Before you get knee-deep into the mortgage and homebuying process, you don’t really know what it’s like. You just think that you apply for a mortgage, get approved, buy a home, get the keys, and keep up with your payments. Oh, no! It’s not like that at all. From the egregious fees to the sitdown meeting with an attorney to constantly renewing your mortgage, there are all sorts of things you go through and many different mortgage questions you may have.
This is why it is imperative that you ask the right questions. So, what are the top mortgage questions to ask anyway?
Here are the top mortgage questions for the first-time home buyer:
1. Can I Afford a Mortgage?
When you’re in the market to purchase a home, the most obvious mortgage question that needs to be asked is: Can I afford homeownership? Remember, owning a house or condominium comes with many responsibilities, from the mortgage payments to home insurance to utilities property taxes – and so much more.
Whether you are engaging with the mortgage lender by phone or in person, it is essential to ask if you can afford the mortgage.
Many of these financial institutions have tools on their websites that show you how much your mortgage will be. The digital resource will request your income, debts, property type, and so on. After a couple of months, the calculator will show you how much you can expect to spend on a monthly basis.
2. How Much of a Down Payment Do I Need?
One of the biggest hurdles to homeownership is the down payment. Indeed, many Canadians could afford the monthly mortgage payments, but it is the down payment that leaves so many potential buyers unable to get into the market.
Under Canada’s housing rules, the minimum down payment is five percent for homes that cost up to $500,000. The minimum down payment for homes that are worth more than $500,000 is five percent for the first five percent, plus an additional 10 percent for the remaining balance.
Any down payments of less than 20% will require the homebuyers to obtain mortgage default insurance. This may not seem like much right now, but once you crunch the numbers, you know it’s nothing to sneeze at, and you need to ask these mortgage questions for clarification.
3. Which Type of Mortgage is Best for Me?
Everyone has different preferences for mortgages. Some want a locked-in rate, and some prefer a variable-rate. Some opt for an open mortgage, and some select a closed mortgage. It is important to ask mortgage questions about which mortgage option works for you and which one will make life a little easier.
4. What is the Interest Rate?
In addition to the down payment, the next biggest hurdle to overcome is the interest rate.
Although the Bank of Canada (BOC) is gradually raising interest rates, they are still hovering just a little bit above historic lows. What does this mean? Well, the mortgage rate you pay will continue to cost you thousands of dollars, but the rate may vary based on which mortgage you want, which lender you’re using, and what your credit situation might be.
5. Are There Other Costs I Need to Pay?
One of the greatest joys of mortgage applications, as well as homeownership, are the myriad of unexpected costs. The origination fee, the closing costs, the land transfer tax, the energy activation fee, the home insurance, and the list of mortgage questions goes on.
Like couples who are preparing for parenthood, you think of only the positive when it comes to homeownership. But, like parenting, there are plenty of unforeseen circumstances when it comes to owning and maintaining property. You should always be ready for these costs.
6. What Will My Monthly Payment Be?
In the end, it is essential to know how much your monthly payment will be. For the most part, your monthly payments are the principal repayment, plus interest and, if applicable, mortgage insurance.
You have the option of weekly, bi-weekly, and monthly payments. And, depending on your mortgage variant, you have the option of paying more into your mortgage (this would require an open mortgage).
7. Are You Doing a Hard Credit Check Today?
Before the mortgage proceedings commence, you need to find out if the lender will initiate a so-called hard check, which is otherwise referred to as a hard pull. This process involves performing multiple credit checks because you have applied for credit with the firm. It is important because this gives them the information they need for a firm interest rate quote.
It should be noted that this will show up on your credit report. You should always receive these hard pulls within a week or so to minimize any effects on your credit score.
8. Am I Pre-Approved for a Mortgage?
One of the best things that could happen to you during the mortgage application process is getting pre-approved. This gives you the confidence that you will be able to afford a home, and it realistically gives you an estimate of what you can work with. You don’t need to fool yourself by seeing $1 million homes, if you will only receive about $450,000.
Home ownership remains the top priorities for families across Canada. You want to own property, build equity, start roots, and ensure you have something to leave behind. Unfortunately, because of ballooning real estate values, career uncertainty, and burdensome debt, many young families are unable to buy a house or a condo. That said, if you can make it happen, then do it right away – don’t wait. Just stop by your mortgage lender, ask the right mortgage questions, and learn more about the mortgage application process.