If you are in the market for your first home, it is important to be prepared. Doing some research ahead of time will help you make the right decision when it comes to mortgages.
Here are some things you should know before getting your first mortgage.
1. Know your credit score
Your credit score gives lenders an idea of your financial health. But it is just as important that you know what your score is before you apply for a mortgage. In Canada, there are five categories of scores, including: poor, fair, good, very good and excellent. The higher your score, the better your chances of getting a low mortgage rate. So, it’s a good idea to do everything you can to try and increase your score.
2. Save for a down payment
The more money you’re able to put down right away, the better – for several reasons:
You won’t have to borrow as much
It affects the size of home you can buy
A larger down payment means you’ll have more equity in your home
To qualify for your first mortgage in Ontario, you need to put at least five percent of the purchase price towards the down payment. Additionally, if you are putting less than 20 percent towards a down payment you’ll also have to pay for mortgage loan insurance. This is a policy that protects the lender in case you default on the loan.
3. Know how much you can afford
Be honest with yourself about how much you can afford to pay in mortgage payments each month. If you don’t already have a budget, it’s a good idea to start one. Consider all your living expenses including debt repayments, utility costs, car expenses, childcare etc. Don’t forget to include the extra expenses of owning a home, like repairs and property taxes.
Lenders can offer you pre-approval for a mortgage which gives you an idea of how much you’ll be able to borrow and what interest rate and term you’ll be offered. It helps you know how big a house you can afford and what you’ll be paying each month. Pre-approvals are good for 90-120 days.
5. Be aware of closing costs
The total cost of buying a home includes more than just the down payment. Unfortunately, many first time homebuyers are not prepared for closing costs. These are additional fees you’ll have to pay such as lawyer fees, land transfer tax, home inspection fees, appraisal fees, property tax etc. Budget for 1.5 percent to 2.5 percent of the purchase price of the home.
6. Go for the best rate
The mortgage rate has a big impact on how much you’ll pay over the term of your loan. You’ll want to get the lowest rate possible. You can improve your chances of getting a low rate if you use a mortgage broker. They will be able to help you shop around for the best offer.
If you are interested in learning more about getting your first mortgage in Toronto, then call Northwood Mortgage™ at 888-495-4825 or contact us here.