Frequently Asked Questions About Mortgages

Purchasing the spacious new home that you’ve always dreamed of is more likely than you imagined if you manage to secure the right mortgage. However, when it comes to mortgages, there are many questions clients have but often find it tricky to get all the answers they seek.

Therefore, Kraft Mortgages Canada Inc. wants to arm you with the most accurate information available to help you understand the process. To do this, we’ve answered some of the most frequently asked questions about mortgages.

1. How much money should I put down on a house?
There is no set amount that you should put down when purchasing a house, as the prices of homes can vary. That said, some loans require as low as 3% down and as high as 20% down. Be aware that the lower the down payment on the loan, the higher the interest rate will be, so it is in your best interest to put down a larger down payment. Along with the down payment, you will also need to be able to cover closing costs. These fees include the house appraisal, inspection, the cost of lawyers, the cost of the title search, and insurance. Usually, closing costs are approximately 5% of the loan value.

2. How do I know if I will qualify for a home loan?
There are a variety of ways that you can qualify for a home loan. Even if you have a poor credit history, that does not necessarily mean that you will not get a loan. While poor credit can cause you to have a higher interest rate, other factors can improve your chances of approval.

While your credit score is a large part of securing a loan, it can do a lot to mitigate a low credit score if you have a large deposit. Additionally, having a solid rental history can help offset a poor credit rating. Other factors that can affect your chances of securing a loan include your current salary, how much outstanding debt you owe, and how large is the requested loan.

3. Do I need a fixed rate or an adjustable-rate mortgage?
The simplest of the two types is the fixed-rate mortgage, and it’s a mortgage with a fixed rate of interest over the course of the loan. The advantages of this are that you don’t get tied to a possibly volatile market and that these types of loans are pretty simple to understand and keep track of the payments. The advantage of the adjustable-rate mortgage is that they offer the possibility of a much lower interest rate than a fixed-rate loan. Simultaneously, they are a bit of a gamble. Depending on the financial index your loan is tied to, your mortgage payment could go up drastically over the life of the loan.

4. Why do some people work with a mortgage broker and some don’t?
Some people work with mortgage brokers as they don’t have the means to find the information themselves. Applying for a mortgage can be complex and overwhelming, especially with so many different options available. Having a mortgage broker can make this process easier and faster. They will do all the research for you and help you find the best option. It’s particularly true if you’re going through the process alone.

Moreover, some people work with mortgage brokers due to their bad credit scores. If you have a hard time getting a loan to begin with and don’t qualify with the banks, a mortgage broker can provide you with even more options. They can also help you find the money you’re looking to secure.

5. How much will I have to pay for closing costs?
As a general rule of thumb, it’s best to put aside at least 1.5% of the purchase price (in addition to the down payment) strictly to cover closing costs. There are several items you should budget for when it comes to closing costs.

Property Transfer Tax gets charged whenever a property is purchased. The tax will vary from jurisdiction to jurisdiction, but a broker can help with the calculation. GST and HST are only charged on new homes and do not affect homes priced at less than $400,000. Homes that exceed this price threshold only get taxed on the portion that exceeds $400,000. (Certain conditions may apply.)

Please contact your lawyer or notary for more detailed information. Your lawyer or notary will charge you a fee for drawing up the mortgage and conveyance of the title. The amount will depend on the individual that you use. The typical cost is $900.

If you’re purchasing a single-family home, you’ll need to give your lender a survey certificate showing where the property sits within the property lines. Some exceptions are made. But, on low loan-to-value deals and acreage properties, a survey will cost approximately $300 to $350, but the lender will often accept a copy of an existing survey. Other costs include an appraisal fee (roughly $200), title insurance, and a home inspection (approximately $350).

6. What will a lender look at when qualifying me for a mortgage?
Most lenders look at five factors when determining whether you qualify for a mortgage. It includes income, debts, employment history, credit history, and the value of the property you wish to purchase.

One of the first things a lender will consider is how much of your total income you’ll be spending on housing. It helps the lender decide whether you can comfortably afford a house. A lender will then look at your debts, which generally include monthly house payments and payments on all loans, credit cards, and child support. A history of steady employment, usually within the same job for several years, helps you qualify. But a short history in your current position shouldn’t prevent you from getting a mortgage, as long as there have been no gaps in income over the past two years. Good credit is also essential in qualifying for a mortgage. The lender will also want to know that the house is worth the price you plan to pay.

7. Should I get pre-approved?
Getting pre-approved for a mortgage is recommended as you’ll get a clear picture of how much you can afford, allowing you to focus on shopping only for homes that work within your budget.

A pre-approval means that the lender has specified to you in writing the amount they are willing to lend. In addition to giving you a budget to work with, it can also provide you with leverage when negotiating with home sellers, as they have assurances that you have the funds to afford the home.

8. Can I pay off my mortgage early?
Yes, but it could cost you. Each lender has different rules regarding lump sum payments used to pay off the mortgage faster. You may incur penalties if you decide to pay off your mortgage early, and these penalties vary depending on the terms of your mortgage contract. Ensure you review your mortgage contract to fully understand the financial implications of making additional payments on your mortgage.

If you have any more questions about mortgages, get in touch with the experts at Kraft Mortgages Canada Inc. As the best mortgage agents in Surrey, BC, we have created a unique model where we provide ongoing support to new brokers to fund deals, which help them take care of our clients’ needs successfully.

We provide mortgage services to clients across Surrey, Abbotsford, Delta, Langley, Burnaby, Vancouver, Richmond, Coquitlam, Maple Ridge, North Vancouver, White Rock, New Westminster, and West Vancouver, BC.

To learn more about how we can help you, please click here or contact us by clicking here.