pre-approval is as good as money in the bank. It entails a completed credit application, and a certificate which guarantees you a mortgage to the specified level when you find the home you're looking for. Contact The Lee Jenkins Mortgage Team and get pre-approved today!
2. Know what you can afford When you discuss mortgage pre-approval with your mortgage broker, find out what level you qualify for, but also pre-assess for yourself what monthly dollar amount you feel comfortable committing to. Your situation may give you a pre-approval amount that is higher (or lower) than the amount of money you would want to pay out each month. Determine what this monthly amount is, and what value of home this translates into at today's rates, you won't waste time looking at homes that are not in your price range.
3. Determine the Mortgage best suited for you There are a number of questions you should be asking yourself before you commit to a certain type of mortgage. How long do you think you will own this home? What direction are interest rates going in, and how quickly? Is your income expected to change (up or down) in the near term, impacting how much money you can afford to pay to your mortgage? The answers to these and other questions will help you determine the most appropriate mortgage you should be seeking
4. Make sure you understand what prepayment privileges and payment frequency options are available to you More frequent payments (for example weekly or biweekly) can literally shave years off your mortgage. This will significantly lessen the amount of interest that you will be charged over the term. For the same reason, authorized pre-payment of a certain percentage of your mort-gage, or an increase in the amount you pay monthly, will have also have a major impact on the number of years you will have to pay and could shorten your payment term considerably. These two payment options can cut years off your mortgage, and save you thousands of dollars in interest. However, not every mortgage has these prepayment privileges built in, so make sure you ask the proper questions.
5. Ask if your mortgage is both portable and/or assumable A portable mortgage is one that you can carry with you when you buy your next home and avoid paying any discharge penalties. This means that you will be able to take advantage of your current mortgage rate and term. You will also be able to avoid any high discharge penalties for paying the mortgage out prior to the end of the term. An assumable mortgage is one that the buyer for your home can take over when you move to your next home. This can be a very powerful tool at the negotiating table making it much easier and more desirable for a buyer to buy your home, and again saves you any discharge penalties.
This concludes the First Time Home Buyer Information Guide for more information contact Jim@Straughan.ca
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