mortgageloanagreementpic MORTGAGE PROCESS AND PRE APPROVAL

Mortgage pre-approval

A mortgage pre-approval shows you, the home buyer, what value of home you can afford, and the mortgage payments associated with various purchase prices. It also guarantees a mortgage rate for a period of time; therefore, protecting you against potential rate increases. You are not obligated to the bank or mortgage broker to whom you received your mortgage pre-approval, and there is no cost. So, there is limited downside to obtaining a pre-approval.

Home buying process

Once you have found a home that you would like to put an offer on, you will put this offer in writing in a document called an ‘offer to purchase.’ Your real estate agent will help you put the offer together. This offer should include the following details:

  • Your name, the name of the vendor and the address of the property
  • The purchase price offered
  • The chattels that will be included in the purchase price (for example, window coverings, appliances, etc.).
  • Whatever items in or around the home that you think are included in the sale should be stated in your offer
  • The deposit amount
  • The closing day (the date you take possession of the home), which is usually 30 to 60 days from the date of agreement. As of the closing date, the purchaser is responsible for taxes, utilities, repairs and maintenance
  • Request for a current land survey of the property
  • Date when the offer becomes null and void — that is, when it expires
  • Financing Condition: a condition which allows the home buyer to secure financing (i.e. mortgage approval) before the sale is final. If you cannot secure financing, then you can still walk away from the deal and recover your full deposit. Typically, you should ask for 7 days to secure financing
  • Home inspection: a condition which allows the home buyer to have the house looked at by a professional inspector prior to making the sale final. If the inspection uncovers something you do not like, then you can still walk away from the deal and recover your full deposit

This process may occur several times over: it is not uncommon to make an offer, receive a counter-offer, and then make revisions.

Mortgage approval

A Mortgage approval is similar to a pre-approval, but it contains all of the specific details of the house you want to purchase. The mortgage approval will have the full address, exact purchase price, closing date, property taxes, etc. These are details which are not in the mortgage pre-approval. Once your mortgage provider has all of these details, they will give a mortgage approval as long as they are comfortable with the property you are purchasing and your qualifying criteria are in line. Once you have a mortgage approval that you are satisfied with, you can waive your financing condition and finalize the sale.



piggybankhouse TOP 10 MONEY SAVING TIPS

1. Do your homework

If you already have a mortgage, dig out your documents and find out more about the product you currently have. It’s not enough to just know what your monthly payments are, find out what rate you are on, when it’s up for renewal, the penalty fee to break your mortgage, and the restrictions for changing your mortgage rate (i.e. the conversion privileges for moving from a variable rate into a fixed rate).

If you are a first time home buyer, make sure you have a complete picture of your total income, debts and expenses so the lender can easily determine how much you can afford. A good rule of thumb is that your mortgage payments should not exceed more then 40% of your net income.

2. Don’t take on more debt than you can afford

It seems that Canadians (and the rest of the world) are taking on too much debt. This is partly a result of record low interest rates which have encouraged consumers to borrow more money. But interest rates have been low for a long time now and as the economy picks up pace, it is inevitable that rates will increase.

Many experts are saying that rates will be 2-3% higher by the end of 2011, so be sure to plan for rate increases when calculating how much debt you can afford.

3. Compare mortgage rates

Don’t take out a mortgage with your current bank just because it’s easy. Don’t sign the renewal letter from your existing mortgage lender without trying to negotiate a better rate.

Make sure you compare mortgage rates before you choose a lender or broker. This will give you more power to negotiate a better rate and you may even find a different broker or lender offering a much lower rate. Remember, even a few basis points can make a big difference when it comes paying off a mortgage.

4. Don’t be fooled by marketing tactics

banks that offer really low mortgage rates if you switch your everyday banking to them may not be giving you the full picture. Often these providers will need to make up the money they lose on the mortgage interest by charging higher administration fees for normal chequing and savings accounts.

5. Speak to a mortgage specialist

For personalized advice, you should speak with a mortgage expert. A good mortgage planner will be able to answer all of your questions and provide you with advice that suites your needs.

Finding the best mortgage rate is a good starting point when shopping for a mortgage, but mortgage rates are not the only thing that matters. A mortgage professional take you through other important details such as the prepayment options, portability, penalties, etc.

6. Assess your risk tolerance

One of the biggest mortgage decisions that you will need to make is the popular fixed versus variable rate debate. In order to make this decision you will need to ask yourself how much risk are you willing to take on? A variable rate mortgage can fluctuate so your payments may increase without much notice. A mortgage professional can help you access your risk tolerance so you can feel confident making this decision.

7. Check the fine print

As with all contracts, it’s very important that you know what you’re signing. Make sure you look at all of the details, including prepayment options, late payment fees, refinancing penalties, etc. For example, if you take out a variable rate mortgage and it’s convertible into a fixed rate, make sure you know how the lender will calculate the fixed rate.

8. Increase the frequency of your payments

Any additional payments you can make on your mortgage will most likely end up saving you lots of money in interest over the life of the loan. As the mortgage balance decreases, less of your payment will go towards paying off the interest and more will come off of the principal, allowing you to pay off the debt much more quickly. A small change from a monthly to a bi-weekly rapid payment schedule will help you to pay off your mortgage years earlier.

9. Shorten Your amortization period

When you need to renew your mortgage at the end of each term, consider shaving off a year or two from the amortization period, particularly if you can renew at a lower rate so that you’re payments will not be effected. For example, if you took out a 5 year fixed mortgage with an amortization over 25 years, after 5 years you will need to renew for another term, but instead of renewing at 20 years amortization, see if you can manage the payments of a 19 or 18 year amortization period. This will help you to pay less interest in the long run.

10. Protect your mortgage.

Before you purchase mortgage insurance through your bank or lender, make sure you do your homework. A mortgage insurance product (not to be confused with mortgage default insurance) protects the lender, not you. In most cases a life insurance policy is a much better solution to protect your mortgage. Find out more about the differences between mortgage insurance and life insurance and compare life insurance quotes to get the best rate.



On July 4, 2011, federal, provincial and territorial ministers responsible for housing announced a combined $1.4 billion investment toward reducing the number of Canadians in housing need under a new Affordable Housing Framework 2011 – 2014. The Framework is the basis for bilateral agreements between the federal government, represented by CMHC, and each Province and Territory…




CMHC Mortgage Loan Insurance guide

Use this guide to calculate your Total Mortgage Loan Insurance Premium when Buying a Property.

mortgageloanagreementpic CMHC Mortgage Loan Insurance guide

clickhere CMHC Mortgage Loan Insurance guide