Congratulations! You about to make the biggest purchasing decision in your life – yes, even more than those $10,000 tickets to the World Series! Whether are you obtaining a monster mortgage or you want a modest mortgage for that bungalow just outside of the city, there are plenty of things you should have on your checklist in 2019.
By having a checklist in your quest for homeownership, you are protecting your finances, ensuring you are making the right moves, and you are doing the best for your family.
Don’t have one? We have you covered. Here are nine items to add to your mortgage checklist in 2019:
1. Pre-Approved Mortgage
Shopping around for a house without knowing what you can work with? That’s like walking around blind without a cane.
- A pre-approved mortgage is an essential aspect of the home-buying process.
- By having this in your back pocket, you can feel confident in purchasing property.
- By knowing that you are approved for up to $500,000, then you can look around until you find a home that is right for you.
So, before you grab a real estate agent and search for a home in Leaside, Forest Hill, or Malvern, you should first make a trip to your local branch and determine if you qualify for a mortgage and how much.
2. A Mortgage Lender
The financial services market has grown exponentially over the last five to 10 years. Because we are in the digital age, the mainstream banking industry has innovated its products and services. Also, with the rise of alternative banking, you do not need to rely on traditional businesses for your banking needs.
Ditto for your mortgage.
While many people rely on a TD Canada Trust or a Royal Bank of Canada for their mortgages, there’s a segment of the population, particularly the younger generation, turning to credit unions, online banks, and community banks for their mortgage needs. Mortgage brokers are also a popular source to attaining a mortgage that is tailored to your financial situation.
3. Employment Information
If you are employed as a permanent full-time worker at a company, then you need the basic employment information to extend to a bank:
- T4 Slip
- Copy of latest paycheque
- Letter of employment
Be careful if you are self-employed. The big banks are a lot more cautious about lending to the self-employed because of the lack of certainty pertaining to precarious employment. That said, if you are a contractor, a freelancer, or business owner, then you may need to T1 – General Notice of Assessment (NOA) letter to support your annual income.
4. Your Budget
You earn $50,000 a year, but you want an $800,000 mortgage? You are drowning in debt, but you want to add to the pile with a monster mortgage? Indeed, everyone’s personal finances are different, but it is essential to create a budget, maintain it, and make the necessary cutbacks. With this in mind, you need to factor in your budget when deciding how big you want your mortgage to be.
Sure, a mortgage may cost you $2,300 a month – the cost of your monthly rent right now – but then there are plenty of other costs associated with your home, from hydro to water to repairs to taxes. You never know what will arise.
With a budget, you can feel confident in how much you’re spending to attain the Canadian Dream.
5. Required Down Payment Amount
In recent years, the federal government changed its minimum down payment requirements – both the costs and rules. For instance, today, the minimum down payment for a home is 5% for mortgages under $500,000, but it increases to 10% on homes over $500,000 plus a portion of the price. Or, if your down payment is less than 20%, then homebuyers must buy mortgage default insurance.
Indeed, the higher your down payment, the lower your principal mortgage will be.
Do you have it? It can be hard, and it is one of the biggest deterrents for young people who want to be homeowners but don’t have the $100,000 needed to achieve this dream.
6. Assets vs. Liabilities
What are your assets compared to your liabilities? Answering this can determine your net worth.
An asset can be anything from your savings to your stock portfolio to your automobile. A liability is credit card debt, a student loan, or lien on your vehicle.
Why is this important? Well, you want as fewer liabilities as possible when you’re getting a mortgage. This is especially true if you are seeking the approval for a monster mortgage. Some Canadians are trying to consolidate all their debt into one big mortgage, but even that is becoming too consuming for them.
7. Legal Representation
Back in the day, you would buy a house, get the keys, and move in. Today, like so many other things, it has dramatically changed. You need a lot of dough, you need to have impeccable credit, you need to pay a wide variety of mortgage fees and taxes, and you will plenty of bills to pay with homeownership.
One more thing: You need the proper legal representation. An attorney can help you navigate through complex real estate contracts. This legal professional can protect you, provider the best advice, and ensure everything is perfectly lawful.
8. Housing Appraisal
The biggest danger in this housing market? Potential buyers foregoing the housing appraisal process. It’s becoming increasingly alarming that prospects are not getting these homes appraises out of fear that they will waste too much time and spend too much money.
In a bidding war, you are competing with 20 other people for that dream four-bedroom house, so it is understandable that a lot of younger people are dismissing the services of home appraisers. It is the wrong course of action, but it’s hard not to be sympathetic if the homeowner decides to sell to someone else who didn’t want to establish an appraisal.
9. Do You Have the Closing Costs?
Out all of the budgeting, there is one thing that you forgot to budget for: closing costs. Believe it or not, closing costs can be so expensive that some financial institutions offer loans for these undesired costs. To get an idea, if your mortgage is $200,000, then you’re paying about $10,000 in closing costs.
Question: Do you have the dough needed to pay for the closing costs?
It is mind-boggling when you see a shack sell for $1.4 million just because of the area. Unfortunately, that’s the way it is when you live in the big city – or just outside of an urban center. Remember, there’s a reason why total mortgage debt is in the trillions in this country.
Before you commit to such an exorbitant price, you need to make sure that you can afford it. A mortgage isn’t anything to sneeze at. It is the biggest responsibility you will ever come across, next to having kids. At least your children leave the nest at 18; your mortgage will haunt you for 20, 25, or even 30 years.
Are you ready? Use this checklist as your guide.