How much home can you afford?
If you’re like most people, you probably feel like shopping for a mortgage can be about as much fun as getting a root canal. But it doesn’t have to be that way. Here are six basic steps you can take to ensure that you find a mortgage that works for you when getting ready to buy a home.
1. Check your credit
Get a copy of your credit report from Equifax.com (or a similar service). Double-check every item listed and if there are any errors or omissions, contact your credit bureau to change them. How’s your score? One way to improve your rating is to pay off any outstanding credit card debt. Be sure not to close out accounts when you pay them off though. If you credit rating is challenged right now, we will dive into how to increase your credit rating in a future post.
2. Do the math
Now that you have an idea of how much you owe, gather up all of your information on your assets (your current home, investments, stocks, bonds, other properties) and add them up. Hint: it’s best when you own more than you owe. You can use online calculators such as those available through your bank or I can suggest some of my favourites to you. These days, all banks have have Income Calculators and Mortgage Calculators to assist you in these calculations in order to make sense of the numbers and give you a preliminary idea of the mortgage amount you qualify for.
Meet with a bank or lender. They’ll ask you some questions that may point out some things you missed in your initial estimate, like liabilities – or assets you didn’t realize you had. Using all this information, they’ll give you a rough estimate of how much you can borrow. However, this informal process isn’t a guarantee or a pre-approval. It’s simply a way to help you gauge the properties you can afford and figure out if you’re ready to make this type of financial commitment.
4. Learn the lingo
Familiarize yourself with mortgage terms and options by doing your homework. Give me a call and we can chat, or ask friends and family and check out all the websites and articles that have this info about amortization periods, the benefits of fixed or variable rates and more – there are lots of them.
5. Choose a lender
A mortgage is one of the biggest financial commitments you can make, so it pays to shop around. Even if you have an excellent relationship with your bank, there’s no harm in exploring the option of obtaining financing from another company.
Many homebuyers have found financing online, whether it’s through a mortgage finding service or a bricks-and-mortar institution. You don’t have to leave your home to do it, and you can shop 24/7. The downside of doing it online is that lacks a personal touch – you may miss out on an option that you might have come across by talking to someone in person.
6. Get pre-approved
Getting mortgage pre-approval is similar to pre-qualifying, but the result is an approval from a lender for a specific amount, locked into an interest rate for a period of time (normally 90 to 120 days).
So there you have it—six simple steps to get you closer to a mortgage that not only works for you but also gets you into the home of your dreams.
Have any further questions? Let’s connect and allow me to help you turn your dreams into an Address!