What To Know About Getting A Mortgage

Does Preapproval Affect Your Credit Score

Getting preapproved for a mortgage has an impact on your credit score. Thats because when lenders check your credit, they perform a hard inquiry, which can drop your score by a few points. The good news is that the effect is small, and gets even smaller as time passes: Hard inquiries come off your report entirely after two years.

If youre planning to get a preapproval from more than one lender, aim to do it within a 45-day window to avoid more damage to your score than necessary. Inquiries within this time frame will be counted as one inquiry, instead of multiple.

Your Ex Partner’s Score Can Wreck Yours

If you’re financially linked to someone else but you’re now separated or have nothing to do with them, then de-link yourself.

If not, any late payments or misdemeanour they’ve committed will reflect badly on you. Write to the credit agencies and ask for a notice of ‘disassociation’.

You could still be linked to old flatmates if you had a joint bank account for bills, so it’s worth checking that their credit history isn’t affecting yours. If it is, de-link yourself quickly.

Even if the person you’re linked to has a good history now, you still risk problems in future if they miss payments. The guide has full details of what to do.

What Is The Difference Between Fannie Mae And Freddie Mac

Fannie and Freddie both purchase mortgages from different financial institutions. Fannie purchases loans from credit unions, big banks in the commercial finance industry, and mortgage brokers. Freddie, on the other hand, buys the smaller loans from original lenders who are sometimes referred to as thrift banks. Both Fannie and Freddie are a vital part of the mortgage industry. Their role in moving money through the US Housing economy helps to assure that mortgages are affordable and accessible to homebuyers.

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Working Out What You Can Afford

Use our Mortgage Affordability calculator to work out how much you can afford.

Dont stretch yourself if you think youll struggle to keep up repayments.

Also, think about the running costs of owning a home such as household bills, council tax, insurance and maintenance.

Lenders will want to see proof of your income and certain expenditure, and if you have any debts.

They might ask for information about household bills, child maintenance and personal expenses.

Lenders want proof that you will be able to keep up repayments if interest rates rise.

They might refuse to offer you a mortgage if they dont think youll be able to afford it.

How To Find Your Mortgage And Make Sure You Get The Best One

Mortgages: Some lenders will have deals for specific types of buyers

Under the new rules, almost all mortgages will have to be taken out with financial advice.

This can be from a bank adviser who will only recommend their employers own products, in which case doing your own research across the whole of the market is vital, or via a mortgage broker that can search the whole of the market for you.

Using a broker can be beneficial as they can help you through the whole application process and should know what type of applicants a lender will accept. This can speed up the process and means you dont waste time with other lenders.

A broker may have access to exclusive deals and could help find lenders that cater for niche cases such as those with a poor credit history or who are self- employed.

Some brokers will not charge any upfront fees and will instead get paid from commission if you take out a mortgage with them. If you dont take out the mortgage they recommend, and there is no obligation to do so, you should not end up paying.

Other brokers will charge you for searching for products and for the application process.There are some banks such as HSBC and the Post Office that do not work through brokers so it is still worth keeping an eye on the wider market.

All mortgage brokers should be listed on the FCA register if a broker doesnt appear there then they are not authorised to provide mortgage advice.

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How Long Does A Preapproval Last

Many mortgage preapprovals are valid for 90 days, though some lenders will only authorize a 30- or 60-day preapproval. If your preapproval expires, getting it renewed can be as simple as your lender rechecking your credit and finances to make sure there have been no major changes to your situation since you were first preapproved.

Applying For A Mortgage

Applying for a mortgage is often a two-stage process.

The first stage usually involves a basic fact find to help you work out how much you can afford, and which type of mortgage you might need.

The second stage is where the mortgage lender will conduct a more detailed affordability check, and if they havent already requested it, evidence of income.

Stage 1

Generally, the lender or mortgage broker will ask you a series of questions to work out what kind of mortgage you want, and how long you want it for.

Theyll also try to work out, without going into too much detail, your financial situation.

This is generally used to provide an indication of how much a lender might be prepared to lend you.

They should also give you key information about the product, their service and any fees or charges if applicable.

Stage 2

This is usually where you begin your application.

The lender or mortgage broker will begin a full fact find and a detailed affordability assessment, for which youll need to provide evidence of your income and specific expenditure, and stress tests of your finances.

This could involve some detailed questioning of your finances and future plans that could impact your future income.

Theyll also assess the impact on your repayments should interest rates rise in the future.

If your application has been accepted, the lender will provide you with a binding offer and a Mortgage illustration document explainingterms of yourmortgage.

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Where Can I Get A Mortgage

There are several routes you can take when hunting for a mortgage, including going to a bank or , or working with a mortgage broker. Whatever type of lender you choose, we have recommendations for the best places to get your mortgage that we suggest looking at if youre just at the beginning of your search.

How Is My Borrowing Amount Determined And How Do I Qualify

The amount that you are able to borrow will be determined during the pre-approval and approval process. You should consider early on in your home search how much of a monthly payment you would be comfortable paying. From the lenders perspective, the amount you are approved to borrow will be relative to your income.

Keep in mind that your total payment will include the principal and interest payments , real estate taxes , homeowners insurance , and finally, any homeowners association fees . With these payments in mind and an understanding of how much money you have available for a down payment, the lender will determine your loan amount and the approximate price of property you can afford.

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How Long Do I Have To Pay Back My Loan And At What Rate

Typically, mortgages are 30-year loans, but you can pay off the mortgage early without penalty. The interest rate is determined by the current market and is readily found online or by consulting a mortgage professional. A trusted mortgage professional can act as a guide and help you find the best rates available.

What Is A Decision In Principle Is It The Same As A Mortgage Offer

A decision in principle from a lender tells you how much they are willing to lend you in theory, based on a quick assessment of how much they think you can afford a month. It is not the same as a mortgage offer, which the lender will only make once they have conducted the necessary financial checks, and a basic valuation of the property to check how much its worth.

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What To Know About Getting A Mortgage Approval In Your 20s

The process of buying your first home can be intimidating, especially if youre young and have a relatively brief financial history. It takes time to save up for a down payment, build good credit and establish a strong relationship with your financial institution and as we all know, none of this happens overnight or without effort. When you go to a lender and ask for something as significant as a mortgage in your 20s, when your career and financial plan are still developing, its natural to wonder if youll actually get approved.

Good news: your chances are pretty good. While it may be daunting to apply for a mortgage in your 20s, Interior Savings has solutions for Canadians in all stages of life. Heres how to get a mortgage approval in your 20s if you have any questions, please reach out to our team for personalized advice.

Mortgages : A Guide To Getting Your Mortgage

Youre probably already familiar with the fundamental concept of obtaining a loan to become a homeowner. But in reality a mortgage is a rather complex marathon of financial calculations, comparing offers, and various approval stages.

In this article well explore mortgages in depth, and in simple, comprehensible terms. Well go over the mortgage process from start to finish, where to look for the best rates, and the vocabulary youll need along the way.

In This Article:

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Beware Of Credit Barriers

The pitfall of not having a credit history is one barrier that could halt or delay the application process. According to Miller, just using a debit card can help you begin to establish a credit history. Frankly, its quite challenging or relatively impossible to get approval without a good credit score.

The lender evaluates your work history, job stability, and down payment when determining whether you have the ability to repay. “If youve been on your first job for a month, you might want to give yourself a little time to build a savings before jumping right into a mortgage,” says Miller.

What Information Will I Need To Provide As Part Of My Mortgage Application

As part of your application you will be asked for basic information along with proof of your monthly income and expenditure.

Lenders will ask detailed questions to help them get an overall picture of your financial circumstances and how you manage your money. They need to know you can afford to pay your mortgage now and in the future They will consider your monthly income against your monthly outgoings, including any loan repayments, utility bills and general living expenses . You will also need to include any additional expenses for your partner or spouse, and dependents .

Lenders will also consider any possible changes in your circumstances such as redundancy or retirement which may affect your ability to meet your monthly repayments in the future.

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Understand The Mortgage You’ve Selected By Carefully Reviewing The Loan Estimate And Closing Disclosure Forms

If you apply for a mortgage on or after October 3, 2015, the lender must deliver or mail to you a form called a “Loan Estimate” no later than the third business day after receiving your mortgage loan application. You’ll also get a user-friendly “Closing Disclosure” three business days before you close on the mortgage loan. Be sure to review these forms carefully and ask your lender any questions before you go to the closing table.

What To Provide To Your Lender Or Mortgage Broker

Before preapproving you, a lender or mortgage broker will look at:

• your assets
• your income

Youll need to provide the following:

• identification
• proof you can pay for the down payment and closing costs
• information about your other assets, such as a car, cottage or boat
• information about your debts or financial obligations

For proof of employment, you may have to provide:

• a proof of your current salary or hourly pay rate (for example, a recent pay stub
• your position and length of time with the employer
• notices of assessment from the Canada Revenue Agency for the past 2 years, if youre self-employed

Your lender or mortgage broker may ask you to provide recent financial statements from bank accounts or investments. This will help them determine if you have the down payment.

Your debts or financial obligations may include your monthly payments for:

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Dropping Mortgage Rates Drive Borrowers To Refinance Should You

by Maurie Backman | Published on Nov. 10, 2021

Many or all of the products here are from our partners. We may earn a commission from offers on this page. Its how we make money. But our editorial integrity ensures our experts opinions arent influenced by compensation. Terms may apply to offers listed on this page.

What Happens When I Pay Off My Mortgage

Your servicer will send a mortgage release. This document, otherwise known as mortgage satisfaction paperwork, shows that your loan is paid in full and the bank no longer owns a lien against the house. Once you have officially paid off your home and your mortgage is free and clear, you are going to have to start paying any monthly charges, such as insurance, and property taxes yourself.

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Important Terms To Know

Pre-Qualification: This is ideal when youre only thinking about buying a home. A lender will collect basic information about your finances and then give you an approximate figure for how much theyd potentially be willing to lend you to buy a property.

Pre-Approval: Getting pre-approved for a mortgage is more formal than pre-qualifying. In this stage a lender will verify the financial information you provide them and run a credit check. If youre pre-approved it indicates that the lender is committed to providing you with a loan, though the final amount theyre willing to lend you and the terms of the mortgage are subject to change based on an actual property valuation as well as market fluctuations.

The Mortgage Stress Test: This is a calculation of whether you can still afford to pay your mortgage in the event that rates increase. The results of this stress test will determine your qualifications for the mortgage youre looking to take and applies to all home buyers, including those who make a 20% down payment on their home.

Down Payment: This is the amount of money youre required to pay upfront when buying real estate. The bigger your down payment, the smaller the mortgage youll need. The size of your down payment depends on the purchase price of your home. For example, if you spend less than $500,000 on a home, youre only required to put 5% of the purchase price down.

How Long Does This Process Take

The timeframe to expect for a mortgage to get approved and financed will depend on the lender. Before you begin the process, it is important that you ask how long it will take to get your loans closed. It is possible for an experienced lender to be able to get your loans closed within 30 to 45 days from application. However, there is always a chance that certain factors may delay this process. This is why you should always stay in constant contact with the lender to be updated throughout the process.

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Mistakes Can Cost You When Buying A House

When youre preparing to get a mortgage and buy a new home, its important to clean up your personal finances and present yourself as a strong borrowing candidate.

However, that doesnt just mean saving up cash for a down payment and closing costs.

It also means avoiding common financial mistakes that can reduce your borrowing power or even, in a worst-case scenario, get you denied for a mortgage.

Most buyers are so preoccupied with simply saving up for a down payment and getting their foot in the door that they forget about the little details that can trip you up such as a low credit score and paying down their debt, says Michele Harrington, COO of First Team Real Estate.

Dont get so caught up in saving and house hunting that you forget about other details that impact your mortgage.

Khari Washington, broker and owner of 1st United Realty & Mortgage, agrees.

Its easy for a home buyer to make mistakes during this process because this transaction is one of the most expensive things a person will engage in during their lifetime, says Washington.

Buying a home entails a lot of different activities going on at the same time. There are house condition issues, mortgage financing issues, contract negotiation issues, and appraisal issues that can all cause problems, distract you, and lead to errors in judgment if you are not careful, he cautions.

So, what do you need to look out for? And how can you set yourself up for success?