It’s a good idea to get a pre-approved mortgage before you start looking for a property. A lender will review your finances and figure the amount mortgage you can afford. It’s free and it does not commit you to one single lender. Get it in writing with a fixed interest rate. It will only be good for a specific amount of time. By locking in your rate, you’re protected if interest rates rise while you’re shopping for a home. If interest rates go down within the time frame, your lender will honor the lower rate.
When you visit the lender for the first time you should bring:
· Your personal information, including your identification such as a passport or driver’s licence
· An employment letter that includes type of work, salary, and length of employment
· All your sources of income
· Details and information on all bank accounts, loans and other debts
· Proof of financial assets
· Source and amount of down payment and deposit
· Proof of source of funds for the closing costs (1.5% to 4% of the purchase price)
Your lender or broker should offer you choices to find you the mortgage that fits your particular needs.
Here are a few terms that you should be familiar with:
Amortization Period – This refers to the length of time you choose to pay off your mortgage.
Mortgage Term – It can be six months or as long as five years or more.
Payment Schedule – Monthly, twice a month, every two weeks, weekly or accelerated.
Down Payment – Part of the home purchase price that does not come from the mortgage loan.
Deposit – Is paid when you make an Offer to Purchase, (readily available funds, typically payable within 24 hours of the accepted offer). This will be part of the down payment with the balance owing at closing.
Appraisal – Is an estimate of the value of the home. In order to complete a mortgage loan, your mortgage lender may ask you to pay for a recognized appraisal.
Principal, Interest, Taxes and Heating “P.I.T.H” for short – This is your monthly mortgage payment (principal and interest), property taxes and heating.
Gross Debt Service (GDS) ratio – Lenders add up your housing costs and figure out what percentage they are of your average gross monthly income.
Total Debt Service(TDS) ratio – Your entire monthly debt load includes your housing costs (P.I.T.H.) plus all your other debt payments (car loans or leases, credit card payments, lines of credit, etc.,) This too will be calculated.
However, a pre-approved mortgage is not a guarantee of being approved for the mortgage loan.
Mortgage advisers can “pre-qualify” you to confirm that you meet general guidelines, but only a lender’s underwriter can confirm that your income, down payment, purchase agreement, property details, credit and debt ratios meet their full approval.
Your actions after pre-approval matter. Beware that missing payments, adding debt, changing jobs, moving around your down payment money or co-signing for someone, among other things, can void your pre-approval.
Features matter. Choose the pre-approval with good prepayments, a fair penalty, good port and refinance policies, etc.). Contact me for at email@example.com with any real estate questions you may have!