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When you’re looking to buy your first home, finding your dream property is only half the battle. Choosing a mortgage loan is the less desirable and more complicated half of the process.
With so many mortgage lenders on the market, and so many different types of loans available, choosing the right mortgage loan can feel daunting – especially when you factor in all the other decisions and responsibilities that come with finding and buying your first home. With the right preparation and guidance, you can make an educated choice well suited to your specific needs.
Selecting and obtaining your mortgage loan will bring you one step closer to buying your home and set you on the pathway to success. The good news is, there are plenty of resources out there to help guide your decision.
If you are a first-time homebuyer, these are the resources you can use and the steps you will want to take to ensure a fair mortgage rate well suited to your needs.
Use a Mortgage Rate Calculator
A mortgage rate calculator will help you determine the closest approximate costs of getting a mortgage, as long as you’re aware of the price of the home, the down payment you can make, the amortization period, mortgage rate, and frequency of payment. The tool is generally straightforward to use and allows homebuyers to budget their finances and prepare for the purchase with real-time data.
There are various organizations that offer a mortgage rate calculator Canada residents can use to help the booming housing market across the region. That said, you will want to find one that is accurate, and can provide you with a wealth of information. A good mortgage calculator will act as a one-stop resource, providing homebuyers with an accurate representation of what to expect as a borrower.
Learn the Relevant Terms
Understanding the technical terms related to mortgage loans can be challenging for first-time homebuyers. Familiarizing yourself with important terms can help you better understand the process. Some important terms include:
- Pre-approval: When a borrower is pre-approved, it means that the lender has qualified them for a mortgage loan based on the information the buyer has provided and is subject to certain conditions.
- Mortgage rate: A mortgage rate is the rate of interest charged on a mortgage and is determined by the lender. Depending on your agreement with the lender, it can be fixed or variable.
- Closing costs: These are fees a buyer owes at the closing of a real estate transaction and can include lawyer fees, land transfer taxes and home inspection.
Different Types of Mortgages
Lenders offer a range of mortgages for homeowners to choose from based on their individual needs. Some types of mortgages include:
- Open or closed mortgages: An open mortgage allows homeowners to repay all or part of their mortgage at any time during the term without a prepayment charge. A closed mortgage can incur penalties for paying all or part of your mortgage before the end of the term.
- Fixed or variable rates: When you have a fixed mortgage rate, your interest rate and payments remain the same over the term. The interest can fluctuate according to the lender’s prime interest rate with a variable mortgage rate.
- Conventional loan: A conventional loan is not backed by the federal government but is suitable for borrowers with a good credit score.
Find Out What Lenders Look At
One of the most critical steps to finding the right mortgage is knowing what lenders look at when deciding whether or not to approve your application. They look at several things, including your income, down payment, assets, credit scores, debts, and the property.
When you have a better idea of what makes you a reliable candidate, you can prepare for the application and make adjustments in your life accordingly. For example, you can improve your credit score to gain the lender’s trust.
There are many things to consider while shopping for a mortgage loan. Being prepared for the process will ease your mind and help you prepare accordingly.