Before putting in an offer on a property, you should speak to a mortgage broker or financial representative to get pre-approved.  

Pre-approval saves you a lot of time and helps to expediate things when you finally find 'that special home' and want to put in an offer.  It also will assist you in finding out what price range of home you should be looking at, according to your own financial situation.  

However getting pre-approved, the lender may hold the rate for only 60 days.  This means that if you purchase a home and the closing date is 70 days after you've been pre-approved, the lender may not honour the rate they gave you.  

What happens when you apply for a mortgage:
Your mortgage broker, or financial representative will first check out your credit rating.  The credit bureau is a company that collects all your financial data that relates to your credit history and they will rate you according to your history of credit. This is called your Credit Score.  If your score is equal to or greater than a SET NUMBER, then your loan/mortgage should be approved but if it is lower than the set number you may not be approved.


What influences a Credit Rating:

* an up-to-date credit report
* your credit history over the years
* if you already own a home and have a mortgage on it
* your employment history
* if you have presently have any loans & any paid loans from the past
* credit cards you have, the history of payments & the balance owing
* your past/present residences & the length of time you resided there
* your age is a factor sometimes
* your total income
* the number of times you'v applied for credit in the past few months

For many, home ownership is a compelling dream. We look forward to the freedom and security of owning our own home and are more than willing to make the sacrifices required to achieve our goal.  These include working hard and finding ways to save the funds we will need to make our first purchase.

But owning a home is not for everyone and  you must consider your personal needs carefully before taking on this large responsibility. Your decision to buy should include an assessment of our financial situation and how well you manage your money. But first, a word or two about timing.

WHEN SHOULD YOU BUY?

Much has been written about the 'right time' to enter the real estate market and become a home owner. This decision is especially challenging when the market seems to be changing.  If housing prices are falling, people tell you to wait unitl the market 'bottoms out' before buying.  When prices are increasing quickly, there's an urgency to buy now and avoid being left behind. Unfortunatley, even the so-called 'experts' can't predit accurately when a market will reach its peak or lowest point.

REMEMBER:  The primary purpose of buying a home is to provide you and your family with a comfortable place to live for several years or longer.

Think of your primary residence as a long-term investment. No matter when you buy in a market's cycle, home ownership will always be one of the best investment opportunities available to you.  Rather than trying to 'out-guess' the market, your decision on timing should focus primarily on your current financial situation.

One easy way to evaluate  your buying decision is to ask yourself, "If all else were equal, would I rather rent or own my home?" It's safe to say that most of us would opt for ownership. So, how do you make the choice financially? By thinking about where you'd like to be in the future.

ARE YOU READY TO BUY A HOME?

This checklist may help you decide:

* Over the years, I have demonstrated the ability to save moneny and am generally pleased with the amount I've saved so far.
* I'm ready to change my spending and lifestyle habits to support the additional costs of paying for and maintaining a home.
*I've work hard to earn a good credit rating and continue to use credit wisely.
*I'm prepared to enter into a long term commitment for my family's security, both physically and financially.
* Pride of ownership is important to me and I would enjoy the chance to take care of my own home, inside and out.
IF YOU CHECKED ALL OR MOST OF THESE BOXES, YOU MAY BE READY TO BUY A HOME.

Most first time buyers want their dream home right away...the white picket fence, trees shading a huge yard, several thousand square feet of living space and a fully finished walk-out basement, overlooking a stream in the valley below.  You all know the picture.  Your dream may be somewhat different but just as appealing.

Where do we get these ideas?  Often they relate to our parents' or grandparents' homes.  We associate warm memories with those places and naturally want to duplicate the feelings.

Realty soon sets in, however. Our dream home sells for several hundred thousand dollars and the down payment is more than we earn in a year....not to mention the payments which are 3 times our take-home salary for a month.

The best way to deal with reality is to match your financial capabilities with the home that meets as many of your needs as possible.  Many first time buyers purchase what is commonly known as a 'starter home'.  There's nothing wrong with this approach. In fact, its good common sense to avoid buying a home that will stretch your budget to its breaking point.  Remember, the starter home is just that - a way to get started in long-term real estate investment.

Once the Realtor has a clear understanding of what you want and what you can afford, you're ready to view prospective homes.  Here's where the Realtor's knowledge of the market will really pay off - save you a lot of unnecessary time looking at homes that aren't right for you.

No matter what kind of condition the market is in, house hunting isn't a process that should be rushed.  How long will it take and how many houses are you going to see?  The answer is different for every buyer. However we recommend looking at a few rather than many.

If you and the Realtor have done your homework, ideally you should only have to visit a handfull of homes to make an informed and wise selection.

Much of your search can be done through the Multiple Listing Service (MLS) and prelimainary discussions with the Realtor. As you visit and react to each home you see, the Realtor will have an increasingly better idea of what you want and don't want and will refine the search process until you find the house that is just right for you.

The important thing is to remain objective and avoid letting a particular feature effect your judgment about an entire home. The seductive powers of an in-ground pool or huge island in the kitchen can mask other features that do not match your list of needs and wants.  Take the time to look at each promising home carefully, and avoid being pressured by anyone into making a decision before you're completely satisfied.

This doesn't mean you should be too casual about the process either.  If the Realtor shows you a home that seems to fit your criteria particularly well, seriously consider acting on it soon.  In a strong market, you may lose the opportunity to make an offer on the home if you don't act on it quickly. Even in a 'soft market', attractively priced, feature-packed homes don't stay unsold for very long. Remain available for your Realtor and be prepared to view any new listings as soon as you can.

House hunting is a form of 'market research'. Each visit will give you additional knowledge about the features of the homes in the neighbourhood and the price you can expect to pay for the specific home that interests you.  Your Realtor can also show you a list of the homes that have recently sold in the area and their selling prices, giving you even more specific market knowledge.

Once you've selected a Realtor, be honest in discussing your financial situation and carefully review the features you are looking for in a home.  This will help your Realtor find prospective homes best suited to your needs, and it will save you a great deal of time in the bargain.

Most importantly, remain loyal to the Realtor you've chosen. this individual will be spending a great deal of time and effort on your project but won't be paid unless and until the transaction is completed.  In return, the Realtor deserves a degree of loyalty from you.  

Getting involved with more than one Realtor creates unnecessary and confusing duplication of effort.  Most Realtors in an area use the same Multiple Listing Service and are likely to show you the same homes.  Buyers who attempt to deal with more than one Realtor may miss out on the high level of interest and comprehensive service one is entitled to expect through loyalty to a single Realtor.

In fact, most Real Estate Brokerage firms in Ontario are now requesting buyers to sign a "Buyer Agency Agreement" form that establishes a formal and exclusive relationship between the potential buyer and the broker and its representatives.

This Agreement is intended to protect your interests, as well as thos of the Realtor you've selected.  It provides a description of the type of property you are seeking, as well as a description of the services your Realtor will be providing.  Moreover, it specifies any commission to be paid and under what circumstances.

1. MAKING AN OFFER ON A HOME WITHOUT BEING PREQUALIFIED.
This step will make your purchase easier-take the time to speak to a lender. Their specific quiestions in regard to income, debt, etc, will hlep you determine the price range you can afford. It is an essential step to homeownership.

2. LIMITING YOUR SEARCH TO OPEN HOUSES, AD OR INTERNET
Many homes listed in magazines or on the internet have already been sold.  Your best course of action is to contact a RE/MAX Realtor. They have up-to-date information that is unavailable to the general public and are the best resource to help you find the home you want.

3.  CHOOSING A REAL ESTATE SALES REPRESENTATIVE WHO IS NOT COMMITTED TO FORMING A STRONG BUSINESS RELATIONSHIP WITH YOU.
Making a connection with the right Realtor is crucial. Choose a professional who is dedicated to serving your needs, before, during and after the sale.

4.  THINKING THAT THERE IS ONLY ONE PERFECT HOME OUT THERE.
Buying a home is a process of elimination, not selection. New properties arrive on the market daily, so be open to all possibilities. Ask your Realtor for a comparative market analysis.  This compares similar homes that have recently sold or are still for sale.

5. NOT CONSIDERING LONG-TERM NEEDS.
It is important to think ahead. Will the home suit your needs 2-5 year from now?

6.  NOT HAVING A HOME INSPECTION.
Trying to save money today can end up costing you tomorrow. a qualified home inspector will detect issues that many buyers can overlook.

7.  NOT EXAMINING INSURANCE ISSUES.
Advice from an insurance agent can provide you with answers to any concerns you may have.  You might be looking at a home with knob and tubing wiring, etc.  Purchase adequate insurance, get a quote.

8.  NOT BUYING MORTGAGE INSURANCE.
Expect in the case where you have enough life insurance to pay off the mortgage in case of death, mortgage insurance is likely the best coverage.  Make sure, that both spouses are covered.

9.  NOT KNOWING TOTAL COSTS INVOLVED.
Ask your Realtor or lender up-front for an estimate of closing costs:  Land Transfer tax, legal fees, appraisal fees and CMHC insurance cost (in case of a High Ratio mortgage).

10. NOT FOLLOWING THROUGH ON DUE DILIGENCE.
Buyers should make a list of any major concerns they have regarding:  schools, neighbourhood, powerlines, environmental conditions etc.  Ask the important questions before you make an offer on a home. Be diligent, so that you can have confidence in your purchase.

Most mortgages have the option to allow payments to be made on a weekly or bi-weekly basis. This option may be desirable for two reasons. The first is it can save you money as you can expect to pay off your mortgage about 4 years sooner. This can save you dramatically over the life of your mortgage. The other reason why these options are so popular is that if your employer pays you on a weekly or bi-weekly basis, you can simplify your budgeting by making the payment line up with the way you paid.

Paying extra amounts on your mortgage can make a big interest saving over time. When we select a mortgage company, privilege payments options are something that we look for. A 20% privilege payment will allow you to pay off up to $20,000 per year on a $100 000 mortgage. It is important that the privilege payment also be flexible to allow you to pay smaller payments on the mortgage and as often as you wish. An extra $1000 periodically paid on a mortgage can help you become mortgage free faster.

The options for mortgages available can be very confusing for most mortgage shoppers. Terms for mortgages vary between variable and fixed rate, 6-month terms to 10 year terms. Taking a variable or floating rate mortgage can have savings. Typically the shorter the term or guarantee of the rate, the lower the rate will be. This does not always happen, depending on the market place and the economy, but history has shown that short-term rates tend to be lower than long-term rates. The up side of variable rate is the strong potential for interest rate savings. The down side is the fact that you are accepting the interest rate risk without a guarantee. If you are considering a variable rate mortgage you need to look at your own risk tolerance, and your cash flow available to deal with potential increased payment. Considering projections of rates and where we see interest rates heading can also be important in this decision. Make sure you talk to an expert when you are making this decision.

When you require a mortgage for more than 80% of the purchase price of a property, that mortgage must be insured by Canada Mortgage and Housing (CMHC) or GE Mortgage insurance. The premium charged by these company`s decreases as the down payment increases. When you finance your property at 95%, a premium of 3.75% is added to the mortgage. By increasing the down payment to 10% of the purchase price the premium can be reduced to 2.5%. If you can put down 20%, you can avoid any additional insurance fee. Depending on your situation there are ways that you can structure this financing to avoid the CMHC or GE insurance premium.