Tips for Shopping for a Mortgage

Before you jump head first into shopping for your new home, do your homework and shop around for your mortgage. A mortgage is a product, so price and terms may be negotiable and although shopping around will take time out of your busy schedule - it could save you thousands of dollars.

KNOW WHAT YOU CAN AFFORD

Review your spending to estimate what you can afford to pay- include mortgage, property taxes, home insurance, monthly utilities, and condo fees if applicable. Design a spreadsheet to track your budget.

Get your documentation organized and up-to-date - tax assessments, thorough accounting of your income, employment information, nonsalaried contracts and any debts.

Plan ahead! Make sure you can afford monthly payments for several years, not just for several months. 

Cash on hand- you will need approximately 2% (of purchase price) to cover closing costs including legal fees, mortgage insurance, title insurance, and land transfer taxes.

Check your credit and make sure there are no errors! Better credit means better interest rates.

SHOP AROUND 

Yes, shopping takes time and it takes energy- but not shopping can cost you thousands of dollars. Independent mortgage brokers are licensed mortgage specialists who have access to multiple lenders and mortgage rates. They essentially negotiate the lowest rate for you, and because they acquire high quantities of mortgage products, mortgage brokers can pass volume discounts directly on to you. However, neither mortgage brokers or lenders need to find you the best loan - it is up to you to do the shopping!

EDUCATE YOURSELF - UNDERSTAND PRICES AND FEES

On any given day, lenders and brokers may offer different interest rates and fees to different consumers for the same loan. Shopping around is the best way to avoid spending more money. Keep in mind that the pre-approved amounts can overestimate what you can comfortably afford to payMany consumers will often go with the first loan offered, so be patient and explore your options!

KNOW THE RISKS AND BENEFITS

Mortgages have many features- fixed vs. variable interest rates, open vs closed mortgages, payment schedules, pre-payment options, penalties, etc. Consider all features, including settlement costs and annual percentage rate (APR), and keep a worksheet to help identify the features of the different loans. Ask your lender to calculate your payments from now, and also 5- 10 years down the road. Read all terms and conditions, and ask questions if you do not understand fully.

 

GET ADVICE FROM TRUSTED SOURCES

It's ok to ask for help- this is one of the biggest financial commitments you will ever make. Talk to a trusted REALTOR® or real estate lawyer that you hire about any concerns that you may have.

MAKE THE RIGHT DECISION FOR YOUR NEEDS

Evaluate your current situation - are you moving to another city or starting a family in the near future? If so, you may be upgrading sooner that you realize. Avoid paying hefty penalties - decide if this is right time for you. 

 

 

Buying a home can be incredibly satisfying and meaningful - so get out there and explore!

 

 

 

 

 

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