Home ownership can seem daunting. There is so much to consider as you look at houses and begin the mortgage process that you can easily become overwhelmed. In fact, the entire thing can make continuing to rent seem quite enticing. Sure, your money goes to someone else every month, but you also are not responsible for maintaining the place.
Perhaps you have already started the process on your own and have visited a few banks searching for the lowest mortgage rates in Calgary . Most likely, you quickly found the process overwhelming and realized that going through the process with too many different banks could damage your credit rating. You may have even found yourself disappointed with what you found out about current mortgage rates in Calgary . On the other hand, maybe all the technical terms were too much to navigate. It is easy to become discouraged with the process. However, you do not need to resolve yourself to a life of renting just because you feel a bit in over your head.
The truth is, home ownership doesn’t need to be a scary thing, though it can be when you attempt to navigate the waters on your own. That is why using a mortgage broker is such a wise choice; they can help your get through the process and get you great mortgage rates. Calgary has a robust housing market, just waiting for you to get out there and find the perfect home for you.
Before you take the plunge, you probably should get a better understanding of the process, even with a broker to guide you. Read up below to get a feeling for the basics of the journey to home ownership.
Why Purchase a Home?
Before you purchase a home, you need to ask yourself why doing so would be the right decision for you. The answer for each person will be different; however, there are a few elements most people will have in common.
The biggest reason to purchase a home is that your money stays with you, and if you get the best mortgage rates in Calgary, you get to keep even more of that money. When you rent, the money you pay each month goes into someone else’s pocket, and any repairs or upgrades you opt to make on your own will never show you a return on the investment.
Owning a home allows you to build equity when you make the correct choices. Equity is the amount of house you own. When placing a down payment, the amount you are able to pay is the amount of house you own. Generally, to be considered as building equity, you need a down payment of 20% or more.
Beyond money—though that certainly is a top concern—you have to consider your pride and legacy. When something is your own, you take care of it and you feel pride in what you create. Taking a house and making it a home is not an easy job. One should feel a sense of accomplishment in doing so. A home also gives you a legacy, something of value to pass on to your children to help them in their adult lives.
Types of Loans
There are three main types or mortgages available to you: interest only, fixed rate, and adjustable rate.
An interest only loan is a loan that allows the borrower to make payments equal to the interest being earned for a set period of time. This period of time is usually limited to the first five years of the loan. In some cases, it might be extended to the first ten. Once this period is over, the borrower must begin making payments at a rate agreed upon when the loan was signed for. These loans tend to be for extended periods of time, up to forty years in some cases.
A fixed rate loan is a loan where the amount of interest charged is set for the agreed upon duration of the loan. With this loan, changes in the market will not affect what the borrower pays, though it may mean that the borrower misses out on lower rates in the future.
An adjustable rate loan will start off with the interest set for a certain period of time. Once this time has elapsed, the interest rate can be adjusted on a monthly basis. These mortgages are seen as being a bit of a gamble as your rates can adjust quite high over your initial rate. However, the rates can also go lower, allowing you to save money over the long term.
These are the primary fees associated with taking on a mortgage. Depending on the bank and broker used, you might be able to avoid some of these fees. Additionally, you may be charged other fees which are not as standard as those listed below; different lenders will have different fees, just as they have different rates.
- Application—this is the fee charged for the processing of the application
- Points—each point is a fee which amounts to 1% of your loan; discount points are applied towards your interest and origination points are used by the lender to cover the costs associated with issuing the loan
- Credit evaluation—this fee is charged to cover the costs of checking and evaluating your credit score
- Loan processing—the costs of processing the paperwork and other items associated with the loan are covered by this fee
- Appraisal—this helps the lender cover the costs of the appraisal team that was used to determine the value of your property
- Title search—this covers the money put out by the lender when searching to make certain the title on the property is free and clear; they often must hire an outside company to complete this
- Documentation—this fee is for costs associated with verifying and validating the documentation presented
- Underwriting—this goes to pay the underwriter who evaluated and verified the mortgage
While many banks are eliminating the pre-approval process, for borrowers, it often provides the sense of power and security they need to begin the home ownership process. When you are pre-approved, the bank looks at the documents you provide and determines the maximum price point for a house you can afford to maintain a mortgage on.
In order to issue a pre-approval, the bank will need several different documents. In general, the documents required are as follows: proof of income, proof of assets, proof of employment/employment verification, proof of residence, and basic documentation such as identification. Additionally, a credit check will be run.
Beware lenders who advertise no verification or no documentation loans as these tend to have exorbitant rates and can further hurt your credit.
The down payment is a percentage of the purchase price of your home that you pay upfront. The amount you pay will determine your future monthly payments on your mortgage. A standard down payment is 20%; down payments of 20% or more give you immediate equity in your home.
There are low down payment plans available. These plans tend to have down payment rates between 5% and 15%. While this may be more affordable in the moment, a lower down payment means a higher monthly payment. Additionally, most lenders require private mortgage insurance on loans with lower than a 20% down payment.
Zero down payment options are available; these are generally offered through government programs.
How Can a Mortgage Company or Broker Help Guide You?
You do not need a middle man in the mortgage process. You are free to negotiate directly with the lender yourself. However, there are many benefits to using a mortgage company or broker. A quality broker will help walk you through the process, the laws, explain everything in detail, and help you get a realistic picture of what you can and cannot take on. These individuals have been through the process and have an intimate understanding of how banks operate; they then put this knowledge to work for you.
A broker takes the legwork out of the process for you. They will shop around for the lowest rates for you, allowing you to get the best deal without compromising your credit rating. Trips to the bank will mainly be made without you needing to stop by. They can also assist in the negotiate process; they might even be able to get special extras, such as convincing the bank to fix up the house priot to purchase.
The goal of a mortgage broker is to protect you and get you the best deal. Here at MyMortgageBroker.com, we make certain to get our buyers the best mortgage rates in Calgary, Alberta. If First Calgary Financial mortgage rates are the best, then that is what we will get you; if not, we look elsewhere.
Remember: in the process of buying a home, your broker may be the only person who is actually on your side, making them an invaluable asset.
Beware the Last Minute Bait and Switch
Any last minute changes made by the lender or the broker should be declined. When changes are made at the last minute, it is a sign that you are being manipulated. The person making this changes will not be making them in your best interest and they are counting on you to go along due to your fear of wasting the effort you have put out to make it to that point.
Remember: you do not want to place your financial future into the hands of a dishonest person. If they are attempting to trick or pressure you into last minute changes, it is safer to decline and risk having to walk away than to push through to avoid going through the process over again.
How to tell if a Mortgage Broker is Reputable
Not all mortgage brokers can be trusted. It is a sad fact, but a fact none the less. There are many people out there who are willing to take advantage of people who are attempting to attain their dream of home ownership. Before you select a mortgage broker or company—even us—you should take the time to evaluate their trustworthiness. Remember: just because the rate is low doesn’t mean you should jump.
What are signs that you should find a different broker?
- The tactics used by the broker are aggressive and make you feel pressured.
- The broker encourages you to take out a loan for more than the amount needed to purchase your desired home.
- The broker pushes you to go for a monthly payment higher than what you think you can comfortably afford.
- When completing the paperwork, the broker attempts to sell you add-ons you do not need nor want.
- The broker asks you to lie during the application process.
- Blank forms are presented to you for a signature by the broker.
- The broker refuses to provide you with duplicates of signed documents.
- The broker declines to give you the mandated disclosure agreements.
- The broker asks you to deed your house to another person.
How to Stay on Top of your Loan and Protect Yourself
Once you sign for the loan and purchase the house, it is your job to stay on top of your loan and keep yourself protected. The decisions you make regarding repayments, refinancing, and borrowing against your home will have repercussions far into the future.
The first thing to keep in mind is that you should avoid paying the minimum or interest only if it is at all possible. If you elect to pay the minimum or only the interest, the loan can quickly become more than your house is actually worth. When you get upside down in a mortgage, it is nearly impossible to recover.
When you purchase title insurance, make certain it protects both you and the lender. In fact, at every stage of the process, ask yourself if what you are doing protects you as much as the other interested party. If it does not, you should evaluate whether or not you should continue down the path you are taking.
Borrowing against your home or taking out a second mortgage can be an excellent option is you are financially wise and well organized. If not, such a decision could spell disaster. And if you choose to refinance, you should be careful to look at all the fine print. And—once again—select a broker you can trust.
As you can see, the world of home buying and mortgages is a very complicated one, but also one which leads to deep personal satisfaction on the part of the home buyer. If you are ready to make the leap, begin doing your due diligence and start researching potential brokers today. Contact us at iMortgage Solutions Inc. today at 403-870-2669 or visit us at MyMortgageBroker.com and get yourself on your path to home ownership.