FINANCING YOUR HOME
Most homebuyers rely on lenders (banks, credit unions, population, pension funds and insurance companies) to lend them money to finance the purchase of their home. This loan, called a mortgage, is repaid by you through regular payments over a period of time, typically 25 years
Lenders will charge interest to lend you this money. Interest is the cost of borrowing money. It will be added to your regular payments.
GETTING PRE-APPROVED BEFORE SHOPPING
It’s a good idea to sit down with your lender or mortgage broker to discuss your needs and get mortgage pre-approval. Pre-approval means that your lender commits to giving you a mortgage up to a specified amount, at certain terms and conditions, including the interest rate. This commitment will be valid for a specific period, usually up to 90 days. Preapproval doesn’t lock you into the mortgage. You are still free to pursue other arrangements. That way, you know exactly how much you can spend on your new home.
DOWN PAYMENT AND MORTGAGE LOAN INSURANCE
The amount of your mortgage will be determined by the price of the home minus an initial cash payment (called the down payment) made up front. If the down payment is less than 20% of the value of your new home, your lender will probably require “Mortgage Loan Insurance”.
In addition to a lower down payment, Mortgage Loan Insurance will help you access interest rates that you otherwise wouldn’t have been able to negotiate. The cost for Mortgage Loan Insurance, called a premium, is usually offset by the savings you get from lower interest rates.