Five reasons to get a mortgage financing pre-approval

So you think you’re ready to start shopping for a property? Whoa Nelly! While it may seem like you’re ready because you’ve done lots of online property window shopping and begun to feel confident about comparing market values, you’ve missed a crucial step in the process. Here are five reasons to get a mortgage financing pre-approval early:

checklist

Time savings

Does it make sense to look at a smorgasbord of properties that you have absolutely no chance of purchasing? Don’t you have better things to do with your free time than view half the condos in the city?

Secure a mortgage rate-hold

Once pre-approved, you will likely be guaranteed a particular mortgage rate for up to 120 days. This is can be very helpful in times when rates just happen to be on the up-swing. In the event of rates dropping, your mortgage broker will ensure you get the lowest rate possible.

Be ready to act quickly on the right property

You never know when the right property will present itself and you’ll need to act quickly. Pre-approval will put you in a position to act swiftly and from a position of strength when writing an offer.

Gain the upper hand in negotiations

If you are interested in a hot property and you find yourself pitted against a other buyers in a multiple offer situation, being pre-approved can make the difference. Imagine yourself as the seller: if you are courting several interested buyers and only one is pre-approved, which party would you sell to?

One final benefit – you may save your Realtor some aggravation (and time) if you are pre-approved before you begin viewing homes. And who wouldn’t want this?

I welcome any questions about selling or buying.
Feel free to comment here or contact me directly.

5% Down – Available to some purchasers but not necessarily advisable

Just say no to 5% down. Unless of course you’re a gambler or expect a steep salary increase in the short-term or some sort of windfall is on the horizon… Here’s a convincing Globe and Mail article on the reasons why a low down property purchase may not be a prudent decision.

Photo courtesy USACEpublicaffairs.

Purchasing with 5% down is most likely not for the faint of heart. If there is a market downturn a property owner could quickly be in a negative equity situation. If property values do start to decline we could see mortgage lending rules tighten up and the minimum down payment requirement could increase.

So here’s the simple point: If you have to stretch yourself financially to buy a new home, you’re probably not ready to trade in your landlord for a lender. If you do press forward with just 5 per cent down, be prepared to stay in your home a while – potentially a long while.

If you must press on with your low down payment purchasing plans make sure you have a contingency plan, or better, access to emergency funds. If you do make a purchase with the minimum down payment and run into trouble in the future, I’m here to help 🙂

I welcome any questions you may have about selling or buying.
Feel free to comment here or contact me directly.

Fixed or Variable Rate Mortgage?

Some interesting posts raised in today’s Globe and Mail article. The gap between the two types of mortgages is smaller than it has been for quite some time causing many to consider opting for a fixed rate mortgage.

In a fixed rate mortgage, the interest rate, and hence periodic payment, remains fixed for the term of the loan. Therefore the payment is fixed and payments for principal and interest should not change over the life of the loan. With a variable rate mortgage, on the other hand, the interest rate ‘floats’ and this may result in a fluctuating monthly payment.

The considerations for home owners have not changed? How much risk can you tolerate? How long is your time frame for owning the property? Where do you see the prime rate going and when, etc?

I welcome any questions you may have about selling or buying.
Feel free to comment here or contact me directly.