The Early Buyer Gets the Home

Where does the home buying process begin?

Does it start when you fall in love with the

perfect home? When you make the decision

to buy? Or maybe it's when you make that very first

mortgage payment? Many experts will tell you that the most

important step towards home ownership is getting

pre-approved for a mortgage, which is most certainly the

start of the official process of purchasing a home.

Pre-approval not only ensures that you qualify for a

mortgage, but it determines how much money you qualify

for and guarantees a rate of interest for a specified amount

of time while you shop (60, 90, or sometimes 120 days).

From here you can decide the location, size, and level of

luxury you can afford and even the timing of your home

purchase. It might also mean the difference between getting

the house of your dreams and losing it to the next person.

Pre-approved buyers definitely get preferred treatment.

Many options are available to get you started: you can conduct your own calculations using an online mortgage

calculator, you can visit a mortgage broker, or you can

simply walk into your financial institution. The one thing

that is certain is that you should take this important step

before you buy.

Paul Bimm, vice-president of the builders' market at

RBC Royal Bank, says "I encourage anyone who is

looking at buying to speak to a mortgage specialist to get

pre-approved. One of the things I've noticed is that some customers will purchase the home they fall in love

with and then go to get qualified and find out they can't

afford it."

Recent homebuyers Shari Brown and Greg Marshall

used online calculators to get an idea of what they could

afford while they did some preliminary shopping. "We

had been looking at new homes for a year or so to get an

idea of what we wanted. Since the pre-approval has an

expiry date we saw no point in rushing it," Brown says.

How do you avoid unwanted surprises? Bimm suggests

a few easy guidelines to help you estimate the price you'll

be able to afford. "The rule of thumb is that 32 per cent

of the gross household income can be used to pay the

mortgage and housing costs." This figure includes the

mortgage principal and interests costs, property taxes,

heating, and if you live in a condominium development,

one-half of the condo fees.

Once you have an idea of what's out there and whether

or not you can afford it, it's time to determine where you

want to apply for pre-approval. Brown and Marshall say

that the two biggest factors in this decision were past

experience with financial institutions and which one had

the better rate. If you decide to go into a financial

institution or even if you apply online, Bimm says that

you should "really know your numbers in terms of what

your income is." The more up-to-date the information

you provide is, the smaller the room for error in your

pre-approval amount will be.

If Brown and Marshall had to do it again, what would

they change? There were a few things that came up

unexpectedly in the process, such as estimating the cost

of mortgage insurance and where to obtain this coverage.

"These are all things that we know for next time and

we'll pass on to our friends when they apply for a mortgage."

Bimm also includes one last piece of often-overlooked

information: obtaining pre-approval for a mortgage is

free, and so is the advice that comes with it.