Tips To Avoid Getting Into Mortgage Mishaps
Buying one's first home has always been an overwhelming experience. However, people buying their first home should also be cautious enough so that they don't get trapped into any mortgage misfortune. And for this they ought to do some homework even before they set out to search for their dream home.
In fact, when an individual purchases a home, it is one of the major financial obligations that he or she would ever undertake. The most intimidating part in the process of buying a new home is perhaps submitting an application for a mortgage. It may be remembered that this task is so daunting that at times even the smartest among us have made slips while trying to get the best mortgage plan for their home.
In case you are contemplating to buy a home in the sometime soon, you need to follow certain guidelines with a view to avoid the common mistakes that many first-time home buyers make while getting a mortgage. Here are a few tips regarding ways and means to avoid these mistakes while you go for a mortgage.
- Learn about your credit rating
- It has been generally seen that several people who are buying a home for the first time are actually ignorant or uninformed regarding their status vis-à-vis their credit rating. It is important to note that people having a superior credit rating are actually better positioned to qualify for a mortgage. Hence, instead of crossing your fingers while visiting your bank with the hope that your mortgage application would be approved straightaway, it is advisable to obtain a copy of your credit report beforehand. By doing this, you would be able to know where you stand precisely vis-à-vis your credit rating. There are a number of ways to obtain your credit rating. You may choose to get it free of cost by e-mail from Equifax Canada or pay a charge to access your credit rating online immediately.
- Undertake some comparison shopping
- While you are seeking a mortgage for your new home, generally your instincts would take you to your home bank branch - and, believe us, this is indeed an excellent place to begin your search for a mortgage. However, it is also important to check at the other banks and financial institutions to find out what they are offering. In fact, it is not advisable to accept the very first offer that is presented to you. Instead you ought to do some research and find out if there are some other financial institutions who are offering better deals. Weigh the offerings by each of these financial institutions and eventually decided on the one which you think suits your requirements best.
- Interest is not the sole criteria
- Many of us have misconceptions that getting a low rate mortgage is most beneficial. While it is true that a low rate on your mortgage would be ideal, all the times it is not going to help you save money over a prolonged period. Therefore, it is important you also consider all other aspects regarding the mortgage, such as the cost of the home, the nature of the mortgage (fixed or variable), the amortization period and also the different sort of payment plans that are available.
- Get pre-approved
- Getting pre-approved for a mortgage helps you to know the precise price of the home that you have enough money for. In addition, getting pre-approved also enhances your bargaining position against rival bidders when you are putting in your offer on a house. In fact, when you get pre-approved for a mortgage, you need to contend with lesser number of conditions.
- You need not use the complete amount you were pre-approved for
- To be pre-approved for a $650,000 mortgage may really be very exciting, but then you would be required to be equipped to deal with the payments that come along with such a big mortgage. Hence, it is advisable that you should play it safe and abide by the amount you have actually budgeted for. Never allow the budget to go over your head, or you may be in trouble while making the mortgage payments.
- It is imperative to allow for closing costs
- This is one aspect which may catch the first time home buyers napping. Once your mortgage has been approved and you have made the requisite down payment, it is important for you to ensure that you keep back some money as reserve funds with a view to cover the expenses of home inspection, fees of the lawyer, property and land transfer taxes, insurance and, obviously, the expenses that you will incur in moving to your new home. However, it you spend all the money you receive as mortgage on purchasing the house alone, you would face difficulties later in meeting these essential expenses associated with buying a new house.
It needs to be reiterated that the most excellent way to keep away from getting into any mortgage troubles is essentially to do your homework beforehand. It is always advisable that you first talk to the mortgage expert at your home branch bank, your real estate agents as well as friends, relatives and colleagues who have already gone through the experience individually and learned thing the harder way. At the same time, it is important not to be afraid to ask as many questions you need to in order to get a clear picture regarding the problems you might come across in the process of buying your new home. Always bear in mind that buying a new house is one of major decisions that you make in your lifetime and, hence, you have the right to know about all and everything you are getting before you sign any agreement or document pertaining to your home purchase.