June 28, 2018 | Posted by:
Getting a mortgage can be very simple or one of the hardest and most stressful tasks depending on how the process is approached. It is important to do your homework, review finances and find a professional that they trust so that their experience can be a breeze.
There are several common misconceptions when it comes to getting financing so this is what I mean by 'do your homework'
FIXED RATE IS ALWAYS BETTER THAN VARIABLE RATE
There are two types of home-owners out there. Those who can sleep every night knowing that tomorrow their interest rate may increase, and those that can only sleep at night knowing that it won’t.
It is important to first determine what kind of home owner you are. If you are someone who can roll with the changes if prime does increase then it is time to look at the math. First, map out what your monthly payment would be at the current fixed rate. Secondly, map out what your monthly payment at the current variable rate. Thirdly, look at how many .25% increases to prime you can have before the variable payment exceeds the fixed. At that point, you need to get a feel for how many increases you can handle with your budget. Based on history we are using .25% increase as a reference, however the variable rate can raise by more or less.
Keep in mind, that if you do choose to go variable, you can lock into a fixed rate at any time. The rate is locked in based on how many years you have left in your term.
USE THE BEST CREDIT SCORE
If there is more than one party, meaning you have a joint borrower or co-signer it seems simple to think that the lender would work with the highest credit score to qualify for financing.
However, lenders look at each score independently and the lowest of the scores can affect the entire file, not just that applicant. Often, rates are associated with credit scores meaning that typically the lower the credit score the higher the rate. In some cases, the rate can increase to a place where the application no longer qualifies for the mortgage.
REAL ESTATE AGENTS DON'T CARE WHERE YOU GET FINANCING AS LONG AS YOU GET IT
Agents representing a buyer should care! There are many Mortgage Agents who aren’t familiar with an area, new rules, current mortgage trends, procedures and appraisal methodologies. This knowledge is key in getting successful financing for clients and can also be the make or break of the sale for the Real Estate Agent.
Looking at the other side of things, Agents representing sellers look at offers from qualified buyers as having credibility.
It is important before throwing in the towel on an offer because of a bank turn down or a Mortgage Agent not being able to find a lender, that there are experienced teams out there that may have access to additional lenders that can save the deal.
THE RATE YOU'RE QUOTED IS THE RATE YOU'LL GET
If you are prepared to apply and lock into a rate upon being quoted the current interest rate, they can go up without warning. Rates are subject to change at any time, just the same as rate promotions can come about at any time without warning. To lock in a rate, you need a complete application with supporting documentation that a Mortgage Agent can walk you though.
If you have been pre-approved, it is common for there to be a rate premium on the pre-approval. This guarantees a rate typically higher than the todays posted rate but it ensures that at time of purchase, your rate will not be higher than the pre-approved rate. However it is important to note that should the rates decrease to a rate lower than the pre-approval rate, you would receive the lower rate. The pre-approval is rate protection.
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