Of Prime Interest: Mortgage process

Your home is one the largest purchases you will ever make so it’s important to ensure you are getting proper guidance.

  • Jul. 8, 2015 7:00 a.m.

First and foremost choose the right professional for you.

Your home is one the largest purchases you will ever make so it’s important to ensure you are getting proper guidance. Ask friends and family for referrals and if you are looking online check out reviews.

A mortgage pre-approval is key. It not only avoids the disappointment of putting an offer on a home and not qualifying but also guarantees the rate for up to 120 days. A pre-approval will involve a credit consultation. If there are any issues with your credit they will be revealed and with the advice of a professional you can make a plan to improve your credit and work at achieving your goal.

Rate is important but just as important are prepayment privileges and payout penalties. Once when you fully understand your options  will the decision where to place your mortgage be made.

Qualifying your income is one of the most important requirements in the mortgage process. Especially important if you are self employed or on contract, paid commissions or have bonuses or overtime.

In order to utilize all your income, your mortgage broker has to be fully informed on where and how it comes to you. Be prepared to provide documentation confirming your income. You will be required to provide pay stubs or tax returns and CRA Notice of Assessments depending on your situation. You may also have to provide documents if you have cleared up any derogatory credit in the past. Always keep such documents.

Your down payment funds must be from your own resources and most lenders will ask for a 90 day history to confirm. If you are unable to provide the history the funds may not be used towards your down payment. There are exceptions where the funds have been gifted from a family member. The giftor is required to sign a gift letter confirming they are gifting the funds and do not expect repayment. Other exceptions do exist and your mortgage professional will guide you through the process.

An appraisal may be part of the process when you are purchasing or refinancing a home. If the appraised value does not support the value of the home you will either have to put more money down or renegotiate the price.  Some lenders use an automatic evaluation in lieu of an appraisal. If the automated value comes up short the lender will ask for an appraisal.

If you are purchasing a condo it is imperative that you review all condo documents. These provide you with the financial information with regards to the condo association. They will also reveal happenings around the condo, any upcoming renovations or special levies that could affect you. A special levy will mean cash out of your pocket and may be negotiated into the purchase price.

Above all, do not rush the process. Allow yourself at least 10 days for a subject removal date once you have made an offer. Possession date should be at least 30 to 45 days from date of offer.

If you’re mortgage is coming up for renewal, contact a mortgage professional up to five months prior. That gives you time to do the initial work and a pre-approval will hold the rate for up to four months. In times such as these when interest rates could increase at any time a pre-approval is one of the smartest options out there.

Remember, you are making a huge commitment that will impact your lifestyle going forward. Avoid being pressured into quick decisions and be fully aware of your options.

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