When anyone looks at the real estate market in Canada, they often see a lot of dollar signs and a long process ahead of them. Buying a home can be an overwhelming task, but will reap numerous benefits once you officially become a homeowner. One of the most common ways people are able to afford to buy a house is through getting a loan. The process of getting a mortgage can be daunting to many who don’t know what to do. To alleviate the stress, this guide below will walk you through getting a mortgage.
You can get a loan through various types of lenders. Those lenders are:
- Mortgage Companies
- Insurance Companies
- Credit Unions
- Loan Companies
There are a few more options out there, however the ones listed are the most commonly known. Now you may be thinking “That’s a lot to choose from!”, and you’re right. Your decision on which lender to get your mortgage through will be based upon a few factors. Different lenders have different interest rates, application requirements, and other conditions. Before you make any decision, you’ll want to speak with a few lenders to lay out and compare you options to come up with the best choice for your needs.
Don’t want to go through the process alone? This is where a mortgage broker comes in. Mortgage brokers act as a liaison during your process. They will find a lender for you and arrange the transaction.
A pre-approval is different than being pre-qualified. The first thing to keep in mind when seeing your pre-approved total for a mortgage is that it is not guaranteed. This is only an estimated amount that a lender will potentially lend you.
Getting pre-approved may seem like a pointless step to some, but its critical to have an estimated number to spend in order for you to budget all costs in the process. Once you’re pre-approved you can budget for what you expect to afford for your new home. In addition to pre-approval, you also have to budget for closing costs, moving costs, and general maintenance costs once you live in the home.
To save yourself time, you’ll want to collect all necessary documents when applying for a mortgage before you go to a lender. Having these documents on hand will keep you organized and expedite the communication process.
- Photo ID
- Proof of Employment
- Proof of Previously Paid Bills
- Credit Report
- Information on Other Assets
- Information on Other Outstanding Debts
Various lenders may require a few more documents for the application process, but this list is the general documentation you will need to go through with the application.
A good rule of thumb to follow is to keep your monthly mortgage payment lower than 32% of your total monthly gross household income. This is what’s called the Gross Debt Service (GDS) ratio. Overextending your budget will not only put your credit at jeopardy, but could put you at risk for losing your house in the event that you can no longer afford payments on your mortgage.
There’s a lot more to budget for when buying a house than just the cost of monthly mortgage payments. Be sure to speak with a loan consultant and make sure you can afford your new home!