When you decide to purchase a home for the first time, you may feel overwhelmed with the countless different mortgage options available to choose from. Not only that, but the terminology can also be confusing to understand.
So, to help provide some clarity, your local Burlington mortgage broker with Loewen Group Mortgages have listed some of the most frequently asked mortgage questions and their answers.
Frequently Asked Questions
What is the difference between an adjustable rate mortgage and a fixed rate mortgage?
An adjustable-rate mortgage (ARM) is a loan where you are usually given a lower initial interest rate than other mortgages, however, your rates vary depending on the market. An ARM is popular amongst first-time homebuyers due to the cheaper initial interest rates, but this mortgage option makes it difficult to budget your finances because if the market changes your interest rate could rise or fall with little to no warning.
A fixed rate mortgage has a higher mortgage rate compared to an ARM, but you will never have to worry about your rates fluctuating throughout your amortization period. You will receive a set rate that will not change, which will help you accurately budget your expenses.
Should I get pre-approved?
There are many benefits associated with getting pre-approved. It allows you to know what type of homes you can afford so you know what price range to shop in. It also gives you more credibility with seller’s because it shows them that a Burlington mortgage broker has reviewed your finances and you are financially capable of taking on the financial responsibility.
Do you have to have perfect credit to become a homeowner?
You do not need a perfect credit score to become a homeowner. Different mortgage options have varying credit score requirements. Talk with your local broker to see which options are best for your financial situation.
How much should I pay towards my down payment?
If you wish to apply for a Burlington mortgage, you will need to pay for at least 5% of your down payment. However, if you pay less than 20% towards your down payment, you may be required to obtain mortgage default insurance. This is a fee charged by your broker to ensure they are protected in case you were to default on your monthly payments. This insurance does not protect the borrower, only the broker.
For more useful frequently asked questions or if you would like to apply for a Burlington home loan, please contact the Loewen Group Mortgages team at 289-337-4029.