Common Mistakes People Make When Seeking A Mortgage
Obtaining the right mortgage product will take you a step closer to your dream of home ownership. However, if you’re a first-time home buyer, navigating the mortgage market, searching for the best deal, and submitting your mortgage application can be overwhelming.
Unfortunately, in the rush to purchase their new house, many mortgage seekers make costly mistakes when applying for a mortgage due to a lack of knowledge and expert assistance.
As a professional mortgage agent in Toronto, ON, some of my clients may undermine their mortgage application by committing errors that can be avoided if the client is aware of a few details. To help you navigate the mortgage process smoothly and steer clear of these situations, I have compiled a list of many common mistakes people make when seeking a mortgage and how you can avoid them.
1. Assuming that seeking a low-rate mortgage is easy
People will often assume that they can seek a low-rate mortgage if they have no mortgage on their property or if they have a very small mortgage. Although a borrower can often secure a mortgage with a private lender when they have plenty of equity in their property, banks and credit unions require that a borrower have a good credit rating and sufficient provable income as well. Most banks and credit unions will allow approximately 40% or less of the borrower’s income to be used to cover the annual costs of the mortgage payments, annual property tax and annual heating costs for the home. Additionally, most banks and credit unions require a credit score in the range of 650 or better, with no recent bankruptcies, no credit proposals, and no major amounts owed to Canada Revenue Agency or the local Property Tax Authority. Many borrowers often secure a private mortgage to pay out accumulated debts, including income taxes and/or property taxes owed as well as credit proposals so that they can clear their credit report and improve their credit score to better qualify with banks and credit unions for low-interest rate mortgages.
2. Applying for a mortgage that you cannot qualify for
New home buyers often think that they can buy a home with a bank mortgage if the mortgage payments are less than their annual income. In this case as well, banks and credit unions will allow for only a portion of a borrower's provable income to be used to pay annual mortgage costs in addition to other expenses so that there is enough income available for the borrower to pay other living costs. You can use a mortgage calculator to establish the monthly payments for the amount you want to borrow. Then you can add the annual property taxes and approximate annual heating costs for the home to the annual costs of the mortgage payment to total no more than 40 percent of your income to understand which mortgage fits your needs the best. Calculating the amount you can afford will enable you to establish how big a mortgage you can carry and adjust your expectations on what type of home you can afford before you sign a purchase and sale agreement.
3. Thinking you can buy a home with only 5% down payment
While some lenders may offer a mortgage with as little as a 10% down payment, this involves purchasing mortgage insurance and still requires that the borrower qualifies with good credit and sufficient provable income. While private lenders may consider offering a mortgage to 95% of property value, government regulations are currently changing and this is becoming more difficult. It is easy enough for borrowers to seek the advice of a good mortgage agent to learn what size of mortgage they can afford and the costs involved.
To avoid these and other mistakes related to securing a mortgage, reach out to Andre Ouimet - Mortgage Agent in Toronto, ON, License number “M-13000820”. Whether you’re a first time home buyer or struggling with your existing mortgage, I can help you create solutions for your financial problems by assessing your needs thoroughly. With years of experience in many fields, including real estate and lending, I can evaluate your situation and assist you in making important financial decisions. My mortgage services are available across Barrie, Newmarket, Aurora, Port Perry, Oshawa, Whitby, Ajax, Pickering, Markham, Richmond Hill, Vaughan, Scarborough, Toronto, Caledon, Brampton, Orangeville, Mississauga, Milton, Oakville, Guelph, Kitchener, Burlington, Hamilton, St. Catharines & Niagara Falls, ON.