How to climb the mortgage ladder

Congratulations and feel free to cue the Rocky music

So, you have decided that you would like to become a home owner?

Good for you! Before you get too far ahead of yourself you may want to look at how you can most easily climb the rungs to your new home.

Step 1. Develop strong credit. The magic number for credit is two.

You need to have two types of credit reporting for two years to have super strong credit. Do not exceed 50% of the available credit balance and make all your payments on time including your cell phone.

A visit to equifax.ca will allow you to pull your own credit with a score for a cost of about $25.

Step 2. Save the down payment and closing costs. Savings is a habit like anything else otherwise sports heroes would never go bankrupt after earning huge sums.

Set your goal and the timeline and put into play.

You will need five per cent of the purchase price to put down, another 1.5 per cent for the closing costs and your application will appear very strong if you can also demonstrate you have a bit more in case of emergency.

Ideally you will have at least 10 per cent saved.

It is important to note that certain circumstances will require more than five per cent down.

Step 3. Get pre-approved and set your budget.

Meet with a qualified mortgage professional, have your credit and situation looked at carefully. This person will ask for your paperwork and send the application off to a mortgage provider for a fully underwritten pre-approval.

This will allow you to house hunt knowing your rate is secure and that your offer is as solid as possible.

Your budget should encompass the mortgage payment, property taxes, home insurance and enough life and disability insurance to protect your home and family.

Step 4. Find a home. A professional realtor will find you the right home for your situation now and later.

These people have to go through schooling and ongoing training, so you can rest assured they have your best interest at heart and will help you avoid things you didn’t even know about.

Step 5. Complete the mortgage approval. Once you have negotiated, your property will be sent for review to the mortgage lender and from there to the mortgage default insurer.

They may ask for additional information from you. After they are 100 per cent satisfied you can go ahead and remove that financing condition.

It is advisable to ensure your financing is secure prior to incurring the cost of the home inspection.

Step 6. Meet with the lawyer. About five to 10 days before you get the home you will meet with the lawyer to sign all the required paperwork.

You will be asked to bring in bank draft for the balance of the down payment and the other costs. You will need two pieces of acceptable ID as well

Step 8. Move in day! The lawyer will send the funds from the mortgage and the down payment to the lawyer of the person you are buying the home from.

Once this is complete the home is yours! Congratulations and feel free to cue the Rocky music and take a victory lap. You deserve it for all the work you did to get here.

Pam Pikkert is a mortgage broker with Mortgage Alliance – Regional Mortgage Group in Red Deer.

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