Buying a home can be an exciting time, so the last thing we want is for you to be hit by any surprises. Let’s take a look at five things to keep in mind before you write an offer.
1. Get your mortgage in place before you write an offer. Meeting or speaking to an actual person who will take your application and pull your credit is the best strategy. You will get a firm amount of how much of a mortgage you may qualify for. This is also a great time to make some decisions like if you want a fixed rate or variable rate, if you want a monthly or biweekly payment. You are far removed from stress of meeting any condition of financing dates at this time, so you have the luxury of time to ask your questions.
2. Be ready to provide the necessary paperwork. If I was lending someone $300,000, I would want to know that they could pay me back and so would you I’m sure. You are going to be required to provide a lot of paperwork. Getting a complete list ahead of time and starting to gather it really makes it less stressful for you once the offer is accepted.
3. There are extra costs. It is not just a matter of having the down payment. You will also have to pay for legal fees, title insurance, property tax adjustment if necessary, mortgage default premiums and on and on. That is why you must have at least 5% down and an additional 1.5% of the purchase price in your account to cover these costs. The banks also really like to see that you have a fallback position of extra cash in case you get sick or downsized.
4. You can get extra funds for improvements to the new home added to your mortgage. Most lenders allow up to $40,000 for upgrades. These must be things such as flooring, windows, exterior, kitchen, bathroom or any other manner of upgrade which will stay with the property. The funds are held at the lawyer’s office until an appraiser verifies the work is complete, so you will have to be able to cover any costs in the short term.
5. Here is how the process goes.
• You get the mortgage pre-approval
• Find a home and place an offer with a condition of financing date and likely a home inspection one as well
• The application is sent off for approval based on both you and the property and you provide all the necessary paperwork
• The bank says they are 100% happy with you and you say you are 100% happy with the offer of financing and you remove the financing condition. Do not make any changes to your financial picture after you remove the condition. It can be cancelled if you leave your job, take on more debt or rack up the credit cards.
• You meet with the lawyer to provide the balance of the down payment, cover the other costs
• Day of possession you are given the keys once it is confirmed that the funds have transferred to the seller
• Congrats! You own a home
This has been a crash course in buying a home but there are so many resources online or available to you for free over the phone that it shouldn’t be too awful. Happy House hunting!
Pam Pikkert is a mortgage broker with Mortgage Alliance – Regional Mortgage Group in Red Deer.