The Mortgage Process
Obtaining a mortgage can be intimidating and confusing. Similar to the buyer and seller guides, I’ve outlined the mortgage process for you in 4 easy steps!
Step 1: Mortgage Application
Before an application gets filled out, it’s important to first asses yourself financially. Figure out how much money you have and how much you need to borrow. It’s always critical to sort out how much you can afford so that when you apply for a mortgage you will be able to financially sustain yourself. A mortgage associate will then take an application by phone, in person, or online. Once it has been received, the mortgage application process will begin by verifying the information you have provided.
Step 2: Choose the Right Mortgage Program
Like all homes, mortgages also come in all shapes and sizes. You have to pick which loan is more aligned with your financial situation and goals. There are four basic types of home financing loans.
A) Fixed Rate Mortgage
Fixed Rate mortgages usually have terms that can last from 1 year to 10 years. As the name suggests, the interest rate and monthly payments will remain the same for the specified term. This type of loan should appeal to you if you: Plan to live in the home for more than 5 years Like the stability of a fixed interest payment Think your income and spending will stay the same Don’t like the risk of having a higher monthly payment
B) Adjustable Rate Mortgage
An Adjustable Rate Mortgage (ARM) lasts for 3-5 years. But during these terms, the interest rate on the loan can go up or down which means monthly payments can increase or decrease. This type of loan should appeal to you if you: Plan to say in your home for less than 5 years Don’t mind having your monthly payment increase or decrease Are comfortable with risk of possible payment increases in the future Think your income will probably increase in the future
C) Combination Rate Mortgage
A Combination Rate Mortgage combines fixed interest rates and adjustable interest rates. This type of loan would appeal to you if you: Want to manage interest rate risk Choose to take advantage of both long and short term rates Like the stability of a fixed interest payment Don’t mind having monthly payment increase or decrease
D) Lines of Credit
Utilizing a Line of Credit is becoming an innovative way to finance your home purchase. You can take the amount you need from the credit limit that you were granted. You only pay interest on what you use and this money can be put towards things like home renovations, a child’s education, and debt consolidation.
Step 3: Mortgage Submission and Approval
Once you select the appropriate mortgage program, the application will be submitted with any other required documentation. You will then wait for the mortgage approval. Keep in mind that your approval may come with conditions which will likely need to be fullfilled before the mortgage tranaction takes place.
Step 4: Lawyer
The mortgage instructions get sent to your lawyer for review and signing of the documents by you. First you will review all the terms and conditions to make sure the interest rate and loan terms are what were promised. Double check to see that the names and address are correctly spelled on the documents. Signing takes place in front of a notary public or lawyer. There will be several fees with obtaining a mortgage and transferring property ownership which will be paid at closing. You may need to bring a bank draft cheque for the down payment and/or closing costs if required. Personal cheques are not accepted. Other items: proof of homeowners insurance and other requirements such as flood or fire insurance and proof of payment.
