A home is the biggest purchase most people will ever make, and deciding on the right mortgage loan is an important step. This can feel like a complicated process, even when you know what to do. Here’s a step-by-step guide to help you get started.
- Review your financial standing: Get a credit report from the three major credit reporting bureaus – Equifax, Experian, and TransUnion. If you notice any errors or discrepancies, contact the bureau to get them corrected right away since they could affect your borrowing power.
- Pick the right type of mortgage: Decide whether you need a low down payment mortgage or if you would rather make a typical down payment of 20% and avoid mortgage insurance.
- Choose the mortgage term: A 30-year fixed-rate mortgage is the most popular choice, given that it has the lowest monthly payment. But then, a shorter, 15-year fixed mortgage can save you thousands of dollars in interest charges, as long as you are comfortable with higher monthly payments. Pick a term that’s suitable for you.
- Build your savings: Apart from saving money for the down payment, you will need cash to pay for closing costs. You should also be prepared for unexpected repair and maintenance expenses that could cost you some money.
- Compare rates: It is always wise to compare interest rates from three or more mortgage lenders and pick a loan that offers the best interest with the terms and conditions.
- Get a mortgage preapproval: Most realtors require you to have a preapproval letter from the lender before they start showing you homes in the area, so apply for preapproval once you find a suitable loan.
- Make an offer: Once you’ve found the right home, submit your best offer with a copy of the preapproval letter.
- Arrange for a home inspection: Once your offer is accepted, have a professional inspect the home to identify any issues or repairs. After repairs, if any, your lender will usually have a home appraisal to verify the home’s market value.
- Complete the closing: This is usually the last step of the loan approval process. At this stage, all you need to do is hand over your cheque for the down payment and closing costs to complete the process and move into your new home.
