Have mortgage questions? You’re not alone. Mortgages can be intimidating, so we’re here to help you understand just what’s up when purchasing your new home.
What’s a Mortgage Pre-Approval? Do I Need One?
This is one of the best ways to start your new home ownership journey! Meeting with a mortgage professional will help determine how much you can afford and pre-qualify you for a mortgage. A pre-approved mortgage is a home loan that has been tentatively agreed upon by the lender. This sets the maximum amount you can spend before you start house hunting and gives you leverage when you decide to put an offer on your dream home.
Fixed, Variable, Amortization, Huh?
Some common mortgage lingo defined:
Mortgage Lender – The organization that provides you with financing for a real estate purchase. This may be a major bank or a smaller lender. Not all lenders will give you the same mortgage rate, so you may choose to visit multiple lenders before settling on one.
Mortgage Broker – A professional who can help connect you with a mortgage lender. Mortgage brokers typically have relationships with a number of different lenders and will do the negotiating for you to help you find a good mortgage rate.
Mortgage Rates – The rate of interest charged on a mortgage. This amount is determined by the lender and is a percentage of the total amount borrowed.
Fixed Rate – Your payments will stay the same for the length of the term you select. A term can be anywhere from 1 year to 10 years! Your interest rate will be locked in, so you won’t have to worry about your payment fluctuating.
Variable Rate – Your payments will fluctuate based on the current interest rates. This means that your payment could go up, or down! An option for those who are comfortable within their budget.
Term – The period of time that the mortgage rate, payments, and other mortgage conditions are set. Each time your term is up, you’ll chat with your lender to decide the length of your next term, rates, and conditions.
Amortization Period – The amount of time it will take you to pay your mortgage in full. Your term may be 5 years, but the total amortization period is typically 20 or 25 years when purchasing a home.
Down Payment – The amount of money you put down at the point of purchase. The minimum down payment amount is 5% of the total purchase price.
Woohoo! I’m Pre-Approved! Now What?
Hold your horses! Just because you were approved for $500,000 doesn’t mean that’s what you should spend. Determine what you can really afford. Create a budget and identify other important financial commitments, such as existing debt, other loans, and monthly expenditures (this includes those dinners out and shopping trips!). Finding balance is important; we want you to truly enjoy life in your new home.
What Exactly is a Completion Mortgage?
Simply put, a completion mortgage means that you do not start paying your mortgage until you take possession of your new home. You’ll make a down payment as per your contract and once you take possession the mortgage amount is then advanced to the builder.
See? We told you! The in’s and out’s of mortgages aren’t so bad.
Remember: These tips are meant as a guideline only. Be sure to speak with your mortgage professional for further questions an advice.
