Mortgage FAQ

I need a mortgage, but I don't know where to start.

You've come to the right place. Start with the sections: Bad Credit Mortgages.

  1. I've never had credit before. I've been told I can't qualify for a mortgage unless I pay a really high interest rate.
  2. My Broker Says I have The Best Deal Possible, How Do I Know?
  3. I've Never Bought A House Before, Help!
  4. I've heard bad things about my lender. What now?
  5. What's a “non-conforming” mortgage?
  6. What the heck are all these payment options? What difference do they make?
  7. I've heard I can check the stability of my lender through rating companies. Why would I do that?
  8. My regular bank is offering me a mortgage, but at percent higher than my best quote. Isn't it better to go with my bank?

  1. I've never had credit before. I've been told I can't qualify for a mortgage unless I pay a really high interest rate.

    Can you wait to buy? If you can, do. Get a department store credit card. Get a small loan over a short term (6 months to a year) from your trusted bank or credit union. Pay regularly and on time. In as little as a couple years you can establish a good credit history. While you are establishing your credit history be sure to be saving for a down payment! When you come back to the housing market you should have better luck.

    If you can't wait you may have to pay an interest premium. That's because the lender has no idea how you will handle the credit they are giving you! Don't despair. Get the best deal you can, with your credit as it is. Consider a mortgage broker, who may be able to show your stability (good job, regular pay, possibility of advancement) because of their contacts. While you still may have to pay a higher rate of interest, than someone with a long-standing credit history, you may get a better deal than you could on your own.

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  2. I'm using a Mortgage Broker. The broker says I have the best deal possible. How do I know?

    The only way to know if you got the best deal is to do some homework yourself. Have you been online to get a few free quotes? Have you spoken to any lenders yourself? Have you consulted more than one mortgage broker? Once you have done even a quick review you'll have a better idea if this deal is the one for you.

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  3. I've never bought a house before. Help!

    While there is a lot to know and there are lots of people who can help.

    If you are buying, you can make use of a real estate agent's services free of charge. (The seller of the property pays the agent's commission). Interview a few agents. They'll each have some tidbits of information to share.

    Talk to your bank or financial institution. They may also have some good information. While you are there, get pre-approved for a mortgage! This will help you figure out your budget and whether you are ready for this important step; including whether you can afford to buy at this time.

    Just found the property of your dreams and you're in a hurry? Read our section on Buying a House. We've got some tips and tidbits there for you. It will give you some information that you can keep in mind, while you speak to a lender or a real estate agent.

    In general, it's worth it to take your time and understand what you are getting into. This is likely the single biggest purchase you will ever make. You can afford to shop around.

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  4. I've heard bad things about my lender. What now?

    If you haven't signed papers then don't.

    Take some time and compare the consumer feedback on other lenders. Also, check with financial rating companies to be sure your lender is financially stable. Unfortunately, bad customer service can be the result of financial pressures inside an organization.

    If you have already signed papers, and are paying on a mortgage with this lender, don't panic. First and foremost be sure to make all your payments on time. Whether you have a good lender or not you should keep good records of your payments, so that in a dispute you will have the data to back you up.

    Also, if you have any concerns about the procedures taken by a lender get good legal advice. You might also want to turn to one of the consumer watchdog organizations to get help (many companies will do the right thing if they are put on the spot or in the media).

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  5. What's a “non-conforming” mortgage?

    A non-conforming mortgage is a mortgage that doesn't conform to standard underwriting practice. In most cases this could be because of no credit history or bad credit.

    Don't panic when someone says this to you. It probably means that you will pay a higher interest rate, but if they are offering this to you then you will be able to get a mortgage.

    If you are in the position that you are being offered a non-conforming mortgage be sure to get multiple quotes either online or from more than one mortgage broker. Check out your options. There are lenders who are competing for your business.

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  6. What the heck are all these payment options? What difference do they make?

    Good question. Payment options normally allow you to make extra payments or increase payments. Why would you care about that? Because every time you make an extra payment or increase your regular payments you will be paying more off the amount of your loan.

    The difference to you can be significant. If your lender makes it easier to make payments you have a better chance of making them.

    Let's take an example. Many lenders only give you one day to make lump sum payments and usually it is on the anniversary date of your mortgage. So, you have a bit of extra money around, but you have to wait to make that payment. In the meantime, you find all kinds of good uses for that money and the payment doesn't get made. However, if your lender allowed you to make lump sum payments in any amount at any time during the year,you would have had that money at work for you, reducing your mortgage.

    Some lenders also allow you to increase your regular payments. However, they may only allow you to double payments. What if you have an extra $25 per payment, but not the full double payment? While an extra $25 might not seem like a lot it could be reducing the principal of your loan by hundreds per year, which over 30 years could mean thousands in saved interest costs. It may also mean you pay your mortgage off years sooner. No kidding! Small amounts early in the life of a mortgage can make a big difference.

    It's always best to get the most flexible payment options you can without sacrificing your best interest rate.

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  7. I've heard I can check the stability of my lender through rating companies. Why would I do that?

    If your lender becomes insolvent your loan could become due and payable immediately to pay your lender's creditors. While you would likely be able to negotiate a mortgage with another lender, in order to take care of this problem, it will put you under financial stress and strain.

    Further, any lender that begins to have financial problems may also begin to have poor record keeping. If you have not been keeping good record of your payments to your lender it may look like you owe more than you do. You could pay for the same debt twice.

    If you have a financially stable lender these problems are much less likely to arise.

    However, regardless of how stable your lender is always be sure to keep good personal records of your payments. Even a good lender can occasionally lose track of a payment. And you don't want to be on the hook for more money than you actually owe.

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  8. My regular bank is offering me a mortgage, but at percent higher than my best quote. Isn't it better to go with my bank?

    NO! While you may prefer to deal with your bank the extra interest costs associated with even a percent difference can end up costing you considerably over the life of your mortgage.

    Before you take your business elsewhere though check a few numbers. If the fees to move your mortgage from your bank exceed the savings you'll get on the lower interest rate, it may not make sense to move. Also look at payment options. Does the other lender have better ones? At minimum, the payment options should be comparable.

    There is a certain 'hassle' factor. Moving your mortgage may mean setting up new pre-authorized payments, or other paper work. You might want to take this into consideration too.

    Having said that, if the numbers and options are in your favour go back to your bank. Tell them you have a better rate elsewhere. Also tell them that while you'd much prefer to deal with them you're considering taking your business to the other lender. Ask them if they can meet the lower rate. (Be prepared to have a quote in hand from the other lender). Most banks will want to keep a good customer!

    If they don't, be prepared to make the move.

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