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Common Mistakes to Avoid When Applying for a Home Mortgage in Canada

Written by Roshan D'Souza

On July 25, 2023
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Applying for a home mortgage can be an overwhelming process and it is important to know what mistakes to avoid. Homeowners in Canada should be aware of the common pitfalls that could derail their mortgage application and make securing financing much harder. Here are some of the most common mistakes to avoid when applying for a home mortgage in Canada:

1. Not having enough money saved for a downpayment: In Canada, all borrowers must have a minimum downpayment of 5% for purchases up to $500K and 10% for purchases greater than $500K. Without this amount saved prior to applying, it will be very difficult to get approved, as lenders prefer borrowers who are able to put some skin in the game.

2. Going over budget: Know how much you need and can afford before you start looking at homes or condos! Figure out what your maximum monthly payment would be, including interest payments and taxes, so you don’t end up with an offer that’s over budget.

3. Not Shopping Around: It is extremely important to compare different lenders in order to find the best deal possible on your mortgage loan. Lenders have different requirements and rates and one lender may work better for one person’s needs than another lender will.

4. Closing Costs Are Too High: Mortgage closing costs can add up quickly due to lawyer fees, title insurance premiums, various taxes paid by both buyer and seller, registration fees charged by the province/territory where the home is located, appraisal costs continuing education expenses etcetera – all of these items can add several thousand dollars onto your total cost of purchasing a house without even considering any additional upgrades or renovations you may plan on doing later on! Make sure you factor these into your budget upfront so that there won’t be any surprises when it comes time signing off on the contract with your chosen lender or bank!

5. Applying without Knowing Credit History: One of the most important factors when applying for a home loan is understanding one’s credit score & history well ahead of submitting applications (which affect both application & approval process duration). Understanding current debt loads & past payment history help potential applicants understand if they’ll qualify for mortgages as well as which type might work best – fixed-rate variable or line of credit etcetera – given their financial situation!

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6. Ignoring Preapproval Requirements from Lender: Every lender has its own set of preapproval criteria; borrowers must meet certain levels in terms of income stability credit score job stability debt ratio etcetera before they can qualify for financing– Paying attention early-on helps ensure there aren’t any unpleasant surprises down the road which could delay or entirely halt purchase processes (leading buyers back square 1).

7. Neglecting Property Value Estimates: Before making offers or deals on specific properties ask two three different realtor agents appraisers perform property value inspections/estimates within local areas where homeowners plan eventually buying said homes This allows them protect against paying too much in certain locations while also providing reassurances other buyers possibly able afford going nearer asking prices than average bidders—getting multiple values helps ensure buyers get their desired properties at proper prices!

By avoiding these common mistakes when applying for a home mortgage, Canadians can increase their chances of getting approved for financing while also ensuring they pay fair values with good deals from lenders in place prior completing purchases processes successfully!

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