Getting a home in Toronto can seem overwhelming, particularly in today’s competitive market. It’s good to equip yourself with the knowledge you’ll need to apply for a mortgage and succeed.
Here are the essential things you need to know about getting a mortgage in Toronto.
Homebuyers need to put some money towards the house before being approved for a mortgage. A lender will not offer you the full price of the property. You’ll need to show them you are serious and responsible—plan on saving between five and 20 percent of the sale price. Remember, the more you put down, the less you have to borrow. It can also get you better terms with a lender.
Boost Your Credit Score
Lenders look at a lot of different factors during the mortgage application process. One of the most important is your credit score. Consider improving your credit score as you work to save up for your down payment. You can do that in a few ways, such as:
- Paying down your debt
- Making your payments on time
- Don’t apply for any more credit
Your credit rating demonstrates to lenders how trustworthy you are with money. It will be worth the effort to get your credit rating as high as you can. It can open the door to better terms and a lower rate.
Get Pre-Approved for the Mortgage
Mortgage pre-approval does not mean you’re approved for a mortgage, but it does give you an idea of the terms the lender would offer. It also locks in the rate they offer if anything changes before you decide to make your mortgage application. Getting preapproved can also let you compare rates between different lenders, so you get the best one. Pre-approval can be done by mortgage brokers or directly from lenders.
Understand the Stress-Test
The mortgage rules have changed over the past couple of years, and it’s important to know what impact that will have on your application. The stress test is a term that refers to a new requirement of borrowers. To be approved for a mortgage, you need to afford your monthly mortgage payments at the loan interest rate plus two percent or 5.25 percent, whichever is more.
Don’t Forget the Extras
Many homebuyers get so distracted with saving up for the down payment and making the mortgage application. They forget to budget for the extra costs involved with buying a property. These additional costs include legal fees, land transfer tax, home inspection costs, repairs or renovations, etc. Some of these are closing costs, which mean you’ll need to pay it when you take ownership of the home. Other expenses, like repairs, utilities, and property taxes, can likely be deferred.