Most people cannot afford to buy a home without getting a mortgage. The mortgage refers to a loan issued primarily to buy a home, where the home that you buy becomes the security or collateral of the loan. You are expected to pay the principal amount that you borrow in a stated number of years, and the interest charged on it. There are various qualifications, which you have to meet for your loan application to be approved in Canada. Below are a few tips to help you apply and get a mortgage loan.
Tips to help you apply for a mortgage
Decide between working with a bank or broker
Before you even begin the loan application process, you have to decide whether you will do it via a bank or a broker. Most first-time buyers usually opt for a bank, particularly their existing bank. One of the reasons for this is because of the existing relationship with the financial institution. This will give you some comfort during the entire process, and in some cases, it may even make the entire process easier. The bank can also help you with great financial advice and wealth planning. For example, you may get good advice on whether to use your extra money for down payment of the mortgage, or put it in an RESP, RRSP, or a tax-free savings account.
Using a broker has its own benefits as well. For example, you may get access to a wider variety of products as the brokers work with many different lenders. The brokers also specialize in mortgages unlike the banks, which deals in various types of lending.
Get preapproval before house hunting
It is important that you get pre-approval for your mortgage before you even start looking for your new home. This is because it will help you know the amount that you will be able to afford to borrow with regards to your credit rating and qualifications. It will also make your house hunting a lot easier as you can narrow down your options to the home that will be affordable based on the amount that you qualify for.
Place a high down payment
Most lenders will only approve a mortgage of up to a maximum of 95% of the value the home. This means that you have to cover the balance in the form of a down payment. The more money you put in as down payment, The amount will also influence the overall amount of interest that you will have to pay.