by Bryce Hansen
on Monday, March 2nd, 2020 at 6:39pm.
Navigating the ever-changing mortgage market can feel overwhelming at times. As you’re on this journey to homeownership it’s important to ensure you have trusted professionals working for you. Once you’ve connected with your chosen Realtor® it’s time to start the mortgage pre-approval process. Here are some key terms and first steps to get you started on your path to real estate purchasing success.
Choosing a Lender Establish your affordability by meeting with your favourite Comox Valley mortgage professional prior to beginning your house hunt. Compare your mortgage options by researching lenders, local banks and mortgage brokers to see the products, rates and terms that are available to you.
A pre-approval will help you to establish your own affordability, down payment needs and what basic monthly homeownership obligations will cost. You'll want to confirm what your options are in regard to porting your mortgage, or if there is a penalty in the event you sell the property.
The Stress Test In 2018 OSFI (Canada’s banking regulator) implemented changes to its mortgage underwriting standards that affect the level of mortgage affordability for borrowers. Whether you’re purchasing Courtenay real estate or property elsewhere in Canada, you’ll need to pass a stress test for a mortgage loan at a bank. You must prove you can afford payments at a qualifying interest rate, making qualifying payments higher than your proposed mortgage contract.
Preparing Documentation During the pre-approval process, it may feel like your lender is asking for every financial document you’ve ever laid eyes on. Rest assured; a great financial institution reviews your unique financial situation to ensure you can afford the property you plan to purchase. You can expect a lender to ask you for the following paperwork to establish your affordability;
Identification – confirmation you are who you say you are.
Proof of income– Common income confirmation documents include Notice of Assessments, T4 slips, pay stubs or a signed letter from your employer. Income confirmation will vary depending on whether you’re self-employed, paid salary versus hourly wages or a commissioned-style employee.
Bank account and investment statements – often used to confirm down payment funds, income deposits and proof of invested assets.
Debt Figures – your lender will review with you any vehicle loans, credit cards, lines of credit or other monthly obligations you have that need to be factored into your debt ratio with the new mortgage payments.
Post Pre-Approval Once you have your pre-approval, ensure you review the details of the approval. Confirm whether your mortgage will be a fixed or variable rate, what interest rate has been locked in for you, what extra payment features you have available should you wish to accelerate or pay down your mortgage with a lump sum, etc.
With your pre-approval in hand, now you’re ready to start shopping the market for your dream property. It’s important to remember that your lender may call upon you for updated financial documentation depending on how long your purchase process takes. Avoid major purchases, changing jobs or applying for new credit elsewhere until your mortgage is finalized and funded.
Taking the time to get your finances in order before you apply for a mortgage pre-approval will ensure you have a smooth and enjoyable process. For questions pertaining to your unique Comox Valley real estate home buying experience, connect with Bryce Hansen today. 250-702-6493