Homes are expensive, and we’re constantly hearing about interest rates and where they might be going. So it’s not surprising that one of the first things that novice home buyers ask a mortgage broker is, how low a mortgage rate can they get?
It’s an important question. But when clients ask me that, I ask them to take a couple of steps backward so I can first find out what their ideal living situation would be and see how I can help them accomplish that.
A broker needs to find out what their client’s housing budget is and how that will allow them to keep living their good life and not be house poor. The broker’s responsibility is helping the client realize that, in buying a home, they have to calculate the costs of the blended principal and interest in their mortgage payment; heat, hydro and water costs; home insurance premiums; property taxes; and what they need to put into a savings account to cover home repairs and maintenance.
Once the broker has that amount, they can work backwards to make sure that with the client’s savings or gift from a relative for a down payment and their employment situation, they will meet various lenders’ guidelines for a smooth mortgage placement.
Another key question a broker asks is whether the client has been looking at homes in a certain neighbourhood and in a particular price range. We want them to live in an area of town that works for them and not to just buy a house for the sake of buying a house.
My own strategy is that, after the initial conversation, clients fill out a questionnaire that allows me to get to know them even better. Assessing things like risk tolerance to see if we should talk about options such as variable rate mortgages is a key part of this process. I also want to know about their knowledge of mortgage terms and strategies so they can be made more aware of those issues if required. A discussion can then be tailored that focuses on the client and their specific situation.
A broker then collects a client’s employment, down payment and other documents that a lender needs. The broker also determines which lender might best meet the client’s needs and offer the best rates and terms.
Only after this entire process has been completed is it possible to present rates and terms that best fit a client’s individual situation. By waiting until all the facts are known, the client is assured of getting the best rates and terms possible.
Then it’s just a matter of wrapping up the sale and accepting the key to your new home.
Originally published April 17, 2017