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mortgage infoApplying for your first mortgage is always an exciting experience because it means you're starting a new phase of your life either financially, personally or on both counts. There are some factors you need to take into consideration when buying your first home or piece of real estate, and we hope the following will act as your guide in successfully attaining your very first mortgage.

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Your Credit Score

Nothing else affects the size of the mortgage you can get, or the attached interest rate, more than your existing credit score. In an ideal world you should be checking your credit score at least 12 months in advance of actually applying for your mortgage - doing your very best to eliminate any credit "issues" you might have.

A below average credit score is around 600, whereas an "ideal" credit score is closer to the 800 mark, so somewhere around the 700 region is fine for most mortgages. If at all possible don't change jobs, or go on crazy spending sprees during your mortgage approval process - this can cause you last minute headaches with your mortgage application being declined based on a second credit report being generated just days before you sign the documents.

Manage Your Expectations

Shopping for Real Estate online or offline is addictive, and it's all too easy to get caught up in the "buzz" of buying a new home. This can often lead first-time buyers into deceiving themselves about how much they can really afford, setting them up for foreclosure and financial ruin in the not too distant future. Unless you have unlimited financial resources you should buy a home with enough room for you and your family to grow into, but understand that this first home is as much an investment in a larger future home as it is anything else.

Your Financial Resources

We're kind of touching on the same point of how much you can afford again here, but in a little bit more detail. When a lender is considering the total value of the mortgage they should give you, they have to factor in exactly how much you can afford to repay each month. Arriving at this figure involves calculating your debt-to-income ratio, which is basically a calculation of how much you earn each month versus what your overall expenses are.

Lenders also pay special attention to any long-term debts you might have, including things like student loans, child support, or any other debt which has duration of more than 6 months in total. This might seem unfair at first, but it's to prevent you from winding up in financial difficulty in the first few years of your home ownership, which is typically what happens to most novice property owners.

In the same breath you'll also need to be able to prove that you have a consistent, verifiable and reliable monthly income from your employer(s), and you'll also need to prove this income with wage slips and/or a letter from your employer testifying as to how much you actually earn each month. It's worth mentioning that most lenders will look at your net salary minus any bonuses or overtime you receive, unless you've been in receipt of regular overtime hours and/or bonuses for at least the last 24-months. Basically don't attempt to artificially inflate how much you earn because lenders can and do investigate this for themselves.

Mortgage Brokers Vs Banks

We've found, in our many years of experience, that most buyers struggle an awful lot when it comes to choosing between a mortgage broker and a bank. Basically a bank will only have one of a handful of mortgage "products" which they can sell you. A mortgage broker on the other hand can search dozens of different banks and lenders, working hard to find you the best possible deal available for your financial means. That being said check exactly what fees a mortgage broker is charging - they can be extortionate in some cases. Another advantage of dealing with a bank is that if you're already banking with them you can sometimes negotiate a slightly more favourable interest rate.

The key to successfully landing your very first mortgage is like most things in life - preparation, preparation, preparation.


Mortgage Calculator

This mortgage calculator can be used to figure out monthly payments of a home mortgage loan, based on the home's sale price, the term of the loan desired, buyer's down payment percentage, and the loan's interest rate.

Purchase & Financing Information

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Our Mortgage Specialist

Rowan Smith
Senior Mortgage Specialists

City Wide Mortgage Services
rowan@citywidemortgage.ca
604-657-6775