Applying for a mortgage and becoming a home buyer can seem overwhelming especially if it’s your first time. With the help of  an expert and dedicated Mortgage Specialist, it can be easy. They’ll meet with you anytime to guide you through the process and help you find the best mortgage for your specific needs. Jeff Burton with RBC has  put together a blueprint of the most common pitfalls and how to deal with them, so that you can feel confident and prepared to take the first steps towards homeownership!

Here are some of the pitfalls mortgage specialists can help you avoid.

Not knowing your credit rating.
A credit rating is a record of your credit history and current financial situation which is typically translated into a credit rating score. Lenders can use your credit rating to verify your repayment history. A good credit rating could improve your ability to get loans like mortgages. If your credit rating needs improvement to help you qualify for loans, you can improve your score by always making at least the minimum payments on your credit cards, loans or utility bills in a timely fashion. Checking your history is easy! Simply ask for a copy of your credit rating at
either www.equifax.ca or www.tuc.ca. A small fee will apply.

Being unrealistic about how much you can afford to pay for your home.
You may be under or over-estimating how much you can afford to pay for your home. Our online mortgage calculators make it easy for you – all you need to do is to log in to www.rbcroyalbank.com/mortgages and click on the “How much can you afford” calculator in the tools section. Enter your income and expense information and the calculator will tell you the maximum mortgage payment amount you can afford each month. Or you can always click on the mortgage calculator to quickly figure out monthly payments for different mortgage amounts and rates. You may find out you can comfortably afford more than you originally thought; or for a more personal touch, contact one of our RBC Mortgage Specialist. They can quickly help you determine how much you can afford and answer any questions you might have.

Not considering a mortgage pre-approval.
Knowing the amount you will be approved for gives you the confidence to begin looking at homes within your price range. As long as you earn sufficient income and have no major credit issues or large debt, you should be pre-approved for a mortgage. At RBC®, your preapproved mortgage rate will be guaranteed for **90 days (or lower if rates drop) so you can continue shopping around and don’t have to commit to anything right away.

Assuming you will not qualify for a mortgage.
Have you ever been declined for a mortgage for any reason, even bankruptcy, and still dream of owning your own home? If you don’t qualify for a mortgage with RBC your RBC mortgage specialist may still be able to help you get the home of your dreams by finding an alternative mortgage solution. Although an alternative mortgage may cost a little more initially, once your credit situation has improved we may be able to help you lower your mortgage cost in the future.

Not knowing all the downpayment choices.
You’ll be glad to know that there are different options available depending on how much of a downpayment you can afford:
• conventional mortgage (25% down-payment)
• high-ratio mortgage (minimum 5% down)
• no down-payment mortgage (must have minimum 1.5% value of the home set aside for closing costs) As high-ratio and no down-payment mortgages have lower downpayments, they require a higher mortgage loan insurance premium. The premium is added to the amount you borrow. As a first time homebuyer, you can also use money saved in your RSP towards a down-payment with a maximum of $20,000 per person.

Too focused on interest rate rather than the overall solution.
Your mortgage specialist is there to help you decide which mortgage solution works best for you and fits not only your budget but within your future plans.

• fixed rate mortgage: offers you the security of locking in your interest rate for the length of your mortgage term (anywhere from 6 months to 10 years). The interest rate for a fixed mortgage tends to be somewhat higher than for a variable rate mortgage.
• variable rate mortgage: your interest rate will fluctuate according to the changes in the lender’s prime rate. However, over time, you could have greater savings on long-term interest costs. Worried about not knowing how much you’ll pay regularly? At RBC, your regular payment remains the same on a variable rate mortgage*, only the portion of the payment allocated to principal and interest will fluctuate with RBC prime rate†.
• combination (fixed/variable): If you want to benefit from the best of both worlds (the security of a fixed rate and the potential long term savings of a variable rate mortgage) you should consider the RBC Homeline Plan™. Keep in mind you need to have 25% equity in your home in order to take advantage of this option.

Not choosing your own mortgage payments schedule.
Customize your amortization period depending on how much you can afford. Paying off your mortgage faster saves on interest costs, while a longer amortization period (such as the RBC 35 year option) reduces your regular payment amount and gives you more room to manage your cash flow. Because extended amortization means increased interest costs and paying down a mortgage more slowly, this option isn’t for everyone. A 25 year amortization period should be the starting point as stretching the amortization to 35 years can increase your total interest costs by 50% over the life of the mortgage. If you decide a longer amortization is appropriate, consider a strategy to reduce amortization over the life of the mortgage. RBC’s money-saving options, such as Double Up®, accelerated payment, 10% anniversary payment and annual 10% increase in payment amount, can get you back on track to a 25 year – or even shorter – amortization period.

Regardless of the mortgage option you choose, buying and owning a home is likely to be one of the biggest financial investments of your life. Creditor insurance can help protect  that investment from life's uncertainties and help give you the confidence that comes with knowing your investment is well-protected. 

HomeProtector® life and disability insurance can pay your outstanding mortgage balance up to $500,000 in the event of your death, or can make your regular mortgage payment - up to $3,000 per month for up to 24 months - if you become disabled.††

Forgetting about closing costs and other non-banking details.
By this time, you’ve selected a house, picked your mortgage options and are getting ready to finalize everything and make an offer. This means getting down to some picky details. It helps to know what these are so you can minimize any last minute complications. Here are some things to consider and budget for:

• Professional home inspection: Always make an offer conditional upon a home inspection. As long as your offer is conditional upon the home inspection, you can have the purchase price reduced to offset the cost of needed repairs or cancel the agreement. You should also inspect the home before moving in to make sure the condition has not changed. A newly built home is usually covered by a builder warranty program.

• Lawyer or Notary fees: Make sure you work with an experienced lawyer/notary so that all legal aspects of your house purchase are properly completed.

• Property taxes: Look for the previous year’s payments in the property listing given to you by your real estate agent. Although property taxes fluctuate, you’ll have a general idea of how much you should expect to pay.

• Property Insurance: Your home is probably the biggest investment you will ever make in your lifetime. Property insurance is all about protecting the things you value: your home, your personal belongings and even your financial future. When choosing an insurance company make sure they offer a range of choices allowing you to personalize your insurance to suit your needs.

• Property value: Know that when buying a home, there is a possibility that the property value will fluctuate. Typically over time property values increase and buying a home is generally considered to be a good investment.

• Moving costs: Budget for a professional mover, decorating costs and fees for setting up your cable and telephone and other utilities.

• Ongoing costs: Don’t forget to budget for the cost of maintaining a home, such as heating, electricity, water, repairs and taxes. A good suggestion is to budget at least 1% of the home’s value for yearly maintenance expenses.

Owning your own home is a milestone as well as an exciting experience! How often do you get to live in and enjoy your investments? Your mortgage specialist is always available to guide you through the process.