It is common knowledge that a home can be the most significant investment an individual can have. Also, buying a home is one of the safest investments. It can’t be carried or taken quickly. When you buy a home, mortgage is a word that comes with it. Additionally, a mortgage is a lengthy commitment. In this article we’ll talk about how to shop for a mortgage.
The interest rate varies from lender to lender, and you can negotiate your interest rate depending on your situation. You can get higher or lower. Getting Canada’s best mortgage rate is difficult if you have bad credit.
How to Shop for a Mortgage?
Check your Credit Score
Canada credit score is a three-digit number that determines your creditworthiness. Better deals are possible the higher your credit score.
Check your credit six months before you apply for a mortgage. That way, you’ll be able to check and rectify errors if there are any. A mistake can affect your credit score, which can be why your credit score is lower.
You can also see how you will boost your credit score. By checking your credit report, you know where the problem could be if you have low credit.
You can check your credit report at credit bureaus. It is better to get on both bureaus, TransUnion and Equifax, because there may be slight differences on both credit reports.
Weigh on the Different Types of Mortgage
The mortgage has two different mortgage rates: fixed rate and Variable rate.
The fixed rate won’t change during your loan term. The loan term can be between 5 and 30 years, depending on what you get. The more drawn out your term, the lower your regularly scheduled installment will be. However, your total loan cost may be higher with a longer loan term.
This mortgage rate is best for borrowers who want to predict their monthly mortgage payments. But take note that the fixed rate is higher than the variable rate.
Variable rate, on the other hand, fluctuates together with the market. If the market changes interest rate, so does your mortgage rate. It also has a lower interest rate than a fixed rate.
It is best for homeowners who plan to move before their loan term ends.
Shop for Mortgage Lenders
Rates vary from lender to lender. That is why shopping for a mortgage lender is crucial.
Banks, savings, loan associations, and credit unions are examples of traditional mortgage sources. Any financial company that you already have can be a good start. Since you already trust each other, you can get better negotiation.
Another option is to find a mortgage broker, and a broker can find the lender that best suits you. Mortgage brokers have connections or access to better rates you can’t get alone.
If you have already found the lender that you want to work with, ask for mortgage pre-approval. Pre-approval determines if you are a good candidate for a mortgage or not. Your lender can also lock the interest rate for up to 120 days.
A pre-approval also proves that your mortgage lender is investigating your financial affair. And it will be evidence that you are serious about buying a home.
Get a Loan Estimate
A loan estimate doesn’t come until you find the house you want. The loan estimate comes with a three-page document. It shows the type of loan, estimated interest rate, monthly payment, total closing costs, and estimated tax and insurance costs.
However, it is not a guaranteed mortgage offer. It will only show you what to expect when you apply for a mortgage with the specific property in mind. Borrowers can also negotiate for better terms sometimes.
Finalized your Deal
The loan estimate is only valid for up to ten days. If you’re satisfied with the proposed terms, request a rate lock. It is to lock in your interest rate, protecting you from rising interest rates before you close your deal. Most lenders will charge fees for this, but it will be worth it if you can secure a good mortgage deal.
Conclusion: How to Shop for a Mortgage?
Shopping for a mortgage is easier said than done. It has a lot of processes and can be confusing at times. Mortgage pre-approval can also help you get the home that you want. As mentioned earlier, the mortgage is a long time commitment, so being careful how you process everything is crucial.
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