Home ownership usually involves the largest loan most people will take on in their lifetime. Doing your homework, prior to going house hunting, will help you understand just what you are getting into. These tips will help you, gain a deeper understanding of the various types of mortgages, so you can make an informed decision when it comes time to choose one that is right for you.
Do Your Homework …
Get Your Credit Report
Before you start applying for a mortgage get a copy of your credit report. Your ability to get the best mortgage rate depends largely on the information contained in your report so it’s important for you to ensure that all the information is correct. You can get one from Equifax or Transunion Thoroughly check for errors and other items which may need to be addressed.
Save time and ensure a smooth application process by locating the necessary documents in advance. Depending on the type of mortgage you’re applying for and your employment situation, various documents may be necessary. Use this Scotia Bank Checklist to help you identify some of the paperwork needed.
Getting pre-approved for a mortgage helps you understand how much you can borrow. This important step will help provide some realistic boundaries before jumping head first into the process.
Consider the Future
Plans may change, but the end goal should always be to reduce financial risks. Think about how long you’re planning on staying in the house… should you consider saving for a larger down payment … how much of a risk you are willing to take.
It’s important to be well informed prior to applying for a mortgage. Understanding the options and procedures involved with buying real estate will be hugely beneficial to your plans and finances. See below for a better understanding of the different mortgage types.
- Conventional Mortgage: Requires 20% or more as a down payment on the property.
- High Ratio Mortgage: Allows you to borrow more than 80% of the property’s purchase price. Requiers you also pay mortgage loan default insurance.
- Vendor Take-Back Mortgage: The seller helps the buyer purchase the property holding a portion of the purchase price as a mortgage.
- Assumable Mortgage: Initially this type of mortgage allows the buyer to take over the monthly payments the seller was paying at the same interest rate until the term is completed.
- Blanket Mortgage: This type of mortgage encompasses more than one property and is generally restricted to housing co-ops and occasionally condos. With this type of mortgage, the owners of the units will pay their own portion of the mortgage either by qualifying for a portion of the blanket mortgage, or by obtaining their own mortgage.
- Portable Mortgage: Allows you to transfer the mortgage from one property to another without penalty.
Variable vs Fixed Rate Mortgages
Learn about the various rate options Chose one that suits your needs.
Being well informed on the mortgage application process is important when it comes time for you to apply.
If you have questions about applying for your mortgage, or the different options available to you, make sure you reach out to your real estate agent who will be able to help.