You may have heard of Canada’s First-Time Home Buyer Incentive, but did you know that only 2,000 Canadians received it since it was launched? Most opted out of this incentive because it was not an attractive offer for new homebuyers. Instead of taking the incentive, many went through the traditional mortgage loan process.
Read on to learn about what the mortgage loan process is like and what you can actually expect from it.
Know What You Can Afford
Technically, this is something you should do before beginning the mortgage loan process. Yet, it is essential to know how much you can afford when buying a home. This will help you choose the right mortgage loan in the end.
Think about the monthly payment you can manage reasonably. From here, you can determine the maximum home buying power you have. Financial planning is key to getting a mortgage loan.
Getting Pre-Approved for a Loan
After estimating your budget, you can look at homes that are within your price range. This is the first step of the mortgage loan process.
Ask your mortgage lender for a pre-approval letter. This letter provides the amount of money a mortgage lender has approved based on your income and several other factors.
Having this letter before making an offer on the house will make the process run much smoother. If you are interested in a home, a seller knows you are already qualified because the letter is evidence.
It is important to note that getting pre-approved is different from getting pre-qualified. They both mean a lender is more than likely to give you a certain amount of money. However, realtors prefer pre-approval letters.
Unlike pre-approval letters, pre-qualification letters are not verified. A pre-qualification letter is an estimate of your budget, while a pre-approval letter is vetted.
After receiving a pre-approval letter from a lender, you don’t have to stick with them when you receive the final mortgage. You can find a better deal by looking for another lender.
After getting pre-approved, you can begin house hunting. Visiting homes with your agent is the fun part, but after, you should be ready to make an offer on the home of your choosing.
An agent will help you structure the offer right. You may also have to submit an earnest money deposit during this time to prove you are serious about the offer.
A Home Inspection
Before going through the mortgage application process, many opt to order a home inspection. This provides you with additional information about the home other than what you can physically see.
An inspector will check the structure, foundation, roofing, plumbing, and electrical of the home. As a buyer, you should be aware of repairs you may have to make. This could lead to needing a bigger mortgage loan or a sales negotiation between you and the seller.
Choosing a Lender
If you are sticking with the mortgage company that pre-approved a loan, you are already a step ahead of the game. If you want to keep shopping for a better deal, this step is for you.
After having an offer accepted, many opt to find a different lender. Whatever your case may be, now is the time to make a final decision on the mortgage company you want to work with.
Pro tip: Your mortgage rate doesn’t only depend on your application. The type of loan you get also affects your rate.
Figure out which loans you qualify for and look at different rates. Keep in mind that there may be better deals than those you see online, so don’t be afraid to ask.
Mortgage Application Process
Applying for a mortgage loan is easier if you use the same lender you used for the pre-approval process. This is because a lot of the application has already been completed. The only thing left is to fill out extra documents that will get the loan filed.
The documents necessary for this step are the full Purchase Agreement and the proof of your money deposit. You may need to update your asset documentation and income. You can do this with more recent bank statements and pay stubs.
If you aren’t going with the same lender and don’t know how to apply for a mortgage loan, a lender can help you. Within a few days of filing, you will receive an estimate of the fees, rates, and terms of the offered loan.
Another step on how to get a mortgage loan is getting a home appraisal. The lender usually sets up this step of the process for you to get an estimate of the value of the home.
The loan cannot get approved unless the home is appraised for the contracted purchase price.
Closing on Your Home
After getting a home appraisal, you will experience a waiting period until the closing day comes. In this last step of the process, your lender will send over the closing documents. They will instruct you on preparing them for a title company or attorney.
What does this mean for you? You’ll be signing a lot of paperwork. An essential document to look for is the Closing Disclosure. This is similar to the Loan Estimate but provides you with the confirmed costs instead of estimations.
Generally, the two documents will match or slightly differ. There are laws in place to prevent them from throwing you off guard.
After signing all of the documents, you are now a homeowner and have completed the mortgage loan process!
The Mortgage Loan Process Explained
If you’ve never owned a home before, this guide can help you understand the mortgage loan process. It is nothing to be afraid of if you take the correct steps. A qualified and professional realtor and lender can be the key to success!
Mortgage Winners can help you find the best solution for your situation. Contact us today to get information about mortgage loan options.