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Navigating the mortgage process when buying a home can be a stressful experience. You’re borrowing a lot of money, so you want to be sure you’re getting the right mortgage. You also need to be confident that the mortgage specialist or broker that you choose to work with has your best interests in mind.
Unlike your real estate sales person, who you’ll be in regular contact with, your mortgage broker works behind the scenes. Being confident in their abilities is critical, because a mistake made due to lack of experience or lack of effort can cost you a home or worse, get you in legal trouble.
Knowing the important questions to ask a mortgage broker will go a long way to making the whole experience less stressful and more helpful. Below is a series of questions to guide you in choosing a mortgage broker and the right mortgage for you.
Q: How Does the Pre-approval Process Work?
Understanding how the process works ahead of time will make the experience less stressful.
Q: How Much Do I Qualify to Borrow?
If you’re buying a condo or town house make sure they account for condo fees in the pre-approval.
Q: How Long is the Interest Rate Hold Good For?
Make sure you understand this, because if interest rates go up you want to make sure your mortgage is at the rate you were pre-approved for.
Q: How Much of a Down Payment Do I Need?
First-time home buyers in Canada can buy with as little as 5% down. If you’re new to Canada or self-employed, this will change things. Make sure to let your mortgage person know right away if these things apply to you.
Q: What type of Mortgage is Better for Me? Fixed or Variable?
It’s important that you understand the difference between a fixed and variable mortgage and the benefits of both types.
Q: Do You Charge a Fee For Getting My Financing Approved?
Some mortgage brokers charge a fee for arranging financing, make sure your mortgage broker explains their fees (if any) upfront.
Q: What Commissions do You Get Paid for Arranging My Loan?
Different lenders can offer different commission structures.
Q: What are the different fees associated with my mortgage?
There can be additional fees, such as a property appraisal. Be sure they go over any additional fees before you commit.
Q: What will my ‘All In’ Monthly Payment Be?
Some mortgage brokers like to talk about interest rates and basis points. What you want to know is how much your monthly payment will be, including additional costs such as mortgage insurance and life insurance.
Q: What are your interest rates?
Do your research ahead of time to determine what the going rates are, and if you’re getting a good deal.
Q: If I sell before the term of the mortgage is complete, how is the penalty calculated?
They should be able to easily explain this, and also give you a ballpark amount of what you would owe if you break the mortgage early.
Q: Is the mortgage portable?
Some lenders will allow you to ‘port’ your mortgage if you decide to sell early. This can help you avoid the mortgage penalty but there’s always a catch.
Q: What are the pre-payment privileges?
This is important if your goal is to pay off your mortgage as fast as possible. Not all mortgage products are the same.
Q: How much does it cost to lock into a fixed rate with a variable mortgage?
If you decide to go variable, you will want to understand the process of transferring to a fixed rate loan if rates go up.
Q: Explain the Approval Process?
Have them explain how you will know the mortgage is approved, and how the bank approves the property you are purchasing.
Q: When do You Advise Clients to Waive their Condition on Financing?
If you are buying a home conditional on financing, you want to make sure the mortgage is approved before waiving this condition. Your real estate agent should NEVER be the person advising you to do this.
Q: How do Property Appraisals Work?
Many mortgages are subject to an appraisal by the lender. Have the mortgage person explain this and insist that the appraisal be done during the conditional period.
Q: What is Mortgage Insurance?
All mortgages issued with less than 20% down require mortgage insurance. Ask your mortgage broker to explain the costs and how they work.
Q: How long does the mortgage approval process take?
A conditional on financing normally lasts five banking days, but in some cases you may go with three days if you’re in a bidding war. Make sure your mortgage broker has enough time to get the deal approved.
Q: Do you have any other advice for me?
This is a chance to let your mortgage broker show you their expertise. They should be happy to educate you and make sure you are completely comfortable with the process.
Don’t Commit to a Mortgage Broker Until You’re Satisfied
We hope you found these 20 mortgage questions helpful. It’s important that you take the time to understand the mortgage process and know what to expect. If you don’t like the answers you are receiving, or have a bad feeling about the process then trust your instincts and keep looking!