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Mortgage Info Center - FAQ

(Click on any of the question below to read the answer.)

I've never had credit before. I've been told I can't qualify for a mortgage unless I pay a really high interest rate.

Can you wait to buy? If you can, do. Get a department store credit card. Get a small loan over a short term (6 months to a year) from your trusted bank or credit union. Pay regularly and on time. In as little as a couple years you can establish a good credit history. While you are establishing your credit history be sure to be saving for a down payment! When you come back to the housing market you should have better luck.

If you can't wait you may have to pay an interest premium. That's because the lender has no idea how you will handle the credit they are giving you! Don't despair. Get the best deal you can, with your credit as it is. Consider a mortgage broker, who may be able to show your stability (good job, regular pay, possibility of advancement) because of their contacts. While you still may have to pay a higher rate of interest, than someone with a long-standing credit history, you may get a better deal than you could on your own.

What's a "non-conforming" mortgage?

A non-conforming mortgage is a mortgage that doesn't conform to standard underwriting practice. In most cases this could be because of no credit history or bad credit.

Don't panic when someone says this to you. It probably means that you will pay a higher interest rate, but if they are offering this to you then you will be able to get a mortgage.

If you are in the position that you are being offered a non-conforming mortgage be sure to get multiple quotes either online or from more than one mortgage broker. Check out your options. There are lenders who are competing for your business.

My regular bank is offering me a mortgage, but at percent higher than my best quote. Isn't it better to go with my bank?

NO! While you may prefer to deal with your bank the extra interest costs associated with even a percent difference can end up costing you considerably over the life of your mortgage.

Before you take your business elsewhere though check a few numbers. If the fees to move your mortgage from your bank exceed the savings you'll get on the lower interest rate, it may not make sense to move. Also look at payment options. Does the other lender have better ones? At minimum, the payment options should be comparable.

There is a certain 'hassle' factor. Moving your mortgage may mean setting up new pre-authorized payments, or other paper work. You might want to take this into consideration too.

Having said that, if the numbers and options are in your favour go back to your bank. Tell them you have a better rate elsewhere. Also tell them that while you'd much prefer to deal with them you're considering taking your business to the other lender. Ask them if they can meet the lower rate. (Be prepared to have a quote in hand from the other lender). Most banks will want to keep a good customer!

If they don't, be prepared to make the move.

What are all these payment options? What difference do they make?

Good question. Payment options normally allow you to make extra payments or increase payments. Why would you care about that? Because every time you make an extra payment or increase your regular payments you will be paying more off the amount of your loan.

The difference to you can be significant. If your lender makes it easier to make payments you have a better chance of making them.

Let's take an example. Many lenders only give you one day to make lump sum payments and usually it is on the anniversary date of your mortgage. So, you have a bit of extra money around, but you have to wait to make that payment. In the meantime, you find all kinds of good uses for that money and the payment doesn't get made. However, if your lender allowed you to make lump sum payments in any amount at any time during the year,you would have had that money at work for you, reducing your mortgage.

Some lenders also allow you to increase your regular payments. However, they may only allow you to double payments. What if you have an extra $25 per payment, but not the full double payment? While an extra $25 might not seem like a lot it could be reducing the principal of your loan by hundreds per year, which over 30 years could mean thousands in saved interest costs. It may also mean you pay your mortgage off years sooner. No kidding! Small amounts early in the life of a mortgage can make a big difference.

It's always best to get the most flexible payment options you can without sacrificing your best interest rate.

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