As a Mortgage Broker in Grande Prairie, Alberta, I have had the pleasure of helping many people realize their home-ownership dream. Purchasing a home can be stressful if homeowners lack proper professional support throughout the transaction; especially if this is their first home purchase.
There are a few things that are critical to keep in mind when planning to make a purchase. I would like to elaborate on some of the issues that have come up during transactions as a Mortgage Agent. Below are commonly made mistakes to avoid:
House shopping before getting Pre-Approved:
Getting pre-approved means contacting a mortgage broker like myself to find out what property price range is realistic to be looking at. The pre-approval process is not difficult, however, it does require documentation to be provided such as previous 2 years of Notice of Assessments, T4’s or T1’s (if self-employed), letter of employment and recent paystubs. As your mortgage broker, I will request a credit bureau and compile the documents to prepare your application for pre-approval and calculate the pre-qualified amount that you are able to afford based on mortgage rules, regulation and ratios.
Not using a recommended Realtor:
Chances are pretty good that someone you know has used or knows a realtor in your area that they would recommend. As a first time home buyer, it can be beneficial to find one that has a lot of experience in dealing with first time buyers as they will make sure to explain and recommend things that you might not know about off hand. Always make sure your realtor does not start showing you houses that are at the top of your pre-approved price range. Start looking at the lower end or you may end up in a situation where the only homes you like end up being higher than your pre-approved amount.
Not being aware that you need separate funds for a Down Payment & Closing Costs:
The minimum amount you must provide once you find a home and have an accepted offer is 5% of the purchase price. This amount can not be a loan (can be on exception), is typically required to be savings, Investments, RRSP’s (see RRSP programs), proceeds from the sale of another property, sale of an asset or a gift from an immediate family member. Closing costs can amount to a few thousand dollars and are also part of the process to pay for the solicitor, a property inspection, appraisal (if requested by lender/insurer). I always make sure to disclose to my clients the amount to expect for closing costs and additionally, I like to get quotes from lawyers so that you can get the best price out there.
Not knowing that Property Taxes are a payment above and beyond your mortgage payment:
Property taxes are owed to the city or municipality that you live in. They are assessed at a flat amount each year and you have the choice of paying monthly or making the full payment each year.
Not realizing that there are First Time Home Buyer programs through the Government or by utilizing RRSP’s:
Always look into any first time home buyer programs that may be applicable to you. If there are programs that you do believe would be beneficial, make sure to research them thoroughly as some might end up not being the way to go depending on your circumstances. Click here to see the first time home buyer incentive program.
Saying “NO” to the Life and Disability Insurance offered on your mortgage:
The life and disability insurance program is critical for anyone that does not have life and disability insurance through other sources. The premiums are minimal and if you end up selling your home and taking on a new mortgage with a different lender at some point, the insurance can be ported to your new mortgage as well assuring coverage at all time. You do not start over and your premiums do not increase on the original loan amount. It can give great comfort to know that your mortgage is covered off if you were to pass away or unable to continue earning income due to a disability.
Purchasing vehicles with credit or big items with credit cards before possession date:
Once you start the process of a home purchase you do not want to start piling up any debt. Debt is a huge factor with lenders saying yes or no when approving financing. They take any debt you may have into account when the application is in the processing stage but even once funding is approved they may actually pull another credit bureau report before possession to make sure your debts have stayed consistent.
Making your first home purchase is a huge step and can be very overwhelming. The best way to make sure you are not going to end up with undesirable surprises is to enlist the services of a mortgage broker like myself. I take great pride in making sure that the entire process is a positive experience for home buyers and am happy to help anyone with any mortgage financing questions.