It’s exciting, house hunting for the place you will call home. Especially if it’s your first home buying experience. You look through all the listings online, you make your wish list, you go out and see them in person — or virtually! Then it happens…you fall in love with a home and you are set on making it your own. You talk to your realtor, who draws up the paperwork, you negotiate back and forth until you settle on a price that you feel is fair and the sellers accept it! What a rush.
But…what happens when you buy a home, and you didn’t get pre-approved for a mortgage first? Well, a few things can happen but in the most basic explanation depending on your financial situation, one of two things are likely to happen.
- You call up your mortgage broker and send them all your paperwork to find out that you have nothing to worry about. You’re approved for the mortgage you need for the home you just legally signed on to purchase and things go off without a hitch.
- You call up your mortgage broker and send them your paperwork to find out that you don’t qualify for that size of a mortgage so you can’t really afford the home you just signed on to purchase legally.
If you get lucky and you fall into the first situation for home buyers you have nothing to worry about. However, leaving the financial backing of a huge purchase like your first home to the fates is a bit like playing roulette. Stepping into homeownership holding your breath, hoping the financial end of things will simply come together isn’t recommended.
If you don’t get so lucky and end up in situation 2 mentioned above, that’s where the water gets really muddy. If you sign off legally to purchase a home without any clauses in there to ensure your purchase will happen so long as you can secure financing, you’re still on the hook for that purchase, which can leave you a little in the lurch if you are turned down by a lender.
That’s why getting pre-approved for a mortgage ahead of starting your house hunt is a smart move.
What is the process of getting pre-approved for a mortgage?
When you apply to get pre-approved for a mortgage, your mortgage broker will review all of your financial paperwork, your credit rating, and existing debts and cash reserves, helping you to collect the right details to begin with. Then they will find out what your mortgage options are and how much lenders are willing to loan you to buy the home you want, once you find it. A mortgage broker who is reviewing your finances will also make suggestions and recommendations on how much you need for your down payment, whether you’ll need a co-signer or not, and which amortization schedule makes the most sense for your cashflow situation too. (That’s how often your mortgage payments are made each month, for how much, and how long you’ll be making those payments for.)
Buying your first home or any real estate investment for that matter takes more planning than most would expect but with the right team in place for you to rely on when questions do come up, you’ll be in good hands, and confident that the financial decisions you make today, will be sound investments later in life as well. If you’re soon to be looking for your first home in Barrie or the surrounding area, give me, Darren Robinson a call at 705-315-0516. I’m more than your neighbourhood mortgage broker, I’m the financial partner you didn’t know you needed, until now.