The ‘top 5 mistakes made when applying for a mortgage’ is a really good topic to discuss. These mistakes happen frequently and to many mortgage seekers (over 50%), whether first time buyers or existing home owners looking to refinance.
Here is a look at what we believe are the top 5 mistakes made when applying for a mortgage:
- Not wanting to explore “A” broker channel banks – Why not? Have you heard bad things about them? Are you just not comfortable with anything outside of a traditional major banking institution? The truth is, broker channel banks are more lenient than major banks and very competitive in their space. Why not open up the door for more opportunities?
- Falling for the ‘bait and switch’ tactic of rates advertised solely for the purpose of luring in prospective clients – Yes, we’ve all done it… we go online and we Google ‘best mortgage rates’ or we fall for the signs at red lights and ultimately we create a new and unrealistic benchmark for ourselves. Sometimes things are too good to be true… and sometimes you find out a little too late.
- Underestimating costs (both down payment and closing costs) – Without the proper estimate of costs, you really can’t close on a house at all! Make sure you speak to an expert broker/agent and get accurate costs for down payment and closing costs (land transfer tax, insurance premium, PST on premium, legal, brokerage (if applicable), inspection, misc.). It’s not just our job to arrange financing. We understand very well the associated costs and expenses with each transaction.
- Underestimating the importance of credit – Find out early enough where your credit stands. It only hurts to find out AFTER you’ve committed to an offer. People fear having their credit pulled, but you need to know by physically seeing the report and there’s only one way to do that.
- Not seeking a pre-approval prior to making an offer – Pre-approvals are awesome as a preliminary step. You can`t put all your hope in the pre-approval though as this step does not involve the review of the insurers or management. Nonetheless, it`s a heck of a lot better to be pre-approved than make offers on a whim without knowing what your numbers look like.
Yes, we said ‘top 5 mistakes made when applying for a mortgage’, but I had to throw this extra one in here. This one is crucial, especially in TODAY’S market… reason being that this issue is far more common now than ever before. This mistake is: Not including a condition of financing (COF) in your offer allowing you a grace period to confirm financing. Important, important, important! We understand, negotiating power is everything when bidding on a home and chances are you Realtor will suggest waiving the COF to leverage your offer against competing offers. This mistake kind of goes hand in hand with #5. If you have not been pre-approved, we would say, don’t even think about going in with a firm offer, regardless of what your Realtor says… but this is just our opinion so take it with a grain of salt. We believe a COF is important to protect your deposit as the buyer. Without a COF, you could easily lose your deposit if things goes south with financing. It doesn’t hurt to take extra precautions.
Again, the top 5 mistakes made when applying for a mortgage are our opinion based on years and years of experience. There are others, some big and some small, but these ones really resonate with us. If we can bring awareness to the top 5 mistakes made when applying for a mortgage, we can likely help mortgage seekers prevent them and we love sharing knowledge for free with no strings attached.
Note: Let’s not forget that these top 5 mistakes made when applying for a mortgage are NOT solely the outcome of negligence or ignorance on part of the buyer/home owner. Often times, people are ill advised by inexperienced brokers/agents and sometimes even Realtor’s. In this industry, it’s important to continuously educate ourselves as rules/criteria are forever changing. We at CMS make a habit of continuously learning so that we can provide accurate guidance for our clients. That’s how we’ve lasted 30 years with such a clean reputation.