What Do I Need to Get a Mortgage?
Posted by Garman Group on
You’ve decided it’s time to buy a home. It’s an exciting time in your life, but before you close, you need to go through the proper channels to get there. One of your first steps should be to get your finances in order and know how much you have to work with. We’ve put together this handy guide to help get you started:
Know What Exactly a Mortgage Is
A mortgage is a loan you receive in order to buy a house or property. The property bought is used as collateral to your lender who can take over the property in the event you default on your payments.
The amount you need to purchase the property is called the principal amount, but you'll have to pay interest on top of paying this back. This is why it’s important to get a good rate and not get in over your head.
Talk to a Bank or Broker
Some people swear by going through a broker for a mortgage, while others would only ever consider their own financial institution for a substantial loan like this. There's no right or wrong answer, it depends on your financial situation and the terms you're looking for.
Sometimes, brokers can come up with a wider variety of offers than financial institutions. However, it’s your bank who will generally look at your entire financial picture including RRSP’s and other savings goals you can tap into or continue to invest in.
It’s worth having a conversation with your current financial institution first to see what they can offer you as you already have the relationship with them. But it’s worth getting a second (or even third) quote as well before you make a final decision on who to get your mortgage through. Make sure you work through all your options and have them explained to you. Consider fixed and variable terms as well as short-term or long-term mortgages where you're locked into your interest and payment rate for a specified time. There's also open or closed which allows you to re-pay your mortgage at any time or leave the conditions unchanged.
This is a vital step! Your credit rating and financial situation will be used to determine how much you'll be able to borrow. Once you know this, you'll know the right price range to start your property search.
Your lender will be looking at proof of employment as well as confirmation of income from all parties who are applying for the mortgage.
Generally, your down payment will need to be 5% of the purchase price, which you should already have saved or in other equity. That way your mortgage loan will be the remaining 95% of what your home will cost.
We know this seems awfully confusing so here’s the BC Mortgage calculator to give you some general direction on what type of numbers you'll be looking at.
Factor in Other Costs
Be aware that you need more than a mortgage to buy a home. Other financials will come into play during this process. Read about these in our blog post on Hidden Costs of Buying A Property and remember, as we said above, don’t overextend yourself.
Talk to a Qualified Realtor®
Once you have all these steps in place, you should start working with a qualified MLS REALTOR® to continue your home buying journey. At the Garman Group, we not only have the knowledge of Victoria, BC real estate and what the housing market is up to, but we can clear up any financial questions you may have. Make this an easier process, contact the Garman Group today!