Although it may invigorate the market gestures of brokers, expecting the consumer-debt levels to rise, there is however a concealed catch elaborating the mortgage rates of 2012.

In comparison to other countries, the fear of a fluctuating economy due to the rise and fall of various factors like the increase in the interest rates and the stringent rules of the investors, it is eventually determined that the Canadians do have a low risk financial economy.

The 2.99% 5-year low rate Mortgage announced by BMO, happened to be the most compelling news in the mortgage market. All that after the downfall of the credit ratings of 9 credit boasting European countries.

This surely will attract more consumers to go for a fixed rate mortgage with full reliance; however, some experts also say that it may deteriorate the flow of funds for the Canadian financial institutions in the market. Another piece of news to conclude the mortgage market of 2012 is the recent unchanged key interest rate announced by the Bank of Canada, which is at 1% since September 2010.

Now, after this news of 2012, there may be a knock to get cozier in the winter and to risk the house hold debt level for Canadians. The initial task here should be to make a firm decision to either approach a mortgage broker, or to take the advantages of the long relationship with a Bank. There are several points which clarify this common bewilderment of the borrowers:

1. The risk of disclosure of the financial information.

Many people dislike revealing their personal information to third parties. In this context the Bank is the best option as it doesn’t require any documents. Contrary to this, the broker acts as a middleman between the lender and the borrower.

In such cases the lenders need to validate the credibility of the borrower for which they need all the documentation proofs from the broker. The other reason is to clear all the formalities in comparison to the procedure of application through a broker.

2. The benefit of the availability of various options.

Under this, the broker’s part seems to be more favorable. The Bank will always have their set parameters or condition in their loan provisions, which will always be for their own profitability. Therefore it leaves no choice for the borrower to have their preferred loan conditions in spite of their good credibility with the bank.

The brokers in this case have a prime role, as they usually link with many lenders offering the borrower many options to choose from. The brokers are mostly able to get much lower interest rates in this scenario.

Therefore, the above reasons reveal the fact that although a mortgage can be bought without a broker; a not so mortgage market savvy person should always reconfirm it as there are brokers who can assist in a much better way than a regular banker to avail better loan rates.

Having the principal amount, amortization term and the interest rate will allow you to calculate for the mortgage payments. The principal amount is the amount which needs to be financed through the bank or the lender. The term of amortization is the time the loan will be amortizes for and the interest rate can be obtained either through banks or through the mortgage company’s websites.

Calculating mortgage payments with mortgage calculator will give an estimate on the mortgage payments. This calculator simply requires the principal amount, the term of amortization and the interest rate and the results will show the mortgage payment.

This is especially true when you apply for a home loan and get rejected. Usually, this happens early, when first applying, or late, when you’ve found a home and are ready to close.

In the first case, the impact is not nearly as hard hitting as the second, but when you’ve already been pre-approved, have chosen a home, and are ready to close, only to get rejected, it can be devastating.

In either case, the first step to dealing with the rejection is to find out why it happened. Was it due to missing paperwork? If so, that can be easily corrected. You find what’s missing and hand it over.

Is it inaccurate paperwork? If your last pay stub is lower than the rest, then you might need to explain why it happened (were you sick, did you take vacation, etc) and see if the bank will accept another pay stub.

If you’re self-employed, the bank might not understand the way your income work, so try asking them for the opportunity to explain it.

Also, reference letters, especially from banks, can help overcome small hurdles. If you get rejected because they’re nervous about your lack of credit history, then a bank letter might be enough to push them over the edge.

Lastly, you can try to offer more money down, or if you’re really desperate, a higher interest rate or second mortgage. Banks like to reduce risk, which is exactly what a higher down payment and/or second mortgage will do – reduce the primary lender’s risk.

If none of these work, and they’re standing firm against the potential of offering you a mortgage, then your best bet is to try and keep working on your credit profile, but slowly using credit cards and loans to acquire and pay off debt. Never max out a credit card, but simply carrying a low balance is a good way to raise your score higher over a short period of time. Many times though, it isn’t your credit causing them to reject you as much as it is your job or income history, so try to keep a job at the same place until you are ready to try again.

If you think you’re getting rejected because you’re buying a home that is too expensive, then try using our free mortgage calculator to play with the numbers to see if you can reduce your monthly payment by $100. They like to see you pay no more than 30% of your monthly income on a mortgage payment; using the calculator will help you find this sweet spot. You can also check out our free mortgage calculator & mortgage quotes tool, which will get you five free mortgage quotes from local lenders. Just because you are rejected once doesn’t mean that you can’t try another lender!

1. Can You Pay Points?

A single point is 1% of the loan value, so $1,000 on a $100k loan. This isn’t a huge amount to pay in order to reduce an interest rate, but you have to calculate the cost savings over the lifetime of the loan to see how many you should pay or not pay.

2. Are Points Placed on the Loan?

Many refinance companies will try to place points on the back of the loan, which means you are paying interest in them. This is a very bad idea, and can quickly extend the life and total cost of a home loan. Try to pay all points and closing costs up front.

3. Are You Adding Time?

If you are 10 years into a 30 year loan, it would be foolish to refinance to a 30 year loan, even if you do save money. In this case, you are better to bite the bullet and keep your current loan, or refinance to a 15 year mortgage. Never add time to your loan unless you absolutely need the money and don’t mind paying your mortgage for that time.

4. What are Closing Costs?

This is the tricky part, and it’s where banks try to get greedy. Paying several thousand dollars in closing costs might make sense if you can reduce your payment enough to pay recoup that amount, but no matter what you do, do not place those costs on the back of the loan.

5. Is My Rate Fixed?

It would be foolish to move from a fixed rate loan into a variable or balloon rate loan just to save a few dollars initially. Make sure to ask whether the loan is fixed, and for how long it will be fixed. If a bank tries to confuse you or throw a gimmick at you, then it’s time to walk away.

Answering these questions will help you identify studs and duds, but if you want to take it a step further, use our free mortgage calculator & mortgage quotes page to lock in five free mortgage refinance quotes from local professionals that won’t yank your chain or give you the run around. You can then use the mortgage calculator to play with the numbers and see how much money you’ll save should you decide to finance at a lower rate. Just don’t forget about those points and closing costs! Our mortgage quotes might be free, but a refinance rarely is, so always perform due diligence before signing on the dotted line.

To start, you’ll want to get a copy of your last two to three months worth of pay stubs from your employer. You’ll also want a copy of your latest tax return. If you are self-employed, you will need your last two years of tax returns.

You’ll probably need bank statements as well, to show that you have money to put down, and that you have enough in savings to keep paying your bills. Some banks will also require little things like life insurance statements and retirement account paperwork.

They want all of this for a few reasons:

1. It proves that you are responsible and that you haven’t lied on your application.
2. They can use this as proof in the event that you did lie and they have to sue you for fraud.
3. They don’t want to waste time with approvals only to find out that you have to back out or don’t have money saved for a downpayment.

Of course, you’ll also need a copy of your credit report, which they’ll probably pull for you. Make sure that they give you a copy, as they are required to by law, even when not approving you for credit. Keep this on hand just in case something goes wrong and you have to shop for another loan.

If you have any outstanding collections or liens, you will have to pay those off prior to going into the closing, and the bank’s agent will want a copy of the receipt, or a statement proving that you’ve paid those bills.

Lastly, you’ll need your identification and potentially, your social insurance number (SIN), so keep those on hand and ready to go. In the end, getting your mortgage paperwork in order isn’t as difficult as it sounds, but it’s also very stressful and time consuming, because the bank will change requirements frequently before finally settling on a closing date.

If you want to go a step further and get a specific checklist for your home closing, use our free mortgage calculator & mortgage quote page to get in touch with local lenders. They’ll give you five free mortgage quotes, including requirements and specifications, that you can use to start preparing your mortgage paperwork. Furthermore, if you aren’t sure how much money to put down, try out the free mortgage calculator to play with the  numbers and see how an extra $5k-$10k down will affect your monthly payments. It’s a great way to test the waters before making a commitment.

On the other hand, buying at the wrong time, such as when you have bad credit, could mean that you’ll pay several hundred dollars more per month than you would with good credit.

So what do you do in order to assure that you buy as much as you can afford, but no more? Well, the best way to get started is to talk to a bank representative and ask about a pre-qualification. They will ask you about your current income, how much money you owe to creditors, and how much you pay for monthly bills. They’ll then ask you how much money you have to put down for a down payment. From there, they can use a mortgage calculator to estimate how much home you can afford.

Typically, banks will give you a number based on monthly income, but only after weighing how much debt you have. A conservative estimate is that your monthly mortgage payment should be no more than 30% of your monthly income. Keep in mind though that if most of your income is tied up in long-term debt, than they will base it not on your income, but net income. In this case, it’s a great idea to pay down as much debt as you can prior to getting a home loan. With interest rates as low as they are, your money is far better served paying off high interest debt than being used as a down payment on a home loan.

The difference between a credit card balance, at something like 19%, and a home loan, at 4%, is monumental.

As to how much you should put down, it really depends on your cash situation. It’s best to keep a 3-6 month reserve fund in savings, in case you lose your job or face an emergency. However, if you are approved for a $200k home loan, paying $20k down would allow you to buy a $220k home. On the other hand, it would push you from having 10% down to around 9%, which isn’t a huge difference, but might push your interest rate higher. These are all of the things to consider when trying to decide how much to buy.

If you want to play with the numbers a bit and see how much you’ll need to put down in order to qualify for that dream home, then check out our free mortgage calculator & mortgage quotes tool. You can use this to test varying down payments, interest rates, and home value amounts to see how it affects your monthly payment. You can then compare that to our free mortgage quotes utility, which will give you five free quotes from local lenders that you can use to see what interest rate you qualify for. From there, you’ll know exactly how to manipulate the numbers to your advantage.

The best way to get past this is to apply for a secured credit card or loan, which you can pay off, on time, over time in order to establish credit. From there, getting good credit is simply a matter of paying bills on time and managing your credit well.

If you have had credit problems in the past, whether through late bill payments, lawsuits, or repossession, then it’s likely your credit score will be low. Low credit scores with a history of bad credit decisions will make it very hard for you to get a mortgage, especially without a significant amount of money down.

The worst part about having no credit and/or bad credit is that when you do get a loan or line of credit, you will pay a much higher interest rate. Banks do this to accommodate the risk involved in funding you. This is why getting a home loan with a low credit score is a bad idea. Just a percentage, over the course of 30 years, can mean tens of thousands of dollars in additional costs.

The best way to get a low interest rate is to have a good credit score, and the best way to do that is to guard your credit fiercely. In Canada, there are two bureaus that use credit score: Equifax and Transunion. They are tracked using your social insurance number (SIN) and therefore will follow you everywhere you go.

Make sure that you pay all bills on time, and keep a low debt to income ratio. For example, if you have a few credit cards, it’s OK to carry a balance, but if they are all maxed out, it’s likely your credit will be negatively effected. Fortunately, it’s easy to fix this by paying the debt down and carrying no more than a 10%-25% balance. When doing that, you’ll build credit much quicker because you will have proven that you can manage credit.

To learn more about how your credit might affect your chances of getting approved for a home loan, visit our free mortgage calculator & mortgage quotes tool. You’ll get five free quotes from qualified local lenders to help you analyze your credit score and see what you can do in order to improve your situation. You’ll also get a chance to use the mortgage calculator to test interest rates and see how just a single percentage point can make a huge difference in regards to your monthly payment. It’s free, and there’s absolutely no obligation!

Throughout most of Canada, mortgage rates are hovering between 3-5%, with five year fixed rates being at the low end of the spectrum, and 10 year fixed rates closer to 5.6%. That being said, Ontario is one of the regions with the lowest rates in Canada, with rates about a half of a percent lower than the rest of the country.

Quebec is also holding lower than the country, at about a quarter of a percent lower than most.

The reasons for the lower interest rates have a lot to do with the stability of the housing market in those areas, though each province has at least one or two areas doing just as well. This is probably best reflected by the fact that the regions with the lowest rates in Canada aren’t that far apart, in percentage points, from those with the worst rates.

Of course, these rates will continue to change, as government bonds continue to slide in value, which is why the Canadian government is considering an interest rate hike in the coming months. This could dramatically alter the home mortgage landscape for a time, while banks adjust and until rates settle.

In the midst of fluctuating home values in the United States, Canada appears to be much more stable, and with interest rates as low as the mid-3% range, there’s never been a better time to buy a home. This also goes for those looking to finance, especially if you are in one of the regions with the lowest interest rates in Canada, as you can probably pull out a bit of equity, or just reduce your mortgage payment, without paying a lot of fees or closing costs.

Depending on the rate and bank, you can get into a house for as little as 10% down on a five year fixed rate loan, and in some cases, a 10 year fixed rate loan. TD Bank, ING Direct, CIBC, and Bank of Montreal are just a few of the lenders leading the market with low rates.

To learn more about the current mortgage climate, and the type of rate you qualify for, check out our free mortgage calculator & mortgage quotes website, where you can get five free mortgage quotes from qualified lenders in your area. From there, you can take a look at our free mortgage calculator to play with the numbers to see where you stand in terms of down payment, monthly payment, and total home value. Our free mortgage calculator is also great for those of you looking to refinance but not sure whether it’s worth the cost. You can compare your current loan with that of a new loan with lower rates and see how the payment differs.

What happens if you lowball them and someone else gets the home? What happens if you pay too much?

These are legitimate questions, so let’s try to work through them, one at a time.

1. Is this the right time?

Before you even make an offer, you need to make sure that this is the home you want. Most home buyers say they know it when they see it, but try to be as rational as you can. From there, ask your Realtor to perform comps to see what they think the home is worth. Usually, the home will be listed for more than what it’s worth, but that doesn’t mean you can lowball the offer.

2. Are you pre-approved?

You will probably need to fax a pre-approval letter with your offer in order to prove that you’re serious. If the offer is accepted, you’ll also need to pay a small fee, generally called an escrow, which might be as much as 10-15% of your offer. This is something you need to have ready to go.

3. Is the home in obvious disrepair?

When making an offer on a home in need of repairs or modifications, append these requests to your offer. Generally, it’s better to ask for too much and get rejected than pay too much and miss out on a good deal. Depending on your area, you can negotiate closing costs, repairs, furnishings, home warranties, and even allowances for future repairs.

4. Inspections

Make sure that your offer is contingent upon inspection, otherwise you risk being mislead or being stuck with a repair bill after the deal is done.

5. Offer price

This is your money, and it’s a lot of it, so don’t be afraid to lowball the seller if you think they are asking too much. That being said, be smart, and put yourself in their shoes. Maybe they have a lot of offers, and you’ll have to raise yours in order to get the seller’s attention. Also, maybe they aren’t motivated, and will only accept offers in their price range. These are things you can’t necessarily know ahead of time, but they are worth considering.

If you’ve worked through these five steps, you should be prepared to make an offer, but before you do, make sure to use our free mortgage calculator & mortgage quotes tool to double check your numbers. Using the mortgage calculator, you can make sure that your offer is at a price that you can afford. You will also get free access to a list of local mortgage lenders, where you will be eligible for five free mortgage quotes. If you aren’t sure if you have the right deal, then it’s smart to double check and make sure, especially with so much money at stake.

It’s because of this that you need to choose your mortgage lender carefully, and why you need to get the answers to these five questions before pulling the trigger.

1.  What are closing costs?

Closing costs, when not paid by the seller, are usually embedded into the loan, which means you will pay interest on them if you don’t pay cash during closing. Obviously, you want these to be as low as possible, and you need to ask this question right off the bat. If the lender is hesitant to disclose them, or gives you the run around, then you need to drop them and move on.

2.  Will my interest rate change?

Unless you intentionally pursue a balloon rate or variable rate loan, you should expect to have a fixed rate loan for the duration of your payment period. Ask your lender about this in order to make sure you aren’t surprised years after the purchase.

3.  Will my loan be sold?

It’s common practice for lenders to buy and sell mortgage notes, but it’s still something you should know about. For example, if your lender commonly sells notes to another bank with a history of poor customer service, then this should be cause for concern, or at a minimum, a bit more due diligence.

4.  How much do I need to put down?

Sometimes you can find a 100% loan, while in other cases you might need to put as much as 20% down. Even though you can’t control this, it’s nice to have options, so ask the lender how much they require as a down payment. If you ask several lenders, you might find one that requires less up front, which will help you keep money in the bank.

5.  Can I buy down the rate?

Many lenders will let you buy down the mortgage interest rate by paying additional closing costs. While this isn’t always a smart move, if the numbers work out over the long-term then it’s something you should take into consideration. Even a tenth of a percent makes a big difference over the course of several decades.

If you really want to get the lowdown on how much you can afford to spend on a home, then take advantage of our free mortgage calculator & mortgage quotes. The form is easy to use, and you’ll be able to get five absolutely free mortgage quotes from local lenders. On top of that, our mortgage calculator will let you play with the numbers so that you can determine how much house you can afford, how much you need to put down, and most importantly, how an interest rate can effect the monthly payments and total interest paid. Take a look, it’s free!

Preparation

Step 1: Pre-Approval

The first thing you need to do is shop for a pre-approval letter from a bank. Many times they’ll want a zip code and price range before doing this, but it’s possible to get a pre-approval without this. If you’re still months away from looking, then a pre-qualification will do, but just remember that most Realtors and home sellers won’t want to work a deal until you are pre-approved.

Step 2: Find a Realtor

Finding a Realtor is important, but finding the right Realtor is even more so. Find a Realtor that understands your area and is willing to walk you through the process without rushing you or blowing you off. Be patient, because this can take time.

Useful resource: 3 Ways to Avoid Paying Realtor Fees

Step 3: Identify Areas

Once you have a pre-approval and a Realtor on board, it’s time to isolate a handful of areas to look within. This will help you focus so that you aren’t driving all over the world and wasting time in areas that won’t work for you.

Making an Offer

Step 4: Repairs and Inspections

It’s important that your offer addresses any issues with the home, such as the need for new flooring or appliances. You’ll also want to make sure that the offer is contingent upon inspection so that you can spot problem areas before closing.

Step 5: Escrow and Inspections

Once your offer is approved, you’ll need to route the escrow fee to the seller’s agent, where it will be held in trust. From there, you’ll need to start taking care of the home inspection and any other types of repairs or requests, such as pest treatment.

Step 6: Notify Your Lender

Once the offer is accepted, you’ll also need to notify your lender to prepare the paperwork. They will guide you through most of this, but they’ll need a lot of detail, and this will require a major portion of your time for the next few weeks.

Step 7: Set the Date

With the help of your Realtor and lender, you’ll set a date for closing. During this time you’ll need to prepare your funds to cover things like closing costs and down payment.

Closing

Step 8: Get the Keys!

This is the best step, and it’s the part where you sign the paperwork and get the keys to your home. This is one of the best feelings in the world.

How Much Can You Afford?

Before beginning this process, it’s important that you know how much home you can afford. Instead of guessing, use our mortgage calculator & mortgage quotes tool to help you play with the numbers to determine how much you can afford to pay and/or how much you will need to put down in order to qualify for that dream home you’ve always wanted. You will also get five free mortgage quotes from trusted lenders in your local area, which you can use to comparison shop. This is a great way to start because you’ll know exactly how much money to request in your pre-approval letter.