Posted by John Doe
Becoming a homeowner is a major milestone and life achievement; but the reality is, it requires a sizable investment, especially in a real estate market hotspot like Canada. Acquiring a home in this market requires qualifying for a mortgage loan, which in turn is subject to various regulations.
Most notably, new regulations require lenders to establish and verify a detailed financial history before approving the loan. In response to this, lenders have also strengthened the criteria for underwriting to mitigate losses incurred during the housing crisis.
As a potential homeowner, it’s essential that you navigate the mortgage qualification process expertly, and earn both mortgage cashback and the key to your new home.
Manage Your Expenses
Your financial history is the biggest determinant of qualifying for a mortgage. This is why it’s important to establish a stable and credible financial background in order to demonstrate the capacity to pay off your loan over time. To do this, you will need to avoid overextending yourself with other major financial obligations.
- Avoid other forms of financing
Put off auto financing and personal loans, and ensure that student loans have been paid off. If you absolutely have to take out other loans, do so only after you’ve closed on the home in order to facilitate a smooth mortgage approval process and assure lenders that your income and lifestyle can support the loan.
- Limit credit card usage
Along with other forms of debt, credit card expenses can accrue, resulting in expensive balances. Make sure to use your cards sparingly, and instead project healthy finances.
- Pay bills on time
Late or unpaid bills speak to your ability to make timely payments as well as current and projected financial capacity, so make sure to settle all bills on time. These show up on your credit report, so you will want to make sure that you appear as credible as possible.
- Maintain steady employment
A stable financial history reflects on a steady income, and in turn, the ability to keep up with financial obligations, such as mortgage payments. Make sure to keep your current job and avoid switching until after your mortgage has been approved, except when a new job means a higher pay grade, as this improves your chances of approval.
Prepare Your Funds
Qualifying for a mortgage with the possibility of cashback hinges upon maintaining stable finances. Prior to closing on a mortgage in Canada, you need to have your funds and financial statements ready for examination, as these will be used for your downpayment, as well as set aside for closing costs and additional cash reserves.
The last step in the closing process typically stipulates bringing the money to the closing. Personal checks are not usually accepted, so make sure to check with the title company regarding the accepted forms of payment. As well, if you are moving money to the bank account from which you are transacting for the sale, do it at least a week prior to avoid last-minute problems, particularly when the title company has specific requirements about methods of payment, such as a wire transfer or cashier’s check.
Finalize the Closing Date
Part of securing a mortgage with cashback is determining when you actually need the loan to go through and enable you to close on a deal. To do this, you will have to coordinate with both the lender and the title company regarding setting a closing date and time. An optimal closing date also factors the end of your lease or the sale of your current home, so make sure that the closing coincides with your moving out schedule. Mortgage companies recommend scheduling a closing date for the end of the month as this means paying the least amount of interest at the closing table.
Secure Title Insurance
Title insurance is essential when securing a mortgage with cashback in Canada. Title insurance is designed to protect lenders in case sellers do not actually own the property being closed, or another party has a claim on it.
As a buyer, you can protect your investment with an owner’s title policy. This insures you against losses from fraudulent claims against your ownership, as well as errors in earlier sales that contribute to ownership problems. But even without an owner’s policy, a title policy from the same company that issued the prior owner’s title insurance can also provide you with a reissue discount or “bring down” rate. This is possible because the title company checks records filed from when the previous owner bought the home.
Check the Good Faith Estimate
A mortgage company offering cashback will typically provide you with a Good Faith Estimate that indicates estimated closing fees. Some of these fees can rise by up to 10%, while some will have to remain unchanged. Prior to closing, make sure to compare the figures indicated in the estimate with the final rates that you are provided, and don’t hesitate to ask the loan officer about any increases to ensure that you are not going over budget
Research Homeowner’s Insurance
Homeowner’s insurance is one of the most basic but important steps that homeowners should take in order to protect their investment. Make sure to get quotes and compare policies from multiple companies and secure a policy with coverage that will commence by the closing date.
Every policy is different, and this depends on the size of the property, age, and amenities. Getting a lower premium is possible by opting for a high deductible, or purchasing homeowner’s insurance from the same provider as your auto insurance. If your new home is located where natural disasters like earthquakes, hurricanes, and flooding are common, make sure to look into a separate insurance policy that covers damages resulting from these hazards.
Inspect the Property
By now, you may already have made multiple visits to your potential new home to check out the property and assess the needs for repairs or renovations, but a separate, thorough walk-through is required just right before you close on it.
Once your mortgage with cashback is approved and you are well underway to closing on a deal, it’s common to negotiate on some repairs and ensure that your new house is move-in ready. After all, complete and refreshed amenities are a huge selling point which you deserve to make the most out of.
- Make sure that repairs you have requested have been completed, and check for any major changes since your last visit.
- Check to see if the previous owners left everything they promised to include in the sale, such as fixtures, furniture, and appliances. Make sure that they did not leave behind any personal belongings.
- Test electronics and appliances to make sure that they are functioning optimally.
- Turn on the HVAC and water heater to make sure that they are functioning properly.
- Take a walk out in the yard to check whether plants or shrubs are still in place.
Experiencing issues during your walk-through?
If you identified issues in your new home during the pre-closing walk-through it’s important to get these addressed before it is signed over to you and all the repairs and upgrades you requested become your responsibility, despite already having paid for them as part of the sale. After signing up for a mortgage and years of financial commitment, you want to make sure that every penny is spent smartly. Here’s what you can do:
- Delay the closing
You can move the closing date, provided that it is allowed by local regulations, until such time that the seller complies with previously agreed-upon requests.
- Negotiate a discounted sale
Waiting for the seller to make good on previously agreed requests can affect scheduled moving dates and homeowner’s insurance policy rates and coverage. To avoid this, you can negotiate a discounted sale price and use the savings to cover the cost of the work that needs to be done. Make sure to put in the request prior to closing, as this can cause an additional delay while the title company modifies the paperwork.
- Hold proceeds in escrow
You can also request the title company to hold a portion of the seller’s proceeds in escrow until the dispute is settled. Once it is resolved, the funds will be released to the seller, or to you, depending on the resolution.