What comes first the mortgage or the house?

Many people get it backwards. They shop for a home, and then make an emotional decision without knowing what they are able to afford. And then are surprised and disappointed to find out that they cannot get the financing. Thankfully the banks in Canada do their homework on the applicant to see whether they have the ability to repay the loan while in the lifestyle they are accustomed to.

Somethings to consider about your lifestyle:

  • Are you single or a family of six? Costs for food and clothing alone are very different.
  • Do you take annual vacations.
  • How often do you like to eat out.
  • Are you involved in costly sporting activities.
  • Would you be willing to sacrifice these things for a bigger or nicer home.

The banks will take into consideration the following:

  • Do you have car payments.
  • Do you have to repay student loans.
  • How much do you owe on your credit cards.
  • Do you have bad debts.

 

Falling in love with a home without considering the REAL impact on your lifestyle is a recipe for unhappiness….either in re-adjusting to a “lesser” home or disappointment over the lack of vacations or entertainment.

My advice is to first work on your financing. Go the logic route. Find out what you can afford from a bank’s perspective, but then, spend some time considering the cash flow realities of your choice. Work with your bank to make wise choices.

Additionally, your bank should be advising you on ways to properly represent and transfer your assets, how to explain and document your income, as well as, assisting you in methods to get your optimal credit score. This counsel can be invaluable in smoothing out some of the bumps in the mortgage process, besides giving you the best chance to get the best mortgage rate available.

The choice is  clear get the mortgage before the house!

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