Ontario real estate is currently a seller’s market, with prospective purchasers competing for the chance to buy a home - possibly their first ever.
With the current level of competition and demand for housing, it is essential for homebuyers to have a realistic idea of the mortgage they can afford. Whether you’re planning to purchase a condominium or house, there are several considerations of which you should be aware.
First, you should start shopping for a mortgage about three to six months before you plan to purchase a home. This cushion period will give you time to get your financials in order. Do you need to work on your credit score? Have you considered extra fees, such as closing costs?
Generally, borrowers have two options for their mortgage: an “A” lender (like Canada’s six big banks) or a “B” lender. “A” lenders tend to have strict criteria for their borrowers, while “B” lenders are less strict. However, some costs will be higher when going with a “B” lender. This might include higher interest rates, a higher down payment, and perhaps higher closing costs.
The next step is pre-approval. Essentially, pre-approval gives you a better idea of the maximum amount you’re eligible to borrow. This will help you “ballpark” your maximum budget and provide an estimate of your ongoing payments. Once you get pre-approved it also locks in your interest rate for up to 120 days.
Getting pre-approved does not guarantee you’ll be approved for the actual home you are trying to purchase at the end of the day. Employment changes, taking on additional debt or a credit line, and issues with the appraisal of the property can all affect your final approval.
Shopping for a mortgage can be confusing and intimidating. It is a process, and it will take patience. The upside is that there are options for almost any financial situation.
At Greenpark, we pride ourselves on building communities that are accessible to people from all walks of life. Visit our homes or condos page to learn more about our upcoming communities, and talk to a mortgage specialist you trust when you’re ready to start the process.