Agent Lisa: Preparing Your Finances for Home Buying
by Real Estate Sales Representative Lisa Sly
Nobody on earth likes to get their hopes up, only to be let down in the end. But when it comes to home-buying, it can happen more often than you’d think. That’s because people are only estimating what they can afford, without actually getting their financial “ducks in a row”. If you don’t have a firm idea of what your budget is and what financing you’ll be approved for, you’re really just setting yourself up for disappointment. Imagine falling in love with a home only to find out at the last minute it’s out of reach for your financially. What a let-down!
The good news is there is a TON that you can do RIGHT NOW to get yourself prepared for the buying process. Start digging out a few years of tax assessments, pay stubs, or anything to prove you have a regular income. Be prepared for a credit-check to be done on your financial history. They’re going to see if you consistently pay bills on time, if you have any large outstanding debt, or if you live well-within your means. If you can pay off any debts right now, DO IT! You want to make yourself look like a responsible (AKA not risky!) client for your lender in order to get the best mortgage rate possible. Today, there are more than just banks that give out mortgages so you’ve got a lot of choice. Here is a run-down of where you can start investigating your options for financing.
The Big Banks
Banks offer a wide variety of mortgage products. They can tell you what their available interest rate is but that’s not all you need to consider. You should be thinking about other options included in your package like how much you can put down extra a month/year, how many times you can change that amount and the penalties for breaking your mortgage should you dare (etc., etc.). Because banks offer many different products, there are more to choose from, hence more options that may better suit your needs. Typically, banks are very quick at deciding who gets approved for a mortgage. They have a very streamlined way of calculating whether your application has been declined, approved, or countered. Basically you provide them with the information they need, they plug it into their system and badda-bing, badda-boom! You’ve got a good idea of what you can afford!
Not familiar with Credit Unions? They are a lending institution to which you become a member (not a client) and you hold shares (pieces of the puzzle) in this nonprofit (NOT not-for-profit – Google the difference) organization. Think of that neighbourhood pub where everybody knows your name. Now that is a credit union! Credit Unions thrive on customer service, a sense of community and remembering your birthday – they’re going to work hard for you because they know you personally! Credit Unions have less products than a larger bank. So if you’re looking to have several products in one institution this is where a Credit Union may fall short. BUT they do have one up on the big guys – any profits they make in the year allows them to offer lower rates and other advantages to its “members”. This is a great advantage since your home is likely the largest purchase you’ll make in your life. That’s a lot of interest and money saved.
A lot of people don’t have time to go shopping around to banks & credit unions looking for their best rate. So a mortgage broker might be a great option! They do all the legwork for you. They shop for the best rates for you while only pulling up one credit report (this is to your benefit). They have a plethora of banks, credit unions and private investors at the ready to give you money. And the majority are paid at the back end (by the lender) so there’s no upfront cost to use a broker. If your credit is, shall we say, “less-than-perfect”, a mortgage broker can shop around to various lenders to find a mortgage for you, but remember you may be paying higher interest rates as a result of your credit rating.
By preparing your finances now and getting all those ducks in a row, you’ll know what you can afford when you start shopping for homes. And by only purchasing a home within your means, you’ll be building yourself up for financial success and equity in the years to come!