So, you've made the leap, and decided to buy your own home. You've waited patiently, saved and done all the work required. You've spent months online, weeks viewing properties, compared neighbourhoods, crunched numbers, found a great rate and you're anticipating the keys to your new pad. So, it's time to sit back and relax, right?
Maybe not: Getting a mortgage today is a very complicated process of calculations and strategies that can result in things going very wrong or very right. There are many pitfalls that can be easily avoided.
DO's
1. Provide all requested employment/tax (CRA) documentation to your mortgage professional as soon as possible. Nothing in Real Estate happens in 'real time' so when you hand it over there are more than a dozen people who's desk your docs will ultimately land on prior to closing. It takes time and it's the #1 reason for closing delays, plus it's the last thing you want when all of your stuff is sitting in a truck, it puts pressure on parties involved and creates easily avoidable headaches.
2. Continue to make all of your regular payments for any outstanding loans/credit card balances, just as you've been doing in the past. It's not unheard of to be so busy and caught up in your transaction that a payment could be missed. There's nothing worse than finding out that you no longer qualify for a specific product/rate because of a simple oversight. This can have devastating effects and can cause your entire deal to collapse. (I've seen it).
3. Continue to go to work your normal schedule - taking time off (besides earned vacation) will cause interruption to your income. Lenders get worried that you won't have the financial stability to pay for your new home. Slow and steady wins the race, so be sure to stay the course.
4. Clearly disclose where your down payment are coming from - Anti-money laundering legislation exists in Canada and EVERY lender is going to require where ALL funds come from when purchasing a home. If there are any large deposits (over $1000) they'll need to know where it came from. If it's gift from family, let us know. If you just sold another property, let us know. We know which documents are acceptable to lenders and which are not, so this will save you time and aggravation.
DON'TS
1. Do NOT, I repeat, Do NOT finance any major purchases such as new vehicles, RV's, motorcycles, snow machines, appliances, etc leading up to the purchase. These types of installment loans will have an immediate impact on your debt servicing and when that happens you risk killing your deal. (Regardless of how enticing the offer is, or if you don't have to pay for an extended period of time, it will still affect your numbers.) If you MUST make a big purchase, discuss with your mortgage professional in great detail so they can help guide you.
2. Do not start shifting money around over multiple accounts, the more movement between accounts the more documentation you're going to need to provide before closing. It's confusing and creates unnecessary steps. If your down payment is coming from an RSP, just provide an RSP statement to show funds are available. If it's being "Gifted" from family, we will provide you with a gift letter to sign, plus a copy of your bank statement showing the EXACT amount being deposited. There is no margin of error here. The numbers match up, or they don't. When they don't it creates more delays and requires more documents from you.
2. Do not "seek credit" from multiple lenders, this can have a detrimental effect on your credit score. Understand that if one lender approves you there's a strong chance the next one will as well. (A mortgage broker will only do one credit inquiry yet be able to shop multiple lenders). Every bank you walk into will do an individual inquiry which ultimately can reduce your desirability as a borrower (and can exclude you from the best products/rates). Shop carefully and only commit to those that you feel are offering you the best solution. (Notice I did not say rate?)
4. Do NOT sign a mortgage offer just because it's the lowest rate you could find. There are many questions that to be asked and if you don't know which ones are most important, this oversight can cost you a small fortune. Too many mortgage products offered by major institutions can turn from bliss to nightmare with one phone call. The difference of a $1000 penalty vs a $10,000 one is attached with instant regret and panic. The devil is in the details, yet few people take the time to actually read them. Be smart, dig deeper.
If you follow these simple rules, you can avoid so many problems that I see on a daily basis. It's been said many times before, "Buying an home is the largest purchase most people ever make". What should accompany that is that while everyone wants a home, nobody wants the mortgage that often accompanies it. If you're dealing with the right people and asking the right questions, I assure you, you'll be without one a lot sooner than you ever thought possible.
