The most nerve-wracking part of buying a house is crunching the mortgage numbers. Before you even begin to house shop, know your financial situation inside and out. And choose service-oriented professionals who can guide you through the process, translate any unfamiliar jargon, and get you on the right track towards owning a home that won’t leave you “house poor”. Follow these four easy steps to getting the perfect love shack.
1. Get your credit rating. This can be a difficult process if one of you has an excellent score, while the other may have bad credit or none at all. By establishing your credit rating, though, you’ll know what you’re getting into before you start the process. If you do have credit problems, it’s best to fix them before jumping into buying. A bad score will only makes home shopping more difficult than it has to be.
2. Talk to a professional. Finding the right mortgage lender is essential if you are to save money in both the short and long term. “Most couples are paying only the interest on their mortgage during the first five years,” says James DesLauriers of Jones, DesLauriers and Reynolds Mortgage Group Inc. “But working with a company that will allow you to make some lump sum payments at different times of the year will help you move towards paying down the principal amount faster.” Even doing some legwork ahead of time like using mortgage calculators online will help determine your financial state.
3. Determine your down payment. Calculating this cost into your budget is essential. Having a significant down payment for your home purchase will increase the amount you can afford to spend on your home, or decrease your monthly mortgage payments. If you’ve invested in an RRSP, you can withdraw these funds to use towards the purchase of a home. If you receive a monetary gift from your parents or somebody close to you, your lender will require a letter stating that this money doesn’t need to be paid back.
4. Get pre-approved. A mortgage professional can determine how much you can afford to borrow before you start shopping for a home. “A broker can help you calculate all the costs involved in buying,” explains DesLauriers. A professional can also help you find a suitable interest rate and calculate monthly payments, so you know exactly what you’re willing to spend on a home. It’s important to note that pre-approval doesn’t guarantee you a loan; it just locks in an interest rate while you shop. Always make your home purchase agreement subject to financing.
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