Common Mistakes People Make When Shopping For A Mortgage
As a first-time homebuyer figuring out how to acquire necessary mortgage financing can get you a step closer to your dream home. However, you shouldn’t fret, as there’s an abundance of financial options available through a mortgage broker, which you can avail of to find a suitable product for your needs quickly. But, like some first-time borrowers, you may fail to understand how mortgages work and their intricate rules and conditions. This could lead to you being trapped by your mortgage contract and facing large penalties.
To avoid mistakes like this and others that could prove costly, Kati Asgari has put together a list of the most common mistakes people make when shopping for a mortgage.
1. Believing that first-time borrowers get exceptional treatment
Many clients think that being a first-time buyer entitles them to have special treatments in terms of qualification for a mortgage. Well, as a first-time buyer, you get a tax rebate on land transfer tax. Other than that, like any other client, you will have to qualify for every dollar you borrow.
2. Underestimating the down payment
Clients can put down 5%, 10%, 15% (<20%) ONLY IF the property is owner-occupied OR used as a second home. Know that the definition of a second home is a property used either as a vacation home or is being used by a family member (which gives you no rental income).
3. Assuming that mortgages are difficult to qualify for
Everyone is mortgage-able in Canada! It’s just the type of mortgage, rate, and fees that makes a difference. Those with bruised credit or non-traditional income types can also obtain mortgages but most probably through alternative lenders.
4. Focusing too much on mortgage broker fees
Like many clients, you may think that using a mortgage broker or agent will be an added cost to your finances. On the contrary, all A-deals, brokers are paid by the lenders and will NOT cost you a dime. Only if you use an alternative lender, then you may have to pay a lending fee.
5. Failing to understand mortgage pre-approval
Like most borrowers, you may have assumed that having a pre-approval will guarantee a mortgage. Each mortgage application has four pillars: income, credit, down payment, which can all be verified before putting an offer. But what is usually not paid attention to is the PROPERTY, which is the fourth pillar of an application. NO pre-approval can guarantee the property will be 100% ok-ed by the lender. The biggest threat is the property value not being supported by the appraisal. Often, lenders shy away from some properties for other reasons. Having a financing condition will always protect you from making sure your mortgage file is 100% approved, and there will be no risk in case you waive your financing condition.
6. Not submitting important documents
Sending all documents upfront to the mortgage agent helps them to foresee any potential risks. Mortgage professionals always need to know the full story regarding all the details of your income, credit, down payment, and property. What might seem unimportant to you might change the whole scenario for the lender. Always disclose everything to your broker so that they can make an informed decision on your file.
To avoid these and other mistakes when choosing a mortgage, reach out to Kati Asgari. As a professional mortgage broker in North York, ON, I am passionate about helping you fulfill your homeownership dream. As a licensed broker, I will help you find the right mortgage solution to ensure financial security. I represent your needs to fifty-seven lenders across Canada to find you the best term and rate for your mortgage. I offer a full mortgage service line, which includes debt consolidation, second mortgages, investment property mortgage, private mortgage lending, reverse mortgage, self-employed mortgage, and construction mortgage.