If you have never tried to get a mortgage before, you’re about to enter a mystifying world full of legal jargon, high numerical figures and a whole lot brand-new terminology. When immersed in this complicated world, it’s easy to get confused. Some home buyers get so confused, in fact, that they mistakenly believe a myth to be truth. Falling into this trap can leave you on the hook for thousands of dollars, render you disappointed, or even cause your dreams of home ownership to fall to the sidelines indefinitely.
That’s why we have decided to introduce you to some of the most commonly-believed myths in Canadian real estate. By separating the fact from the fiction, you will be able to make a more informed choice as you move forward.
Myth #1: Pre-Approval is Guaranteed Money
Pre-approval is an important step to take at the beginning of the mortgage lending process, but it is not a guarantee of any kind. Mortgage pre-approval only shows what you qualify for with the specific lender, with rates that are only “locked in” for a brief period of time. Being pre-approved does not mean that you have been actually approved for a mortgage with the lender. You will still have to apply and face the possibility of rejection if the lender feels that you cannot meet their standard for clients.
Myth #2: If You’ve Filed for Bankruptcy, You Can Forget About Owning a Home
Did you know that there actually are lenders who specialize in dealing with clients who’ve declared bankruptcy in the past? That’s right! While many of these lenders might not be traditional banking institutions, they are just as legitimate and valuable to prospective home buyers. A mortgage broker can connect you to these resources so that bankruptcy doesn’t have to hold you back from having a home of your own.
Myth #3: Mortgage Brokers Cost Money
This is a myth often perpetuated by banks and those who feel in competition with the ever-increasing demand for mortgage brokerage services. The truth is that, in Canada, it is very rare for a mortgage broker to ever charge their clients. This is because they get paid by the lenders with whom they work when an agreement is made between a lender and a client – with the broker as the middleman.
Myth #4: Your Down Payment Must be at Least 20%
This is only true of conventional mortgages, which do not entail that you purchase mortgage insurance due to the high value of your down payment. However, there are a multitude of options available for prospective home buyers who have as little as 5% available for a down payment. These are referred to as high-ratio mortgages. Taking out a mortgage of this type is absolutely possible, but you will be on the hook for the additional monthly cost of mortgage insurance.
Myth #5: Banks Always Give the Best Rates
Banks thrive as mortgage lenders because they have built up a relationship with their customers. This loyalty sends their existing customers their way when they are interested in procuring a mortgage. In no way does this mean that you are guaranteed the best rate by being loyal to your bank. Mortgage brokers are the experts at finding the best possible rates for an individual’s possible mortgage, and they’ll often provide options that exceed what you could expect from a traditional banking institution.
The world of real estate is rife with myths that make it difficult for prospective home buyers to make the best decision possible. By knowing what some of the most common myths are, you can read between the lines and identify what’s true and what’s false.
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