You’ve cut costs, you pinched pennies and you finally have your down payment, now what? The mortgage process can be intimidating and it’s important to know you’re asking the right questions. Follow our guidelines here and rest assured you’re making the right financial choices.
Although many people look to their bank as the first step in hunting down a mortgage I always guide my customers to a mortgage broker. Banks have strict guidelines they have to follow and only have access to select lenders. A broker typically has access to over 30 different lenders and can compare many in order to find you the best interest rate. Online mortgage calculators are a great tool to get you started and familiar with the procedure but brokers will ask comprehensive questions on finances and employment during the approval process. These questions revolve around your current credit rating, how much you can afford to pay and how much of a down payment you have stashed away.
Don’t let the different terms scare you, here’s a brief explanation of the types of mortgages currently offered and some language regularly used while shopping for a loan.
- Prime Rate: Largely determined by the Federal Funds Rate (which is the overnight rate that banks use to lend to one another) it also directly affects the lending rates available for a mortgage.
- Fixed Mortgage: Set rate for the term and the longer the mortgage is locked in the higher the rate.
- Variable Mortgage: Typically lower than fixed rate as it fluctuates with the prime.
- Open Mortgage: Higher interest rates, open for pre-payment at any time.
- Closed Mortgage: Typically lower rates but limited to how much you can pay down yearly.
Unless you have 20% to use as a down payment you will be requiring mortgage insurance. This is added to the principle of the loan and is based on the amount of money you’re borrowing. You can choose to pay your mortgage monthly, bi-weekly or weekly. If you pay bi-weekly or weekly the additional payments go directly towards principal and you pay less over the mortgage.
Avonlea Homes has recently introduced a new division within the company- Avonlea Financial. We have our own team of brokers on standby ready to help address any needs and concerns. By using Avonlea Financial for your purchase it not only streamlines the process but they also provide free legal fees! Learn more about Avonlea Financial here, and how we can quickly and easily meet with you to discuss your mortgage options for your new home.
A home is the most important investment you will ever make and Avonlea Homes is here to help. If you’re requiring any assistance or have questions regarding the purchasing process contact me today!
Avonlea Homes Sales Advisor
[email protected] | 403-894-7293