Looking for a home is exciting! It’s tempting to scour the MLS and find the home of your dreams. When you do, you want to see it right way, right?
But wait . . .
Get Your Ducks in a Row
Have you saved up a down payment?
Is your credit score in order?
Do you know how much money you can afford to borrow?
Whether you plan to visit a bank or enlist the help of a mortgage broker, get in touch with a mortgage pro, before you start pounding the pavement.
Follow these steps, before you start looking seriously for a new home:
- Pull your credit score and review your credit report. In Canada, we have two official consumer reporting agencies; Equifax and TransUnion. Request your reports for free by snail mail, or pay a fee and get them instantly. Newer online services, like Credit Karma and Borrowell, provide them at no charge too. Pulling your credit report won’t hurt your credit, if you do it yourself.
- Make sure all your information and accounts are correct. You might see areas that you can improve. If you’ve had credit issues, you can fix them, but it will take time. Now is the time to pay down debt, save for a larger down payment, and increase your credit score.
- Get Pre-Approved. Once your credit file is in order, and you’ve narrowed your property search, talk to your mortgage professional about pre-approval. They will analyze your financial situation. You’ll provide documents to prove your employment and income, and verify your assets and financial obligations. Then your mortgage agent will send your application to the lender, who will confirm and evaluate your information. Hopefully, they’ll issue a pre-approval (subject to approval of the property), with the amount they are willing to lend, and an interest rate guaranteed for a certain amount of time, usually 30-90 days.
It feels tedious to do these things ahead of time, but if you have a pre-approval in hand, you will:
- Find out whether you’re ready to borrow, or if you need to make a plan
- Determine affordability and set your price range
- Set your budget and decide whether updates or renovations will be feasible
More importantly, you won’t miss out because of delays or difficulties with financing.
Occasionally, a pre-approval doesn’t pan out; for example if you can’t provide the necessary documentation before closing, or an appraisal comes in too low. A bank can refuse even if you were pre-approved, but the chances of getting what you want are higher when you seek pre-approval first.
Questions About Mortgages or Real Estate?
Remember, there are unexpected costs related to purchasing and moving, so, budget accordingly. If you need a check-list, so you are not surprised at closing time, call or email me today.