Most of us are not loan officers and most of us do not work at a bank. So when the time does come around where we need to consider financing something like a Montreal condo, many of us are left scratching our head over the complexity of this process. Since this is a complicated affair, it’s always helpful to have a better idea of what you can expect before you even apply for a loan to buy that new place.
A good first place to start is by looking up listings of Montreal condos online. Doing so can help you better assess what places you are interested in, the moving cost to relocate to them, and what they are being offered for on the open market. Once you have an idea of what you are willing to spend to get into your new home, the following tips can give you a better idea of how the financing works in a nutshell.
Your Credit Score & Income Matter
Banks will base their lending decision on your creditworthiness. Most require that you have a clean credit score of at least 600 and no serious delinquencies. If your credit does not meet these stringent requirements, you may not get approved, or you may have to pay an additional fee on top of your monthly mortgage for Mortgage Default Insurance (CMHC insurance).
Banks Usually Want 20% Down
According to Rate Hub, banks usually want to see 5-20% of the purchase price as a down payment. If you are not able to put this amount down, you will either be declined or you may be forced to add costly CMHC insurance to your mortgage payment. This insurance can add as much as 5-20% more in costs to your monthly payment, and does not count towards your mortgage balance. It’s best to avoid this added fee if possible.
Knowing Your Budget
The best place to start is with understanding your budget and just what you can afford to buy. There are a number of free online calculators that you can use to determine what your spending limit and threshold offer as far as Montreal condos are concerned. You may be surprised to learn that you can afford more house than you thought that you could. Or you might find out that you have to go with something less expensive in order to make ends meet.
If you are considering making a real estate purchase, it’s a great idea to contact a few banks and learn your options. Many times, you can apply and get preapproved for a certain loan amount well in advance. Doing so can enable you to shop with greater confidence, knowing what you can afford and what you cannot. Also, you’ll have a much better idea of how the process works, and well in advance of making the actual purchase.