Information on Financing
"It's easier to shop when you have money in your pocket!" Get your financial affairs in order before you start to look for your home and you will cut down your home search time.
Your lender will order a copy, but you should see it first! That way, you can clear up any credit problems before you submit your loan application. Order copies of your credit report from one of the three national credit bureaus:
- Experian (Formally TRW) 1-800-392-1122
- Equifax 1-800-685-1111
- Trans Union Corporation 1-800-888-4213
Find out who is authorized to release information about your employment status. Provide the correct contact name and telephone number to the lender to avoid lengthy loan processing delays.
Organize your recent tax returns and financial documents.
The lender will need your financial information to determine how much you can borrow. If you don't have all the paper work, you can get copies by contacting your tax-preparer and others who deal with your personal finances.
Get Pre approved / Pre Qualified
A very important step when buying your home is to get pre-approved for a mortgage before you start looking at product and especially before making an offer to purchase. Pre qualification is simply a calculation used to determine your maximum purchase price. Your lender will review and verify all of the available financial information detailed in your application and then will determine the maximum amount of financing that you can afford.
Pre approvals ensure that you (the borrower) meet all of the lending institution's criteria so that only the property needs final approval once you make an offer. Getting pre approved will also lock in an interest rate for a specific period (usually 60-90 days) to protect you in the event that mortgage rates go up. Being pre-approved also gives you the comfort of shopping for a home in your price range without the risk that complications will arise in the final hour. You will be able to make a stronger purchase offer without "subject to financing" conditions. This will allow your Realtor to negotiate harder and reach an agreement before a competing purchaser makes a better cash offer.
Choose a Lender
Perry recommends that you select the mortgage that is most favorable to your situation. In order to find the best mortgage, you should plan to contact several mortgage lenders, including the lender to whom you presently make your payments (if applicable), to discuss the mortgage terms they have available, their rates, closing costs, and other fees. Choosing a lender can be very daunting, so as part of Perry's service, he assists many of his clients in this process.
To learn more about mortgage companies, you may want to visit the Canada Mortgage home page. You can find lenders on line, in local newspapers, yellow pages or call / email Perry for a list of recommended mortgage consultants.
There will be a variety of lenders and loan terms, so use the "Canada Mortgage Link Mortgage Checklist" to help you keep track of this important information. You can also use it as a question guide when interviewing lenders about their specific mortgage plans or contact Perry for his checklist of questions to ask your mortgage lender.
Apply for a loan
Documentation that mortgage lender's require:
- Confirmation of your earnings - a signed letter from your employer if you're on salary; three years tax returns if you earn commission; or three years tax return and financial statements if you are self employed.
- Confirmation of your down payment amount - Bank statements or other evidence of accumulated savings. Often the net proceeds of the sale of your current residence will constitute part or all of your down payment. The lender will require a copy of the sales contract to confirm the amount of the net proceeds and timing.
- A copy of your purchase agreement for your new home. This verifies the purchase price and terms of the purchase. You will receive this from Perry.
- Copy of your Realtor's property listing containing all the physical, location and financial details of your new home. If you are buying or building a new home the building plans will be required along with other permits for occupancy. Again, you will receive this from Perry.
- Credit report
Closing Costs and Fees
Once you and your mortgage consultant have estimated your maximum purchase price and mortgage loan, you can start to plan for the additional costs that are typical of the home-buying process.
These extra costs and expenses can amount to between 2% and 4% of the value of the home. Perry always identifies and helps you plan for these costs so there are no unwelcome surprises as you move forward.
Extra Costs may be:
- Mortgage Insurance Application Fee (if required by CMHC)
- Mortgage Loan Insurance
- Appraisal fee
- Land survey fee
- Home inspection fee
- Legal fees
- Prepaid taxes, utility expenses, and other charges
- Provincial Tax
- GST (if purchasing newly constructed home)
- Home Insurance
- Moving Expenses
- Mortgage Consulting Fees
- Additional Expenses (Phone hookup, Utilities, etc.)