It is no secret I am a firm believer in financial knowledge. I have blogged about household finances in the past to create awareness on the importance of understanding your full financial picture.
Knowledge is power, which is why I teamed up with Ashley Champagne to talk about mortgages. Ashley is a Mortgage Agent and helps countless people achieve their dream of homeownership. Ashley helps potential home buyers understand what they can afford and what lenders will do for them.
A house is probably the largest financial commitment you will make in your life time, a great reason to make sure it is done right! I had a chance to sit down with Ashley to ask her a few questions.
Here is what she had to say!
Q- Household finances are extremely important to understand and be on the same page as your partner on. In preparation for buying your first home or upgrading, are there any tips you could offer to make the process easier?
A- Absolutely! The most important thing you can do when you begin the home buying and mortgage process is to be informed. Do not be afraid to do your research. This doesn’t mean you have to know every step of the process (leave that to the professionals), but knowing some terminology and standard processes will most definitely assist you on your journey.
Another important aspect is to understand your affordability or more importantly a payment you are comfortable making each month. You need to be all inclusive when looking at your finances or budget; mortgage payment, property taxes, home insurance, possible condo fees, etc. Deciding on a monthly amount can help lead you to a mortgage amount, which in turn sets your budget for house hunting.
Next, build a team. As a real estate investor, I have learned the importance of building the right team of professionals to achieve my goals. Again, don’t be afraid to do your research and ask a million questions, your team should work for you. It should include a Mortgage Agent, Real Estate Agent, Insurance Broker, Property Inspector, and Lawyer. You’ll note I put Mortgage Agent as number one. No, I am not being biased, you MUST get your financing in order first. It is very tempting to go looking at properties, get excited about your dream home, and put an offer in. Then what? Can you afford that mortgage? Will you be approved for a mortgage? You want to fulfill your dreams of homeownership, not crush them by jumping the gun. Attaining a Mortgage Agent is free of charge for you as a homebuyer and comes with many perks; a personal relationship with someone who is working for you, a single credit check, and access to multiple lenders. This offers you the most variety for your mortgage needs. Don’t limit yourself!
Q- Are there aspects of “pre-approval” amounts you should be aware of when purchasing a home?
A- I think the number one misunderstanding when it comes to a pre-approval is the word “approval”. Although it is a great guide, this is not a guaranteed mortgage. It is all dependent on a full disclosure application, proof of declarations, and the actual property to be purchased. When placing an offer on a home I strongly advise to ALWAYS place a condition of financing in it. This means your offer is valid providing your financing is approved. Don’t allow a bank, or anyone for that matter, to glance at what they have on file or have a verbal discussion with you as a way of obtaining a pre-approval.
As a Mortgage Agent, I insist on a fully completed pre-approval application; the same way I would for an actual mortgage application. This ensures everything is fully disclosed to the lender in advance, we know the exact financial situation, and providing everything remains the same (credit balances, income, etc.) it is a simple and smooth transition into the application. Referring to my previous comment of “understand your affordability”; it is extremely important to assess your personal situation. You may make a great income, carry little debt, and have a great credit score, which would clearly put you in a position for a great pre-approval, but that doesn’t always mean take the maximum mortgage and go house hunting. Stop and think. What do the next few years look like? Do you plan on having kids? Will this lessen your income and make a maximum mortgage unaffordable? Your team can help guide you along the way, but it is up to you to make the right decisions.
Q- Any other expert tips?!
A- Yes, be honest. It may be tempting to exclude information or inflate numbers to make your application look better. In the end you are limiting yourself and the people who are trying to help you. The right professional will take your application, assess it and help guide you in the right direction for your personal situation. There are many financing paths available for different needs.Another “rule” I stress to all current and potential clients is to avoid being rate driven. At this point, all interest rates are the lowest we have ever seen. Don’t let 0.10% of a rate determine which type of mortgage you accept. Focus more on what your needs are in a mortgage. Do you want the ability to pay down your mortgage faster? Or make large lump sum payments? No mortgage is one in the same, do your research and remind yourself you don’t need a rate, you need the right mortgage product to suit your needs.
When you take the time to set yourself up for success, it will pay off and avoid any unnecessary stress. Make the process fun and exciting!