Common Mistakes Clients Make When Obtaining A Mortgage
Buying a home is one of the most expensive purchases you will ever make in your lifetime. The excitement of fulfilling this dream drives many owners to go out and complete the home buying process themselves. Unfortunately, this isn’t the best way to go about it, as without the right kind of assistance, the initial excitement may soon be replaced by frustration in the run-up to obtaining a mortgage.
By working with a mortgage broker, you will have someone who not only knows the system and understands your needs but does the legwork for you. The task of making a successful mortgage application and finding the best deal will rest on the broker’s shoulders so you can focus on other important aspects of your home buying journey.
Fulfilling the dream of homeownership is something that should fill you with euphoria, but to make sure there aren’t any low points along the way, I have compiled a list of the most common mistakes people make with mortgages and how to avoid them.
1. Not working with a mortgage broker
If you approach a mortgage lender directly, the lender may give you a product that suits their best interests and not yours. By working with an experienced mortgage broker, you can rely on their experience and connections to find the right mortgage product. A broker will be able to obtain a mortgage product that is customized to suit your needs.
2. Looking solely at the mortgage rate
We understand that the mortgage rate is a stand-out figure that most people look at. However, a mortgage has so many other aspects that require equal if not more attention. By focussing solely on the mortgage rate, you could end up missing out on a great product. Along with the mortgage rate, you must also keep your eyes out on terms and conditions associated with the product like penalties, fewer prepayment privileges, collateral, or standard charge, is it portable, compounding, etc.
3. Underestimating the construction financing mortgage funds required
Construction financing mortgage funds are an excellent means to assist you in the construction of a home, however, the process requires some amount of experience and knowledge to navigate. Moreover, mortgage brokers have access to more flexible construction draws higher loan-to-value construction financing, including advances on the land to start, and no penalties upon completion when the takeout mortgage pays out the construction financing.
Mortgage brokers can guide you through the construction process and make sure you have the required reserves and budget before starting the project.
4. Failing to get prequalified
Not getting prequalified for a mortgage before shopping for a home is a big mistake. Mortgage brokers will thoroughly review your file so they know the maximum mortgage amount and home price you qualify for. With the financial stress tests and other continually changing requirements, most real estate brokers opt not to work with buyers until they are pre-approved. If you are not prequalified for a mortgage, you do not know whether you would get the mortgage amount required. When you know the amount you can afford, the process is significantly easier because you know the options available to you and gives everyone perspective when they are trying to match to your requirements.
5. Seniors not considering the reverse mortgage option
With a reverse mortgage, no principal and interest payments are required, and you can afford to stay in your home. Mortgage brokers have reverse mortgage options available to them and will explain the pros and cons of a reverse mortgage.
Seniors can access the equity in their home tax free and use the proceeds for whatever they wish such as travel, helping their children and grandchildren, consolidate debts, etc.
6. Assuming mortgage brokers charge fees
Mortgage brokers do not charge fees on regular residential mortgages as their lenders pay them a finders fee. Mortgage brokers shop the mortgage market for the best product and rate available for their clients at no cost to you, the client.
If you are looking for assistance with finding the right mortgage, reach out to Jeff Cody at Platinum Mortgages Ottawa, Mortgage Architects. I offer a wide range of services and am open to sitting with you to understand your needs. I assist in the process and explain your requirements and find a reasonable middle ground. If you are looking for a better understanding of the services that I provide, please click here. If you are looking to get in touch with me, please click here.