Throughout my years of experience in the mortgage industry, I have come across several “myths” that were believed to be facts by many of the clients I have worked with.To some of you, many of these common mortgage myths may seem obvious, but they have been known to lead some clients astray. I believe it is my duty as a Grimsby mortgage professional to make sure my clients, and the general public, are as educated as possible when it comes to the mortgage process, how it works and what they should expect. This is important if the mortgage process is to work out smoothly, which is why I compiled a list of the top three mortgage myths I have heard over time, as well as explanations to go with each of them to better explain why they are not facts.
The first myth is that a pre-approval is a guarantee that you are approved for a mortgage. I have encountered countless people who have been “pre-approved” for a mortgage by their bank, went out and found their dream home, only to apply for their mortgage and find out their application has been denied.
A pre-approval is not the same thing as a pre-qualification, which is one step closer to an approval but is still not a guarantee itself. The banks typically do what they call a pre-approval, which is generally just a rate hold. At most they make a rush judgment on your creditworthiness based on a precursory glance at your general finances, then give you a “rate hold” which essentially means that if you come back and are approved for your final mortgage they will give you the rate on the pre-approval if rates were to go up in the meantime. Because this does not depict your entire financial picture, it also can’t accurately depict whether you will be approved for a mortgage loan.
At Canadian Mortgage Authority we will ‘pre-qualify” you based on a number of variables including affordability based on your income, the amount of existing debt, payments on your proposed mortgage, also taking into consideration your credit history and the amount of your available down payment. This will provide you with a much clearer picture of your mortgage options before you start looking for your dream house.
The second myth is that any one specific mortgage is always the best option. There are people who will tell you that a 5 year fixed rate mortgage is the only way to go when it comes to a mortgage. This is most likely because this is the only mortgage option most people know about.
Just because a mortgage option worked well for someone else’s situation does not mean it will necessarily work out best for you. This may be an option you aren’t qualified for, or it may be an option that could cost you more in the end. At Canadian Mortgage Authority we take the time to listen to what your needs are given you specific situation and match a mortgage product to meet those needs. Once size does not fit all.
My job as a Grimsby mortgage professional is to make sure every one of my clients gets a mortgage that is tailored to their unique situation.
The third myth is that you won’t be able to get a mortgage without a 20% down payment. While the more cash you have for a down payment is better (this will help you get approved for better terms, options, and rates) it is not necessary. As long as you have the minimum amount required for a down payment and decent credit, there are many ways to get you into the mortgage you need. Mortgage insurance was actually designed for just this purpose!
These three myths, especially the myth about pre-qualifications, can easily confuse potential homeowners, leading them down a path that could lead to disappointment if they are not approved for their mortgage in the end.
If you have heard something about the mortgage process that doesn’t make sense to you, don’t be afraid to ask!