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6 Things Before You Buy

The 6 Things You Should Know Before You Buy

Be pre-approved for a mortgage before you go looking for a home
Pre-approval by a lender is the first step you should take before you even look at houses. The lender will do a complete credit check during the pre-approval process, and put it in writing - which is as good as money in the bank! It entails a completed credit application, and specified levels when you find the home you're looking for. Clue: Do not make any large purchases or open any new accounts in the time you are applying for pre-approval and waiting to close on your new home.

Know what monthly dollar amount you feel comfortable committing to
When you discuss mortgage pre-approval with your lender, find out what level you qualify for, but also pre-assess for yourself what monthly dollar amount you feel comfortable committing to. Your situation may give you a pre-approval amount that is higher (or lower) than the amount of money you would want to pay out each month. By working back and forth with your mortgage broker to determine what this monthly amount is, and what value of home this translates into at today's rates, you won't waste time looking at homes that are not in your price range.

Think about your long-term goals and expected situation to determine the type of mortgage that best suits your needs. There are a number of questions you should be asking yourself before you commit to a certain type of mortgage.
How long will I own this home? What direction are interest rates going in, and how quickly? Is my income expected to change (up or down) in the near term, impacting how much money I can afford to pay to my mortgage? The answers to these and other questions will help you to determine the most appropriate mortgage you should seek.

Make sure you understand what prepayment frequency options are available to you. More frequent payments (such as weekly or biweekly) can literally shave years of your mortgage.
Simply by structuring your payments so that they come out more frequently, you will significantly lessen the amount of interest that you will be charged over the term. For the same reasons, authorized prepayment of a certain percentage of your mortgage, or an increase in the amount you pay monthly, will have a major impact on the number of years you will have to pay. For example, a mortgage with a "15 and15" prepayment privilege gives you the right to pay a lump sum of up to 15% of your Outstanding balance. This can be rolled back once during the year (although not lower than your original obligation) if you find that your situation changes.

Can your mortgage be both portable and assumable?
A portable mortgage is one that you can carry with you when you buy your next home. This means that you will not have to go through the entire mortgage process again unless you are making a move up to a much more expensive home. An assumable mortgage is one that the buyer for your home can take over when you move. This can be a very powerful tool at the negotiating table, making it much easier and more desirable for a buyer to buy your home.


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