Approval Process
You'll be asked about your net worth, the difference between the value of
everything you own and the amount you owe. Lenders take into account your bank
balance, any types of investments, other real estate, cars and boats, other
loans, credit card balances and many other things. Remember to be as specific
as possible. So if you have a coin, significant stamp or art collection, have
it appraised.
Your credit rating is your history of loan repayment and will be used by lenders
as an indicator of your ability to repay your mortgage. It covers how you've
managed past debts or if you've filed for bankruptcy. You'll be asked to sign a
form allowing your financial institution to gather information from your employer,
creditors and credit rating agencies.
If you've had credit problems, it may be a good idea to check and clean them up
before you apply for a mortgage. You can check your own credit rating by contacting
a company that compiles the information. Simply send a note asking for your credit
rating along with photocopies of two pieces of ID with your current address, plus a
photocopy of a utility bill or credit card invoice. If there is an outstanding debt,
contact the creditor and resolve it. If you notice an error, report it immediately in
writing and get it resolved.
Although your credit may not be perfect, it does not mean you are unable to purchase
a home. Make sure you talk to a mortgage broker about your situation before you give
up on your dream. Even if you can't buy now, your mortgage broker can help you re-establish
your credit so that one day you will be able to live your dream of owning a home.
Insurance
Mortgage Loan Insurance
As a first-time home buyer, chances are that you're not walking into your deal
with a huge down payment. As you may have already discovered in other areas of
this guide, you can now purchase a home with as little as 5% down.
Bottom line, if your down payment is less than 25% of the value of the home, you
must purchase mortgage loan insurance. This means that if you default on your
mortgage, your lender receives their money. It's coverage like this that gives
most lenders the confidence to finance up to 95% of your purchase.
What Does it Cost?
The actual premium of the loan ranges between 0.5% and 3%, and is based on the size
of the loan and value of your home. You can pay your premium in two ways: As a lump
sum when you make your purchase or as part of your monthly mortgage payment. But keep
in mind, if you're paying it monthly, you're also paying interest on the premium.
