Buying a home is an exciting time, as it’s often the biggest purchase of your life. This is true whether you’re taking your first step onto the property ladder or moving on up in the world by selling your existing home first.

Although this time is filled with anticipation and joy, it can also come with stress and worry. The task of figuring out the financial details of a getting s mortgage isn’t the most fun part, but it is the foundation of your purchase.

Woolcott Real Estate is committed to making your transition as simple and as streamlined as it can possibly be. That’s why we’ve dedicated an entire post to answering your finance-related questions, beginning with how to get a mortgage. (Disclaimer: This is for information purposes only – we recommend speaking with a mortgage professional about your individual situation.)

Searching for houses for sale in Hamilton or Burlington? Start here by browsing a few of our featured listings.

Your Mortgage Education Begins Here

The best way to get approved for a mortgage in Ontario is to first immerse yourself into the world of financing. You’re about to learn a whole new “language” of fixed-rate mortgages versus variable rates, closed versus open mortgages and more.

One of your first steps is to visit your mortgage broker or lender to explore your options. Various terms may be available, and rates can differ between banks and brokers. Also, be sure to consider your future scenarios. What happens if you get a raise at work or a large tax return one year? Does that mean you can increase your payments and pay your mortgage off faster?

A closed mortgage may have penalties. An open mortgage will be more flexible. Make sure that the agreement you make with your banker or broker is right for your individual situation, not just at this moment, but for the future.

Are you buying a new house before selling your existing home? Bridge financing might be the answer to short-term affordability. Learn more in What Is Bridge Financing and Do I Need It When Selling My House?

How Hard Is It to Get a Mortgage in Canada?

Applying for a mortgage is one thing. The ability to actually get approved for a mortgage in Ontario depends on a variety of factors. Your income, assets and level of debt all play a role.

Your history of paying off your existing bills and loans on a timely basis is perhaps most important of all. All of this leads to the next pressing question:

Can You Get Approved for a Mortgage With Debt?

As little debt as possible is undeniably better when applying for a mortgage. However, keep in mind that getting approved is more about your ability and track record in making your payments on time.

All is not necessarily lost even if your credit history is spotty. In the long term, you can work on repairing your credit and restoring your name. In the meantime, some B Lenders actually specialize in helping clients with bruised credit secure a mortgage. There is a catch, however; many of these terms come with higher interest rates to offset the lender’s risk.

Is your existing term is up for renewal? Be sure to read What Happens When Your Mortgage Is Up for Renewal?

What Do You Need to Get a Mortgage?

“What should my credit rating be” and “how big of a mortgage can I afford” are among the most common questions. Once again, it all depends on your credit history and your lender.

Even with stellar credit, traditional lenders will follow a strict approval process. There will be a stress test to cushion existing interest rates to ensure you will still be able to cover your payments in the event of a rate hike.

Many A Lenders (such as banks and credit unions) prefer to see a credit score of 680 or higher. Your rating doesn’t just affect your ability to get approved in the first place. Stellar credit can also help you secure lower interest rates since you are considered low-risk to the lender.

Curious as to how much you should budget for your new home? Our mortgage calculator can help you decide.

Does Applying for a Mortgage Affect Your Credit Score?

Many clients worry about lowering their credit score just by shopping around for a mortgage. Theoretically, rate hunting can have an impact. Keep in mind that there are two types of inquiries:

• A hard credit check: when a lender formally requests your credit report. Too many hard credit checks can impact your score.
• A soft inquiry: a background check on your history that has no impact on your score.

Even the effect of a hard inquiry is generally minimal and temporary when it comes to mortgage shopping, so it shouldn’t stop you from searching for the best terms. In Canada, multiple hard inquiries can show as one event on your credit score. If in doubt, a mortgage broker can submit dozens of inquiries all at once, helping you obtain the best rate without multiple hits to your rating.

Should You Get Pre-Approved?

When to apply for a mortgage is the next big question, and the answer can be surprising. We recommend getting pre-approved for a mortgage before you even begin searching for houses.

It doesn’t just get the hard (and boring) part out of the way. There are a lot of benefits to having a pre-approval ahead of time. It can even give you more negotiating power and ultimately save you money on your purchase. This subject is worth a deep dive all on its own!

The Benefits of a Mortgage Pre-Approval

Budgeting for your purchase can be complex, and getting a mortgage pre-approval helps to simplify the entire process. To start with, how much will you need for your purchase?

Add up how much you have for your down payment and deposit. Keep in mind that you may also need to do some updates to make your new house really feel like home. Plus, there are closing costs to be aware of. A pre-approval factors all of this in, along with how much you will be able to comfortably afford with your monthly payments.

• You will know what houses are in your price range. This saves you the heartache of falling in love with a property way out of your budget.
• Your real estate agent can zero in on listings that you can realistically afford. This saves time for everyone!
• It will give you better negotiating power – if you find a home that you love, you’ll be able to put in an offer right away rather than waiting for your financing to come through. Dropping the condition of financing also makes your offer more appealing to the seller.
• It secures the best interest rate from your pre-approval date until you make your purchase. You are protected against any increases. If the Bank of Canada announces a decrease, you get the lower rate.
  

  ---

Home sellers should also be up to speed on how mortgages work! Learn more in the posts below:

• How Mortgage Stress Tests Affect Home Sellers
• Should You Provide a Vendor Take Back Mortgage?
• When Do I Get the Money After Selling My House?

How to Get Pre-Approved for a Mortgage

You can start online by filling out some forms. Ideally, you’ll want to talk to your mortgage broker or lender in person, or at least over the phone. You will have questions, and a lot of them. This is not the time to go it alone!

Some people choose a bank that they are comfortable with, while others go to a broker or get a referral from their real estate agent. There are advantages to each, so you must decide what is right for you. Whatever you choose, there are some basic guidelines to ensure the best results.

• Always be honest with the organization where you are applying for pre-approval. This will ensure no surprises about your final approval status.
• Get all of your documentation together to prove your earnings and your assets, such as government identification, T4 slips and bank statements.
• Once you get your pre-approval, don’t make any large purchases on credit or any unnecessary life changes until after your closing day. A pre-approval is still considered just an estimate. If your financial or employment status changes, the lender might lower your approval amount.
• As always, it never hurts to shop around a bit. There are different types of mortgages and interest rates may vary between lenders. Take the time to get educated about the type of mortgage that you want.

When you’ve successfully arranged for financing, it’s on to the fun part, searching for a house! The posts below will help set you up for a successful purchase:

• Our Ultimate Handbook for First-Time Buyers
• Buying a House in Ontario Is a Team Effort
• Hidden Costs of Buying a Home You Need to Know Now

How Long Does My Pre-Approval Last?

So you’ve been pre-approved and were able to secure a really great rate. Congratulations!

Now you’re probably wondering how long you have to find your dream home.

Most pre-approvals are good for 90 to 120 days before you have to re-apply. If you find a home within that time, you’ll get either the lender’s current interest rates or the rate you were quoted – whichever is lower. Remember, if the rates go up while you are shopping, you’ll get the rate on your pre-approval – if the rates go down, you’ll get the lower interest rate.

So are you ready to start house hunting? Then start by mortgage hunting!

Are you looking for more home-buying or mortgage tips? Our top agents in Hamilton & Burlington are here to guide you through it all. Reach out today with any questions you have, or call 905-332-9223 to connect with our office.