Mortgage Financing

Know Yourself, your Financial Position and your Limitations

It is important to understand what you can afford by having a clear picture of what is needed when you purchase real estate. Over extending yourself will cause you hardship and you could be house rich and cash poor. I offer some help under the Mortgage Calculator and Affordability Calculator tabs which can give you a snap-shot of your situation. It is very important to talk to a Mortgage Specialist who will help you and will advise you on your Financial Qualifications.

Here are a few things they will talk about:

• What is your GDS 28% (Gross Debt Service) and TDS 36% (Total Debt Service)?
  • Do you have the minimum 5% down payment or if you are purchasing property that will not be your principal residence, 20% down is usually the minimum?
  • Do you have the funds for the closing costs?
  • Where is the money coming from?

Be prepared. You will need to provide proof of your income, your debt, your current living status and all applicants are reviewed on a case-by-case basis. The property you purchase must also qualify and again proof is required that can include a property appraisal.

Once you are financially qualified, they will inform you of a rate that can be assured for you based on closing in 30 days or longer. Ask for a letter of qualification. This is held in confidence by the Realtor^® you are working with and the details are not to be disclosed (verbally or hard copy) to anyone without your written permission. Having such a letter is an advantage as your Realtor^® can talk about it in the negotiation process by saying that you are financially ready for a property for which you seek.

What about the mortgage?

You need to get the best mortgage at the best rate available. This includes knowing if your mortgage is portable, assumable, or if it can be discharged without a penalty. How fast can you pay it down without penalties? Can you make bi-weekly payment or even weekly? Can you pay more than your agreed-on payment, how often? You can pay off your mortgage quicker and more importantly you will save a great deal of money on interest. When you sell, you will have advantages that many may not have and you can save yourself some money in the process.