4 Things You Need to Know Before Getting a Mortgage

October 14, 2017

I deal with many first time buyers. I find that most newbies think the best mortgage is as easy as finding the lowest interest rate. But it’s not that simple.
Here are 3 of the “need to knows” when getting your first mortgage;best-mortgage-rates1

1. Credit score

First things first, you need to have a good handle on your credit score and outstanding debt before inquiring about a mortgage.
Your credit score is a reflection of your credit worthiness and reveals to the lender your ability to mange debt.
The credit report is critical and the lender will base their decision to lend based in part on the credit report.
No one wants to lend to someone that can’t pay it back. I’m sure you’d expect the same if you were to lend to someone.
At theses amounts of money the risk to the lender must be looked over to give the lender some ease in lending.
If your score doesn’t meet the minimum requirements the chances of getting a mortgage at the best rates start to not apply. However there are lenders out there that deal with higher risk mortgages.

2. Down payment

Second thing you should have in mind is how much you’ll be putting down on the property.
There are no more 0% financing, so be ready to have a minimum of 5% down payment. When your dealing in the range of 5%-20% the lender will have you pay for the mortgage to be insured.
There are three mortgage insurers in Canada that do this (CHMC, Genworth, Canada Guaranty). However if you have the down payment of 20% or higher you can avoid this cost all together.
Again everyone’s situation is different. Putting more down on a mortgage will not affect the interest rate. However it will make the interest payments lower.
-hyperlink to default and down payment post.

3.Others Cost

Thirdly you should know that there are other costs that go with a mortgage.
Some of these other cost are things like property taxes, appraisals, closing costs and other loan-origination fees.
Many of these cost will be paid out of your pocket so it’s good to know in advance what your getting into and best to be prepared and save for them.

4. Income

The lender is going to want to know how you’ll be paying back the mortgage and that you have some sort of steady work. Its a good idea to have these documents ready before looking into getting a mortgage.
To verify this lenders will be asking for things like; a job letter (should include; start date, position, guaranteed salary/wages, human resources contact), a recent pay stub (should include; pay date, pay amount, your name and employer’s name) and if any of your income is derived from bonuses, commissions, overtime ect.
If you are self-employed the lender will be looking for notices of assessments from Canada revenue agency, a copy of your business license or articles of incorporation or GST registration number.
Now that you know some of the things that you’ll be getting into with a mortgage, I’d like you to check out my other blog on the “Four advantages to using a mortgage broker”. Weather your a first time buyer or not it’s a really good idea to utilize the services that are out there when getting into one of the biggest adventures in your life.


Christopher Molder

Mortgage Broker

Christopher is a mortgage broker based in Toronto, Canada. And a son of a broker too. He’s a second generation mortgage broker. Following in his father’s steps he joined the family mortgage business straight out of university.