Thinking of buying a home?
A home is usually the biggest investment people make in their lifetime!
Is it for everybody? Maybe not.
It helps to know:
What is involved?
How much will it cost?
FIRST....WHAT IS INVOLVED?
The most practical first step is to talk to your mortgage broker or banker and ask them to 'qualify' you.
What does this mean?
A lender of mortgage money makes a decision about how much they will lend you for a home based on a variety of factors.
1) Gross family income? Gross is the amount earned before any deductions. i.e. the amount shown on a T4 slip.This can include both incomes from a couple.
Generally, a lender will calculate about 40% of the gross income and use this amount to cover:
Mortgage payment also called 'House payment' (Principal and interest)
Monthly commitments such as credit cards, student loans, car payments, etc.
Gross income $40,000 x 40% = $16,000
$16,000 ./. 12 = about $1335 monthly
If taxes are $100 a month
and heat is $125 on budget
and student loans and car payments are $125 a month then there is $985 a month for a house payment.
WORD OF CAUTION! Although $985 a month may be the amount for which you qualify, this does not mean that this is the amount you want to spend!
Look at your budget, your lifestyle, your plans, your dreams.
How much are you comfortable spending?
2) Length of employment. This is how long you have been at your current job.
Most lenders look for at least 6 months but prefer a year of employment at the current job OR
e.g. a food server may change employers for a better paying employer but still be in the food industry. The lender will most often consider the total time spent in the industry.
3) Credit history. This creates a 'Beacon score' . A Beacon score is a number created by the credit bureaus. The higher the number the better! 675+ is preferable.
Credit history can be kept in 'good order' by paying bills on time and always paying at least the minimum payment, preferably more. (Should you find yourself unable to keep a commitment in a month you can help to protect your credit by calling the company and making suitable arrangements with them.)
These are the key factors. Your mortgage broker or banker will have other questions as each has their own criteria.
If you have a good working relationship with your bank you will probably want to start there, or you may wish to work with a reputable mortgage broker.
Who and what are mortgage brokers?
Mortgage brokers are brokers who have established a working relationship with various lenders to establish the best possible rates for their clients.
A mortgage broker takes one application, processes it, causing only one 'hit' on an individual's 'Beacon score'.
A Beacon score is created by credit bureaus. The range may be 400-900. The higher the score the better.
Brokers not only negotiate best rates for clients with stellar credit ratings, but, also, for those who may have had a small problem in their past financial dealings..e.g. late payments on credit cards, etc.
Those whose ratings are not as strong may still qualify for a mortgage. The rate may be one or two points higher, but still quite acceptable.
The advantage of dealing with a mortgage broker is that you make one call and they do all the rest!!
So....now you have determined how much a lender is prepared to allow you for your purchase. What next?
Now you want to choose one realtor to work with.
You want to find someone who cares about you, your family, your real estate wants and needs, and who will repect your budget and your decisions.
'Word of mouth' is still the best way!
Talk to your friends, family and co workers. Ask them who they used and how they felt about their buying experiences.
You will quickly get an idea as to who to use or not!