Shopping for a mortgage can be an overwhelming experience. Especially if you're a first time home buyer and you have little to no knowledge about the mortgage loan process. If you've started shopping online, then you've probably already found hundreds of mortgage sites quoting low ball rates for every length of loan term under the sun. One would think that if you just spend a few hours online you'll find the lowest rate available and receive the best deal. This is rarely the case. Don't play the interest game without all of the accompanying information!
Not All Low Rates Are Considered Equal
The cost of a mortgage loan is much more than just the interest rate. Many lenders will set the interest rate as low as possible and then hike up the fees attached to the loan once you've applied. To ensure the best deal, compare all of the fees involved with the mortgage loan along with the interest rate. Examples of fees are: administrative, flood certification, inspection, survey, underwriting, document preparation, tax service, courier service, processing and lender fees. If you compare companies using this approach, you'll find that a lot of the low rate lenders are not the best deal in town.
What?! I don't qualify for that rate?
The most important thing to learn about mortgages is that rates are based on your individual needs and financial situation. The rates quoted over the phone and/or online are not always accurate representations of what you'll qualify to receive. Most rates quoted are applicable only for individuals with perfect credit, a low debt to income ratio and either a large down payment or a lot of equity in their house.
Here are several qualifying factors that are important to be aware of before shopping for a loan:
Your credit history is important to lenders when evaluating your loan. An individual with many late payments will not be deemed as trustworthy for payment terms as someone with perfect credit. Find out what has been documented on your credit report and correct any mistakes as soon as possible.
2. Debt to Income
Lenders use your debt to income ratio to verify that you have the means to pay a monthly mortgage. To learn how to calculate the two main ratios used in the approval process, check out a previous article on the subject by us here.
3. Down Payment
There are several loans available with little to no down payment required, however, most of these loans come with a higher interest rate. Evaluate your finances and estimate the maximum amount of money you can afford to put down on your new home. Once you have made this estimate, find out how much house you can afford by using one of the many mortgage calculators you can find online.
If you are looking to refinance, receive a home equity line of credit, consolidate debts or make home improvements, then you need to know how much equity you have in your house before you apply. Most of the time, the more equity you have, the more money you can borrow. To estimate this calculation, the formulas below can help:
Equity Ratio = 100% - (Loan amount ÷ Value of the home)
Equity Dollar Amount = (Current value of the home) - (Loan balance)
Mortgage Brokers Niagara places your loan with Canada's top lenders based on your specific needs and financial situtation. Our lenders have competitive rates and can handle less than perfect credit and low down payments! Apply today!