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Mortgage Financing FAQs

Mortgage Financing FAQs


Here are some Frequently Asked Questions and Answers to them …

1. What is the first step I should take in the home loan process?
2. What is the difference between a bank loan officer (your banker) and a mortgage broker?
3. How much will I have to pay in closing costs?
4. What is Mortgage Insurance?
5. How much should I save up for a down payment on my home?

1. What is the first step I should take in the home loan process?

When you’re searching for a home loan, the first thing you should do is get pre-qualified or pre-approved. This will ensure that you’ll be able to secure a loan when you find the home you want to buy. Plus, you’ll have a better idea of how much house you can afford. Having pre-approval makes you more attractive to sellers.

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2. What is the difference between a bank loan officer (your banker) and a mortgage broker?

If you are buying a home, chances are you will need a mortgage, but did you know there is a big difference between mortgage brokers and bank loan officers?

The bank loan officers at a bank or credit union or any other lending institution are employees who work to sell or process mortgages and other loans originated by their employer.  They often have a wide variety of loans type to choose from but all loans originate from one lending institution.

Mortgage Brokers are professionals who are paid a fee by the banks to bring together lenders and borrowers.  They usually work with hundreds of lenders, not as employees but as freelance agents. A good mortgage lender can find a loan for about any type of credit. A mortgage broker working to secure a loan will earn a fee for the transaction and the better deal they achieve for the lender the more they get paid!  Don’t be anxious to disclose a broker the interest rate you are willing to accept….Let them tell you what terms they can secure. Shop around to make sure the terms are reasonable.

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3. How much will I have to pay in closing costs?

There are fees and closing costs associated with mortgage loans and home purchases.  Make sure your legal representative (lawyer or notary) provides you with a Good Faith Estimate, and take time to read all the fine print. Closing costs vary depending if a mortgage will be registered on title.  Prices range from about $600 – $1200 plus GST.  Ask plenty of questions about any fees you don’t understand.

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4. What is Mortgage Insurance?

You are required to pay mortgage insurance if your down payment on a home is less than 20 percent of the total purchase price. It is a type of insurance that protects the lender against the risk of your default—which is what happens if you can no longer make your monthly mortgage payments.

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5. How much should I save up for a down payment on my home?

This really depends on your unique situation. Most real estate experts say that you should put down as much as possible—and at least 20 percent of the purchase price of the home to avoid paying mortgage insurance. The larger your down payment is, the lower your monthly payment will be. Plus, when you make a healthy down payment, you greatly reduce the amount of debt you’ll have to finance through the loan. That said, if you drain your personal savings for the down payment on your home, you’ll have no cash reserves left for emergencies or home improvements.
If you are not sure how much to save for a down payment, discuss your options with a financial advisor.

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