Perhaps you have good credit, a down payment and qualifying for financing will not be a problem, but you want the best mortgage for your needs, and of course, the lowest interest rate available. Sound like you? Or maybe you just have no idea what you qualify for, this is your first purchase and you just want to learn how to get started (on the right foot). Well, read on...

Below is a brief outline of some basic components of getting financing and some tips to get you well ahead of the game.

Traditional Banks

An advantage of using banks rather than mortgage brokers is that you get to deal with someone who knows a lot more than just mortgages. Often, what is best for you in terms of a mortgage might also play into your long term financial planning, and a mortgage broker may not be able to help you align the two. For example, your bank can take into account any credit cards or lines of credit that you may have, along with any savings or RRSP accounts to make sure you have high cash flow and low borrowing costs.

Although getting you approved for your mortgage may be your number one priority, a bank will work with you to make sure that whatever you end up with suits your lifestyle and matches your long term goals.

Some banks even have access to alternative lending sources that may be able to help if your credit is less than perfect or a transaction is out of the ordinary. Ask your banker to find out which options they provide.

Mortgage Brokers

Brokers are typically self employed and are paid by the lenders (or banks) and not by you. This means that they are motivated to get you approved and also give you great service in the hopes of future referrals. They use as many as 30 different lending sources, which even include a lot of major banks.

One of the greatest advantages of using a mortgage broker is that they work with hundreds of unique situations, often have friends in the right places and know some tricks to ensure your mortgage gets the green light. If a traditional bank denies you, a mortgage broker might be able to help.

Lines of Credit

TAKE NOTE: By financing your home with a line of credit, rather than a mortgage, there are some serious benefits. The line of credit will be secured against the home similar to a mortgage; however the payment options are sometimes wide open. There are no penalties for paying off a large lump sum or clearing it completely (very important when you sell). If your monthly finances are a little short, or if monthly cash flow is the goal, then on some LOCs you can make interest only payments which will maximize your monthly income. A line of credit can also be a better way to refinance your home. You can use as much, or as little, of it as you need, and only make payments on the portion you have used.

Creative Financing

How do people buy homes with no money or no credit? Well, some banks still offer zero down mortgages, however you still have to have good credit and income. Some self-employed people have lots of money, but can’t prove their income. Sometimes you need non-traditional methods of financing. Here are a few possibilities:

Private Lenders some lenders will work with high risk clients and simply charge a higher interest rate

Joint Ventures get someone else to front the money for the home and you split the future returns

Vendor Take Backs involve having the owner carry the mortgage

Assumable Mortgages agree to take-over the existing mortgage (only available in certain places)

Other Options combinations of the above and others unique to the particular laws governing the area

Summary

If you have enough motivation and the proper guidance, there is nothing holding you back from finding the money to purchase real estate. The key thing is to check out all your options. If you plan on spending $100,000’s on a new home, it will be well worth your time to do a little homework.

Don’t let everyone pull your credit rating, have the bank run some hypothetical examples and once you find one or two you trust, then pull the details. The more times your credit is pulled, the lower your credit rating becomes. Get pre-approved and lock into an interest rate. Some lenders will hold a rate for up to 120 days. If the rate is lower when you take possession, you get the lower rate anyway. Don’t get caught if rates climb. Be careful whose advice you take. Some REALTORS® are paid incentives based on the business they send a mortgage broker. Ask your Realtor why they recommend someone and if they receive an incentive. Review the terms of your mortgage in depth and be sure you understand the pay-out options, conditions, interest rates, etc. It can be a nasty surprise if your payment suddenly jumps or you have a large pena lty for getting out early.

If you are not approved, ask why not and find out what options you have to get approved (if they can’t tell you then find someone else). Sometimes it would just take an additional letter from an employer or something simple to remedy. There is always a way.

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Have your Realtor provide a detailed price evaluation of the property you are purchasing.

In other words, make sure that you Realtor compares the property you are purchasing with other homes in the are that have recently sold. Note: It is more important to examine recently sold properties than the current active listing inventory or expired listings. It is still important to see what other homes are listed for or have been listed which have not sold but you really want to put your infancies on what the other sold listings like the property you are purchasing have sold for.

Get a home inspection.

Many times buyers will choose to purchase a home without having the home inspected by a qualified professional. Many states if an inspection is performed within a timely manner you can generally ask for the seller to repair or fix the items in question or get an allowance deducted from the price of the home. If it is an issue that cannot be resolved you may even be able to be relieved from your contractual obligations.

Enter into a buyer’s agency relationship with your Realtor.

It is important to understand that agency issues can play a big role in the purchase or sale of a home. By having real estate agent work with you as a buyer’s agent the agent is providing duties of obligations for you the buyer and not the seller or the seller’s agent. Make certain that the real estate professional you have hired has a good clear understanding of buyer’s agency and how it operates before entering into any buyer’s agency contract.

Put a good deposit.

Often time’s buyers put very little earnest money down when negotiating the purchase of a home unfortunately to the seller it shows little commitment on your part as a buyer to purchase the home. A larger earnest money deposit shows your sincerity and your intent to complete the purchase and can be a big factor in the negotiating of the purchase price.

Watch important time lines.

With most real estate contracts to purchase real estate documents there are important dates and time lines that must be followed. How quickly the home inspection must be completed when to review the title work, how quickly your loan approval must be met and more. A good buyer’s agent acting on your behalf will follow these guidelines and make sure that you meet each and very time requirement. However, it is also good practice on your part as the buyer to make note of these date and times so that nothing is overlooked or missed. A good example of this might be the date your complete your home inspection, the date to complete all of your mechanical and structural inspections. The contract may provide for you to terminate the transaction if there is a major defect that can not be corrected or fixed. If this inspection is not performed in a timely manner under the dates and times of the sales contract there maybe no remedy depending on the state law to terminate the transaction if your inspection is not done before the proper date and notice provided to the seller or sellers agent.

Shop around for your home mortgage.

Often buyers will go to only one lender to apply for a home loan before beginning any initial credit reporting or verification or other signed documents with a lender find out what their interest rate, closing cost and other fees are associated with your home mortgage. You can also request that the lender reduce part of the closing cost or ask if any fees are negotiable. Many times lenders fees are not set in stone and can be negotiated or removed from the cost of the loan. For example, some lenders will wave the cost of a credit report or appraisal fee to encourage you to do business with their company or if you credit is good enough and depending on your down payment some lenders may even wave all or part of their origination fees. The important point is for you as a purchaser to ask if any of the costs for the loan can be eliminated or discounted.

Get a survey.

Most title insurance policies in many states do not cover encroachment or survey boundary problems when they arise. After the closing it is generally too late to get help from the previous owner you purchases the home from unless they knew about it or had reason to believe there was an encroachment. Still it could cost you thousands of dollars in legal fees to correct the problem or seek a realty in the right amount of time.

Examine your title policy in a timely manner.

Make sure that your buyer’s agent and you review the title policy in a timely manner. As noted in previous bullet points above there are certain dates and time lines that need to be followed to report any objections you might have with something attached to the real estate. Such as a restriction you would not be happy about.

Make sure the seller provides a detailed disclosure about the property.

Most states now require the sellers to provide comprehensive seller disclosure statements about the real estate they are selling. This can help you as a buyer to determine what or if any problems or issues the sellers have had with the real estate they are conveying.

Ask the seller for copies of warranties on any appliances or work they have had performed.

It is generally easier for the seller to find this information prior to closing then after the transaction has been completed. So any type of warranty question prior to the sellers receiving their funds to their house is a good idea.

Take your time before you purchase.

It is always a good idea to look at home some homes before making a purchase decision. Don’t feel as though you have to buy the first home you look at. Comparing the one you are interested with several others can help you in determining if the value is where it should be for the home you would like to purchase.

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