Are your efforts spent on finding a good mortgage offer bearing no fruits? As the clock ticks, times are equally changing. If you keep a close eye on current events, you have probably heard of the new mortgage rule expected to toughen things up this year. However, amid the mind-boggling happenings and as a borrower, you can still find the best current mortgage rates for yourself.
Think It Is Hard?
Good news. We have listed a step-by-step guide to lead you through the process of acquiring a mortgage. First, you need to find out what has really changed in order to identify your loopholes. Some huge changes in the qualification processes have been affected in the last few years. It is therefore prudent to seek information on the changes. The main point here is to look at things differently.
As directed by the office of the Superintendent of Financial Institutions (OSFI), all federally-regulated mortgages in Canada are subject to a stress test. Before, only high ration mortgage-borrowers with a 20% or less down payment were subjected to the stress test.
As per the new rules, to qualify, homebuyers must attain higher interest rates than the one given by the mortgage provider. The current 5.14% Bank of Canada’s rate is lower than the new qualification targets with a gap of about 2% points.).
While, the mortgage rate may vary, the hypothetical rate would stagnate at 5.14%, translating to a 20% loss they would pay prior to the stress test. Also, rising interest rates is yet another factor that may dim your chances to qualify for a great offer. A few weeks ago, the Bank of Canada announced a rate increase of 1.25%. This decision not only triggered upticks in bank prime rates but to the variable mortgage rates as well. Despite the hard-pressing stress test, there is still a way out to get your dream home provided you plan broadly.
Qualifying For A Mortgage
If you can secure a good deal, you will as well save on your payments. Contrary to the widely held misnomer that you need up to 20% to qualify for a mortgage loan, the rates can swoop to as low as 5% through mortgage default insurance. To have a round-up idea of what may fit into your budget, have a look at the mortgage affordability Calculator. And since there are many things associated with costs, do not rush when making final decisions. Reach out to a trusted and credible mortgage professional for clear direction since there are many other factors that may impact your affordability.
Next, your mortgage lender should give you a pre-approval form. The forms indicate how much mortgage you can qualify for, which helps to estimate the monthly rates. The forms allow you to lock an interest rate up to 120 days. That way, in case the rates shoot within the pre-approved time-lines, you are still guaranteed the lower, pre-approved mortgage rate. Before initiating the process, put together all your documents to expedite the process and avoid inconveniences. Also, order a credit report to counter-check the information to avoid any inaccuracies.
Keeping pulses with your credit score prior to contacting a mortgage professional will keep you informed of the possible rates. Remember also that you will have to provide documents to prove your employment, identification, ability to pay the down payments, closing costs and information about your debts and assets. Your mortgage professional may also demand additional documents.