Tips for First-Time Home Buyers
Mortgage Brokers in Ottawa Offer Advice to Make First-Time Home Buying Less Overwhelming
With a seemingly endless amount of mortgages to choose from these days, choosing the right mortgage can be overwhelming, especially for first-time home buyers. You need to find a mortgage that will suit your current financial situation while also taking into consideration your plans for the future.
Although future plans don’t always work out the way we intended, you can still prepare for the future with a good mortgage. But how do you go about finding this perfect mortgage? First, consult with mortgage brokers in Ottawa so they can help you choose a mortgage suited to your financial situation and prepare for any unexpected changes life may throw your way.
Choosing Your First Mortgage
The first step to choosing a mortgage is figuring out how much you will be approved for—as in, the value of the home you can buy. Your mortgage broker will calculate your income, your partner’s income (if buying a home with another person), your down payment, your debts, and anything else that affects your financial situation.
New Canadian mortgage regulations require federally-regulated financial institutions to complete mortgage stress tests for potential borrowers. These stress tests determine whether or not you can afford to pay for your mortgage if interest rates rise.
These regulations are in place to make sure you don’t buy a home you may not be able to afford in the future. But, as a result, it’s now more difficult to qualify for a large enough mortgage to buy your dream home. So, to make sure you find a mortgage that suits your financial situation and covers a home you’re happy with, consider your options with your mortgage broker.
How long do you plan to live in your new home? This will determine whether or not you will need a mortgage with portability—moving your mortgage to a new property without penalty. If you only plan to live in your new home long enough to renovate and flip it, then you should choose a mortgage with good porting options.
Low-Interest Rates and Prepayments
Ideally, you will find a mortgage with the lowest interest rates. But some of these come with no-frills, as in, less leniency when it comes to porting, refinancing, or paying off your mortgage faster with prepayments.
So, if you don’t plan to move and port your mortgage, or refinance your mortgage, in the near future—say, the next five years—then you can find the lowest but most restrictive mortgages. These tend to offer a cheaper rate but for smaller prepayment privileges, larger penalties for prepayments, and restrictions on breaking your contract to refinance with another lender.
Terms and Rates
Since fluctuating interest rates may seem risky for first-time buyers, many will choose a five-year fixed rate to avoid any surprises. But if you have a steady income, good credit, and manage to save money every month—about five percent of your income—then you may want to choose a variable-rate mortgage with a shorter term. These mortgages tend to have lower rates, allowing you to save more.
For peace of mind and staying within budget, you can also choose variable mortgages that will keep your monthly payments the same despite any changes in mortgage rates. And if you’re still unsure, talk to your mortgage broker about hybrid mortgages. These are split into a fixed rate and a variable rate, providing lower rates while preventing an increase in your monthly payments when interest rates go up.
Buying Your First Home
When you’re ready to buy your first home, enlist the help of professionals to make your dream a reality, without all the stress of doing this work on your own.
Using a cash-flow analysis of your income against current and forecasted expenses, an accountant can give you a realistic budget for how much you can actually afford for monthly mortgage payments.
Upon securing a mortgage, you can now start searching for your new home. A real estate agent can provide valuable advice when shopping around. Realtors will also negotiate with sellers and help you find the right home for the right price. And since you’re a buyer and not a seller, their services are free. Realtors only receive a commission when selling a home.
You may also wish to hire a real estate lawyer or notary to review your contract before finalizing the sale of the home. They will look for any legal issues in the contract, as well as issues regarding the property. These issues can be addressed with the seller prior to finalizing the sale.
With your realistic mortgage payments in mind, a mortgage broker will search for the best mortgage for your current and future goals by negotiating with various lenders. Mortgage brokers are able to negotiate competitive interest rates, handle the paperwork, and guide you through the contract once you are approved for a mortgage.
Mortgage brokers work with a number of different lenders to find the best mortgage for you—which will have enough predictability and flexibility to make your first-time home-buying experience less overwhelming.
How Mortgage Brokers in Ottawa Make Securing a Mortgage Much Easier
A mortgage is usually the largest debt load Canadians take on in their lifetime. And while mortgages are usually considered good debt, it’s still intimidating, especially if it’s your first home. If you’re a first-time home buyer, then finding a dedicated mortgage broker can help with the house hunt and save you stress in the long run.
Why Mortgage Brokers?
Mortgage brokers connect borrowers with lenders to find the best mortgages. The skills and experience of mortgage brokers help homebuyers navigate the mortgage process. These skills can pay off with savings from a lower mortgage interest rate.
When it comes to working with a mortgage broker, you have nothing to lose. Here are some of the many reasons why you should consider the help of mortgage brokers.
Their Services Are Free
That’s right—a mortgage broker won’t charge you for their time! The lenders they work with will pay them when you secure a mortgage. They help you find a mortgage you are happy with, give you professional advice, and do so in your best interest.
Flexible to Meet on Your Time
Mortgage brokers are freelance agents who are flexible when meeting clients. They aren’t restricted to banking hours. So, if you can only meet after work, then your mortgage broker will find a way to accommodate your schedule.
Excellent Negotiation Skills
Mortgage brokers work as the negotiator between you and the lenders. And they aren’t afraid to push for a lower rate. This skill comes in handy for home buyers who are afraid to be aggressive and negotiate a better deal.
Get Lower Interest Rates
Their negotiation skills pay off so you can get a lower mortgage rate. This lower rate could save you hundreds of dollars each month on your mortgage payments. That money can go towards other important savings and plans instead.
Find the Best Mortgage for Your Situation
Mortgage brokers take the time to get to know you and your financial situation. They will calculate what you’re approved for and what kind of mortgage makes sense for you. Your mortgage broker will go over the different types of mortgages. They will want to help you find the best mortgage so will develop a lasting relationship with them.
Relationship with Non-Traditional Lenders
Mortgage brokers work with various types of lenders. This allows more flexibility when it comes to finding and securing a mortgage. Mortgages from non-traditional lenders are possible for borrowers with poor credit. This helps borrowers build their credit and have a chance to enjoy home ownership.
May Even Cover Fees Out of Pocket
Your mortgage broker may have special programs where legal fees and appraisal fees can be reimbursed on closing. This is their way of showing that they are invested in your relationship. You will likely return to renew your mortgage if you are happy with your mortgage broker.
Key Questions to Ask Potential Brokers
Ask the following questions to ensure your mortgage broker is willing to help you, and that you understand what you’re signing up for.
What are the details of the application process?
To gain a thorough understanding of what to expect, make sure you find out the following details:
- All the required documents and your deadlines for submitting them
- Cost and time frame to secure a mortgage rate
- Average time to closing
- Lender and third-party fees
- Loan product requirements—such as down payment, credit score, and debt-to-income ratio
- How you can track the application process/progress of your loan
- The professionals you’ll need to work with (real estate lawyers, realtors, home insurance brokers, movers, etc.)
What Would My Experience Working With You (the Mortgage Broker) be Like?
A professional should be able to make the daunting process easier for you. But you will need to determine a few factors to ensure this is possible. Find out:
- How accessible and available they are. Including if they’ll return your calls or e-mails on time.
- The methods they are willing to contact you by. This could include e-mail, phone, online chat, or a combination of each option.
- If they provide clear answers to your questions. As in, they are straightforward and don’t leave you guessing.
- Determine if they are the only person you will be dealing with. Or, if they have an assistant or a partner who may also contact you.
- The number of years of experience they have in the business.
What are my options if I have bad credit?
For first-time home buyers with bad credit, securing a mortgage isn’t 100% impossible. Make sure you are upfront with your mortgage broker so they know what they’re dealing with right away. This will make the application process go smoother. And you can avoid wasting time going to lenders who have strict lending requirements. Instead, your mortgage broker will tailor your mortgage application to suit your financial needs.
What are the best rates I can get?
Ask specific questions with reference to your financial situation. Explain your desired loan amount, mortgage terms, and down payment, and ask what the best rates are for you. For example, “What rate can I get with a good credit score and a 20% down payment for a $200,000 home?”
You can even be more specific about the length of mortgage you want and whether you want fixed or variable rates. With this information, a mortgage broker will compare rates from various lenders. Then, they will show you the best rates and help you decide on the right one for you. When choosing mortgage brokers in Ottawa, look for those who offer competitive rates. They should also provide professional service and support throughout the process.
A good mortgage broker will help you understand each piece of the loan puzzle. They will give advice on credit scores and financial planning for your future. And they will help make your first time buying a home less scary and more exciting, as it should be.
Buying a first home is both an exciting and scary time in life. Since life is rarely predictable, this unpredictability can make choosing a mortgage and buying a home even more daunting. But with the help of Ottawa mortgage brokers, you can prepare for your current and future lifestyle, goals, and financial situations, including the unexpected, such as a job loss or illness. To learn more about how the Chris Allard team can help you with buying your first home, contact us!
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.