From How to Get the Best Rate to How to Get Pre-Approved – The Chris Allard Team is Here to Answer All Your Questions!
It’s time to look for your next home. But how do you even get started? Purchasing a home is a highly complex process, yet the regular person is expected to be able to navigate it. Before you initiate what is likely the most expensive purchase of your life, it’s time to talk to your mortgage broker. Here are a few of the top mortgage loan questions and answers.
What is the Best Rate You Can Get Me?
When it comes to mortgage lenders, you need to negotiate. Don’t go with the first lender you talk to. Instead, present your financial information and your credit report, and ask them what rate they can offer you.
Get rates from several lenders—don’t just go to your bank! Talk to a mortgage broker and ask them what they can find. Finding the best rate can save you a lot of money.
Which Lender is Best for My Financial Situation?
Brokers help connect you with a wide variety of lenders, including banks, credit unions, monoline lenders, and private lenders.
Banks are among the most common lenders out there and are easily among the biggest players in the mortgage world. They let you combine and streamline all your finances under one umbrella, which can be pretty appealing to some homeowners. Banks are everywhere and can be one of the easiest avenues to a mortgage, but they’re a bit limited in that their rates are their rates, take them or leave them.
Credit unions help fill some of the gaps left by big banks, especially in more rural locations. Credit unions are, well, autonomous collectives, which means they’re owned by their members and not shareholders. They’re also provincially regulated, unlike banks. They can tailor your mortgage to your needs to some extent, but their loan rates can be high.
Monoline lenders offer mortgages and nothing else. They’re usually smaller in scale than banks, and sometimes don’t have brick-and-mortar locations. This helps keep overheads low, and lends to their air of flexibility. Monoline lenders are definitely much more flexible than banks and even have more competitive rates, depending on your situation.
Private lenders are companies that offer short-term loans, all funded by investment. Private loans can be approved quickly, and may be a good fit if you have poor credit history or otherwise can’t meet the usual mortgage standards required by a bank. They’re also popular with property investors.
The downside is that they have higher-than-average interest rates, but even that is balanced by the fact that the loans are typically interest-only; the payments don’t go towards the principal, which means lower monthly payments. Still, private lenders have looser regulations, and you can’t get mortgage insurance on these loans.
What Type of Mortgage is Best for Me?
As mentioned, there are many different types of mortgages. Some of the most common include:
- Traditional or Conventional Mortgages – when a borrower has at least 20 per cent of the down payment, the lender provides the remaining 80 per cent.
- High-Ratio Mortgages – when a borrower has a down payment that is less than 20 per cent of the purchase price.
- Fixed Rate Mortgages – this is an interest rate that is guaranteed by the lender and will not change for a specified amount of time.
- Variable Rate Mortgage (VRM) – the loan’s interest rate fluctuates based on the current prime rate.
- Convertible Mortgage – allows you to move from a variable to a fixed rate (or a shorter to longer term) whenever you want without the risk of penalty.
- Hybrid Mortgage – also known as a 50/50 mortgage, this is a combination of fixed and variable rate mortgages which offers the best of both worlds.
- Closed Mortgages – these have more restrictions with regards to paying off or renegotiating your mortgage before the predetermined loan term.
- Open Mortgages – allows you more flexibility so you can pay off your mortgage in full at anytime during the contract.
- Reverse Mortgages – also known as home equity conversion mortgages, this type of mortgage allows you to turn your home equity into cash while you remain living him your home.
- Portable Mortgage – this type of mortgage moves whenever you do. If you move, you can take your current mortgage and apply it to your new property.
- Assumable Mortgages – as the name states, this type of mortgage can be assumed by someone else (must be approved by lender).
- Home Equity Line of Credit (HELOC) – this is more commonly used in conjunction with a mortgage; however, it can be used solely as a mortgage as long as it’s up to 65% of the property’s assessed value. Some types of lenders can offer this up to 80% of the value of the home.
- Cash Back Mortgage –you get a percentage of the to-be-mortgage amount upfront, in cash. This can be used for whatever you wish except your down payment.
- Collateral Mortgage – a mortgage that allows your lender to lend you more money as your property increases in value. This is done without the need to refinance your mortgage.
A mortgage broker will walk you through the different types of mortgages to help find the best option for your specific needs.
What Interest Rate Do I Qualify For?
Interest rates are going to be based on the lender, the federal interest rate, and also your credit. Of these, your credit score is likely the most significant factor. Your mortgage broker will tell you what interest rate you qualify for, as well as how much you’d need to improve your credit to qualify for a lower interest rate. You may be able to either wait until your credit improves or get a co-signer for an even lower rate.
How Much of a Mortgage Loan Can I Get?
The size of your mortgage loan is going to be primarily base don your income. How much you can spend is one of the most important things to know before you start looking at a home. While mortgage rates can change from month to month, the amount of house you can afford will usually remain relatively static unless you’re able to increase your income.
To determine how much you can qualify for, you will need to prove your income.
Can I Get Pre-Approved?
You always want to get pre-approved or pre-qualified before you start looking for a home. A pre-approval tells a seller that you’ve already given your information to the bank and that they’ve told you how much money you can spend. This means a mortgage professional has gone in-depth through your information, to truly determine what mortgage loan you would be able to get.
This lowers the chances that you could make an offer on a home but not be able to secure the right mortgage lenders. Further, you can ask your lender to lock in your mortgage rates at this time. That means that even if the mortgage rates go up prior to you buying, you’ll still be able to get a loan at the rate that you were initially quoted.
What Penalty Fees Are There?
Some mortgages involve certain penalty fees. The broker should be able to tell you what these penalty fees are. The most common of these is a prepayment penalty, under which the mortgage may charge you if you pay your loan off early, because they aren’t making as much in interest as they initially expected. It’s best to be knowledgeable about these fees beforehand, as you don’t want to be surprised by them later.
What to Look for in a Mortgage Broker
A mortgage broker needs to be trustworthy, confident, and experienced. When looking for a mortgage broker, look for someone who:
- Has established relationships with others in the industry. A mortgage broker should be able to connect to dozens of lenders to find you the best deal.
- Will tailor their services to you. Mortgage brokers need to go through your financial situation, understand your finances, and find the right solutions for you and your family.
- Provides additional mortgage services. A complete mortgage broker will also be able to provide additional services, such as helping with real estate investments.
- Has strong values and good company culture. You’re trusting a mortgage broker with a substantial purchase that will impact you for a long time to come. Look for a mortgage lender that values you as a customer.
By finding the right mortgage broker, you can make sure that you’re making the right decisions.
A mortgage broker will be able to work with multiple lenders to find you the best deal and to get you the home of your dreams. Of course, finding the right broker can also take some work. Chris Allard can help. Contact the Chris Allard Mortgage Team to get started today.
Chris Allard’s experience in the field means he can get you offers with over 50 financial institutions lending in Ottawa. Every lender has many mortgage products they offer, which means Chris and his team will make sure a mortgage caters to your needs while also ensuring you get a competitive rate. Chris Allard is a proud mortgage broker of Smart Debt Mortgages, independently owned and operated. Smart Debt broker #12236.