For many people, owning a home will be the biggest and most important personal investment they will ever make. Thanks to the appreciation of real estate, you can expect the value of your home to rise exponentially in the future.
You may need to upgrade from an apartment to accommodate a larger family, so buying a home may be a requirement for some. However, buying your first home will require that you plan accordingly.
You need to have your finances in order so you can make your monthly payments while also meeting your other financial and personal obligations, like paying taxes, insurance and other living expenses.
If you are a first-time home buyer, then there are certain programs that you may want to look into, including the RRSP Home Buyer’s Plan, HST/GST New Housing Rebate, the First Time Home Buyers’ Tax Credit, and the Land Transfer Tax Rebate.
Here, our focus will be on providing you with expert tips that will help you get your mortgage approved.
Why Owning a Home is Important for Growing Wealth
Buying a home serves as a smart long-term investment. Your home will appreciate over time, and you will build equity over time. Building equity may allow you to tap into certain financial programs and options, such as a home equity line of credit or refinancing.
You can flip your home for a profit and use the money to start a business or pay off all of your outstanding debts. You can also turn your home into a rental unit and use the funds from your rental property to fund your primary residence.
Owning a home allows you to have greater control over your financial goals. There are many programs available that will help meet your unique needs, and working with a broker or financial advisor can help you find customized products that fit your budget.
There are many reasons to own a home today, and if you are interested in becoming a homeowner, you should be focusing on getting mortgage approval as the first step to owning the home of your dreams.
The Mortgage Application Process in Canada
The mortgage approval process begins with an initial discussion, followed by compiling the documents and application details. Next, the pre-approval process begins, followed by the lender underwriting stage.
The discovery call is first. You need to determine if you qualify for a mortgage from lenders. All your options will need to be identified and considered. If you can’t get a bank or credit union to provide a mortgage, you may need to work with private lenders. During your discovery call, your potential mortgage terms and rates will be discussed. The maximum loan amount available to you will also be determined.
The second stage of the mortgage application process involves the pre-approval stage. The lender will explore your current income levels, credit score and financial stability in great detail.
Here, the goal is to determine if you will be able to financially support the mortgage.
Stage three of the mortgage approval process involves live approval. A lender approval request will also be formally presented to the financial institution or private lender you want to work with.
You should have identified the specific property that you want to buy by stage four, the lender underwriting stage. The details of the property as well as the price will need to be provided to your lender or to the mortgage broker you are working with. They will review this information and compare it with the financial information you provided at stage two to determine if you are able to pay off the mortgage.
During stage five, if your lender approves your application they will send you documents with the required conditions that you need to follow to secure the mortgage and keep it in good standing.
At stage six, your lawyer and/or realtor will coordinate with the lender to register the property title and deed under your name if you buy it. They will also go over your down payment, offer to buy and all your require commitments as the homeowner (insurance, taxes, etc)
The final step involves the actual closing. At this stage, the loan will be provided and the funds will be released to you or your lawyer to purchase the property.
Your lender can back out of the mortgage approval process at any time if your financial situation changes.
Expert Tips to Increase the Chance of Your Application Getting Approved on Favorable Terms
You should first take care of all of your outstanding loans. You should work on improving your credit score to enjoy more favourable terms. Furthermore, you should opt for longer tenures whenever possible.
Save up enough money to put down a sizable down payment. Doing so may result in better rates, not to mention you will build equity faster.
Working with a professional mortgage broker is also strongly recommended. They have access to the “hidden” real estate market, allowing you to access many specialized products and services that may benefit your long-term financial goals.
Go over your credit report and all other pertinent documents to rectify any errors that may cause your application to be rejected. Bringing in a co-signer may also allow you to enjoy more favourable terms and get approved for the mortgage that you seek.
In addition, exploring local home-buying assistance programs can be a game-changer for many first-time buyers. If you plan on buying a house in the DC area, the DC area NACA Mortgage Program offers a path to homeownership with no down payment, no closing costs, no fees, and a below-market fixed rate. Participating in such programs can significantly reduce the barriers to owning a home and provide additional support through the home-buying process.
Taking the First Step
Compare and contrast all the lenders, loans, and products available to you. Work with a mortgage broker to obtain the best rates and offers in the industry. Ensure that all of your paperwork is up-to-date, and estimate your mortgage payments beforehand.
Saving up for a few years to get your finances in order and make a sizable down payment may also help secure your financial future.
Sources:
Getting preapproved for a mortgage – Canada.ca
7 Step Mortgage Approval Process (Canada) (richardsmortgagegroup.ca)
First Time Home Buyer Programs | Ratehub.ca
Home Ownership Investment: Risks and Benefits (investopedia.com)
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