There’s a road you will head down when you first decide that it’s time to buy a home. Before taking even the first step, you’ll encounter a fork in that road. Sadly, most first-time homebuyers take the wrong fork and end up disappointed.
NOT HAVING A CLUE ABOUT YOUR CREDIT
Do you know what’s lurking in your credit reports?
It’s bad enough that nearly 80 percent of credit reports contain errors, but did you know that nearly a quarter of them contain mistakes so bad they result in a denial of credit?
You can ask for a free copy of your credit file by mail. There are two national credit bureaus in Canada: Equifax Canada and TransUnion Canada. You should check with both bureaus.
Complete details on how to order credit reports are available online. Basically, you have to send in photocopies of two pieces of identification, along with some basic background information. The reports will come back in two to three weeks.
The “free-report-by-mail” links are not prominently displayed — the credit bureaus are anxious to sell you instant access to your report and credit score online.
If you can’t wait for a free report by mail, you can always get an instant credit report online. TransUnion charges $14.95. Equifax’s rate is $15.50.
To get your all-important credit score, you’ll have to spend a bit more. Both Equifax and TransUnion offer consumers real-time online access to their credit score (your credit report is also included). Equifax charges $23.95, while TransUnion’s fee is $22.90. There is no free service to access your credit score.
You can always try asking the lender you’re trying to do business with, but they’re not supposed to give credit score information to you.
If you find errors, you can write the credit agency in question and tell them you think there’s an error. The credit reporting agency usually sends along the form you need when it sends you the credit report. Use it to spell out the details of any information you dispute. The dispute forms are online, too.
SHOPPING WITHOUT KNOWING HOW MUCH YOU CAN SPEND
That fork in the road we spoke about earlier? Sometimes it takes homebuyers online, looking at homes for sale and, sometimes, to open houses or new-home communities.
Homebuyers, especial first-timers, tend to overestimate how much they’ll be able to borrow. If you’re among them, and you look at homes, you’ll most likely be viewing those that are out of your price range and, after that, those that you can buy will pale in comparison.
Don’t set yourself up for disappointment – see a lender before looking at homes for sale.
Take the next logical step after repairing your credit—start shopping for a lender, not a home (at least not at this point).
NOT SHOPPING STRATEGICALLY FOR A LOAN
It amazes us how casually many people treat the sale and purchase of an investment as large as a home.
A National Association of Realtors’ survey finds that most real estate consumers hire the first real estate agent they meet.
And, the Consumer Financial Protection Bureau clams that half of borrowers use this same cavalier attitude when choosing a lender.
Until you obtain a mortgage, quoted terms aren’t set in stone, so shopping for the best terms will save you money on your closing costs and, quite possibly, your monthly house payment.
So, use the same care in finding a lender and comparing loan products as you would if you were considering buying a big-screen TV.
If you are looking to get pre-approved for a mortgage. contact us and we would be happy to suggest some local Mortgage Brokers.
NOT BEING HONEST
Remember “liar loans?” It wasn’t that long ago that lenders were approving mortgages for just about anyone with a heartbeat.
Think of those loans as dinosaurs, because they no longer exist. Lending standards have tightened considerably since then and lenders are bound by statute to ensure that the borrower can afford to make payments on the loan.
This means that you are required to provide documentation that proves the income you state on your application. So, be honest on all parts of the loan application.
SWITCHING JOBS AFTER LOAN APPROVAL
A common requirement for loan approval is your employment situation. Most want to see at least two years with your current employer (or in your current field), or two years in business if you are self-employed.
It is important to not make any changes to your employment situation during the period of time between loan application and closing on your new home.
CHANGING YOUR FINANCIAL PICTURE
Yes, it’s tempting to start purchasing furniture and appliances as the closing date draws near. But, don’t do it.
The lender will run one final credit check, just before closing, to ensure that nothing in your financial picture has changed. If you purchase items on credit or open new credit accounts, your score may go down.
Also, the new debt you’ve taken on may change your debt-to-income ratio and you’ll be denied the loan and the closing will be cancelled or postponed.
For many real estate consumers, the entire mortgage process is foreign and, quite frankly, dull. But, it involves your money—and lots of it—so learn as much as you can and you should sail through the process. Contact us and we can put you in contact with a good Mortgage Broker.