First things first, you will need to get pre-approved. This will give you the comfort of knowing how much you can afford and what your monthly payments will be. It will also protect you against interest rate increases for a period of time (usually 60-120 days). Make sure to get pre-approved, there is a big difference between pre-qualification and pre-approval.
There are hundreds of lenders out there, and partnering with a mortgage specialist or financial institution to help you find the right product at the best rate is key. Independent mortgage brokers tend to offer the most options because they work with more than one bank. However, if you have a good relationship with your bank/ financial institution, contact them first. If you would like me to introduce you to our in-house
broker, just ask.
Documents you will need include:
1. Identification
2. Previous 2 years’ T4s
3. Most recent pay stub
4. Letter of employment
5. List of assets (savings, investments, etc.)
6. Ideal purchase price & down payment amount
*This will differ for self-employed individuals.
The Basics:
Depending on your down payment amount, there are two
different types of mortgages:
• Conventional mortgage (20% down payment)
• High Ratio mortgage (minimum 5% down)
High Ratio mortgages require mortgage default insurance.
Purchases over $1M require 20% down.
From there, you will have two different mortgage
options to choose from:
• Fixed rate mortgage
Fixed rate mortgages offer the security of locking in your
interest rate for the term of your mortgage, and your
payment amount stays the same.
• Variable rate mortgage
With a variable rate mortgage, your payments also remain
the same. Though, when rates go down, more of your
payment goes towards principal and less towards interest.
When rates increase, the reverse happens, and your
amortization may be extended.
I also find it useful to know what it will cost you monthly
to borrow. Play around with the numbers using our handy
mortgage calculator tool in the buyer drop down menu.
DON’T: Forget to account for closing costs! It’s fairly
safe to assume you will need an additional 1.5% of the
purchase price to cover these.
DON’T: buy/lease a car, change jobs, fail to pay bills,
open a line of credit, or make a major purchase during this
time. It could affect your loan approval. If you are planning
to do so, make sure to okay it with your mortgage agent.