Most of us may still be bundled up against the elements, but spring will spring eventually, and with it will come the annual acceleration housing market and mortgage transactions. Even if your local housing market is as tight as Toronto’s – or even Vancouver’s these days – spring is the busiest time of year for real estate transactions. If you are planning on getting a mortgage this spring, what are you waiting for? Take some time to prepare yourself for the potentially long bumpy road ahead, and hopefully you’ll be rewarded with a smooth homebuying experience.
- Find a mortgage broker
Getting a recommendation from someone who has worked with a mortgage broker is the best way to go about finding one, but if you don’t know anyone who has used a mortgage broker, take the time to find one on your own. Mortgage brokers don’t work for a particular institution and are free to go to multiple lenders to find the best deal for you – included those lenders who you would be unable to access on your own. They also work with banks, so there really is no downside. You’ll probably need to speak with more than one broker to determine whether or not he/she is a good match for you. You want to find one who’s comfortable working with your current financial situation and who doesn’t raise any red flags in the back of your mind, such as suggesting shady practices or loopholes that will get you a home, but end up putting your financial future at risk.
- Check your credit report
You don’t want to find out that you have an error in your credit report when you’re submitting your paperwork for financing. Do what you can to improve your credit and check your credit report for any errors so that you won’t be blindsided at the 11th hour when there’s a house on the line.
- Get a mortgage pre-approval
A mortgage pre-approval is when a lender looks at you as a borrower and determines how much money they’re willing to give you as a mortgage. While your final mortgage amount may vary based on the appraisal of the property that you want to purchase, a mortgage pre-approval is probably the best tool in your house hunt for several reasons. First, it will give you an idea of how much money you can spend. If you were just basing your budget on how much you can afford on a monthly basis, you may be ignoring some facts that are important to the lender and that will impact your worthiness as a borrower, such as your credit history. Secondly, the interest rate that you’re given in your pre-approval is guaranteed for a set period of time. That time period varies, but most lenders honour it for a period of about four months. Another reason is that with a pre-approval, a buyer knows that you’re serious and likely to have no issues with financing, and if once you put an offer in on a home and your offer is approved, you already have a head start on the mortgage process.
- Do your research
If you haven’t started your research online already, do it now. This applies to mortgage interest rates, it applies to different mortgage products, it applies to home prices and styles in your area. Your broker will get you the best rate possible, for example, but in order to know what kind of mortgage you want, you should know the basics about different features that you can get with a mortgage that can closer align it with your short term and long term financial goals, and be able to discuss them with your broker. Another reason you want to do your research first is to learn your housing market. What’s happening halfway across the country really has no bearing on how difficult or easy it will be for you to find a home. If you’re used to living somewhere where homes usually go for under the asking price and you are relocating to an area where bidding wars are common, failing to get aggressive could cause you to lose out on multiple properties.
- Find a realtor
Just as a mortgage broker is your right-hand person when it comes to securing your mortgage, your realtor is your right-hand person when it comes to finding your property. You may have to interview several different realtors before you can find one that suits your needs, and that’s perfectly okay. Depending on your specific criteria for finding a home and the intensity of your particular housing market, you could be working with your realtor for a long time, so not only do you want to like him/her, but you also want to make sure they’re not the kind of person who will push you into a deal that you’re not comfortable with, or to a price point higher than what you gave them. You also want to be able to be brutally honest when it comes to what you think about the properties that they’re showing you. If you’re afraid to tell your realtor the truth, keep searching. And while you want them to be nice, you don’t want them to be a doormat; you want them to be able to fight for you if it comes to negotiations. Some questions you might want to ask are: “What kind of buyers do you typically work with?” “What’s your area of expertise (condos, repeat buyers, investment properties, etc.)?” “What’s your offer strategy?” “What’s the best way for to contact you?” “How many homes have you bought and sold in our target area?”
- Manage your expectations
Buying a home is often a marathon, not a sprint. While you want to hit the ground running, know that transactions can often hit snags for even the most well-prepared buyer. Be realistic with your budget so that you know what kind of home you can afford and don’t waste time and energy looking at other options. Know that every mortgage transaction with every lender is different, so while your brother may have gotten a 2.3 per cent interest rate on his mortgage, that doesn’t mean you will. Your best friend may have scored the deal of the century on a semi-detached home steps away from public transit, but that doesn’t mean you will. Go into the process with an open mind and realistic expectations.
- Don’t give up
If your mortgage application gets rejected or your offer gets denied, try not to get discouraged. Even if you have to explore other financing options, there still may be ways that you can buy a home before the heat of summer arrives.