The first time you’re able to afford your own home, there’s a feeling exhilaration and joy. For many people, that excited feeling can also come along with a different type of giddiness caused by anxiety and uncertainty. At Mortgage Design Group Inc, we believe that mortgages don’t have to be scary. In fact, we believe that it’s a lot more in reach than you might think. In this article, we talk about the common myths associated with mortgages. It can be easy to be intimidated by them. By clarifying the true and false of these mortgage myths, we hope you’ll find that you might be better-prepared to buy a home than you thought!
Mortgage Myths #1: I can’t afford to buy a home.
If you’re currently paying monthly rent, chances are you’ll be able to afford a monthly mortgage payment. One huge perk to buying over renting is that you are putting your money towards an investment that you will eventually own. With a fixed-rate mortgage, your monthly payments and interest rates will stay the same for the entire life of your loan. That means that where your rent can increase year by year, it could actually be cheaper in the long run to have a mortgage.
By talking to qualified experts at a brokerage like Mortgage Design Group Inc, you can find out how much you can afford in your monthly payments. Many banks and brokerages will offer pre-qualifications and pre-approvals. However, if they are not properly checked and underwritten, they can give you a false idea of what you can afford. This can be especially disappointing if you find out that you were actually approved for much less than you had thought.
At Mortgage Design Group Inc, we fully check and underwrite all our pre-approvals so that we can give our clients the most accurate report on what they can afford. Once you’re pre-approved, you’ll know exactly how much you can borrow. This will be a huge help when you’re searching for a dream home within your budget!
Mortgage Myths #2: I need a 20% down payment to buy a home.
While putting a 20% down payment on a house is ideal, there are plenty of people who don’t put down that much. In fact, the minimum required down payment is 5% of the purchase price (for homes that cost $500,000 or less).
That’s where government programs such as the Government of Canada’s First Time Home Buyer Incentive can help. The First Time Home Buyer Incentive is designed to help first-time homebuyers without adding to their financial burdens. For more information about the program, visit their website. Other government initiatives in Canada include the Home Buyers’ Amount, Home Buyers’ Plan, and the GST/HST New Housing Rebate.
Mortgage Myths #3: I need excellent credit to get a mortgage.
Credit history is a big factor that determines whether you will be approved for a loan. However, that doesn’t mean your credit score has to be flawless find a mortgage that fits your budget. That’s where a service like Mortgage Design Group Inc can be very beneficial as they can curate products that work with you. The path to home ownership doesn’t have to end just because you have less than perfect credit. Talk to a knowledgeable broker to see what will work for you.
Bad credit doesn’t always mean that you are unreliable. In the midst of a global pandemic, we understand more than ever that sometimes there are things that are just out of your control. If you have bad credit, consider talking to a trusted broker or financial advisor. They can help you understand what steps you need to take in order to improve your credit score. This will not only help you get a mortgage, but can also make it easier to apply for future business loans, rental applications, and more.
More than good credit, established credit can be more important when a lender is deciding whether or not to give you a loan. Generally, lenders are looking for borrowers that have at least two different trade lines. These include a credit card, vehicle loan, personal loan, and more. These should have a minimum 24 months of history with an available borrowing limit of at least $2000. Lenders are looking for confidence in your ability to pay your mortgage regularly. By making sure you pay your bills on time, you are on the right track to establishing a positive credit score.
If you are new to Canada and do not have credit established, you can also use alternative sources of credit. This could include a reference letter from your landlord establishing 12 months of rental payment history or 12 months of regular payment history for items like vehicle insurance, utility bills, or more.
Mortgage Myths #4: The lowest interest rate is the best option.
Some first time homebuyers might be drawn in by the allure of a low interest rate. After all, with a fixed-mortgage, a lower interest rate just makes sense right? While a low interest rate is of course an important thing to consider, there are other things to consider.
An interest rate is the percentage that you are charged for borrowing money. It doesn’t include other fees that may be required by the lender for the loan. Some other fees to think about could be closing fees, documentation fees, and other finance charges.
When thinking about which option is best for you, consult the annual percentage rate. This will give you a more comprehensive look at how much you will pay when you take out a loan. The annual percentage rate is the total cost of taking out a loan expressed in terms of a rate. That means it includes all the additional costs mentioned above and is a more accurate depiction of how much your loan will actually cost you.
Mortgage Myths #5: The banks are the best providers for mortgages.
With access to more loan products than banks, mortgage brokers can provide more personalized options for your needs. Where a bank might only offer conventional mortgage solutions, a broker can advise which lenders will consider your case based on your individual circumstances. While banks may have in-house mortgage specialists, they are still limited to only offering the products that the institute has to offer. On the other hand, brokers are knowledgeable in both traditional and unconventional mortgages.
At Mortgage Design Group Inc, we strongly believe in making mortgages simple. We do this by making our services accessible to everyone, even from the comfort of your own home. We know how much this means to you. That’s why we’re ready to help you find the best mortgage options within your budget. More importantly, we want to help you take that next big step in life to stability and independence.
With a team of experienced and knowledgeable brokers, we curate all the products on the market to show you the best ones for your wants and needs. We want to take the power of intimidation away from mortgages. We believe that it should work FOR you and not against you. If you have any questions about how to start to establish your credit or would like to get pre-approved with us, we’re here to help! Talk to us today and let us know how we can help!