Pre-Approval and Meeting with a Mortgage Broker

We jumped the gun a little bit with our house hunting since we were SO eager to actually do something after years (literally) of talking about it.  I suppose we did things a little hastily, and maybe not in the right order.  We found our real estate agent first, while we waited for T4s and official numbers from Dan’s bookkeeper.  We started looking at homes before we really had any idea about what we could afford, but with all of the mortgage calculators Dan’s been playing with, and what we know we can afford each month, we had a good guess.  We told Dawn to limit the search to houses that were listed at $260k or under, and after meeting with our broker, we found out we’re spot on with our budgeting.
We used a family friend as our broker, and met with him one night at my mom’s office to enter us into the big-kid world of credit checks and pre-approvals.  The process took about an hour to go through all of our employee history for the last three years and enter everything.  After playing around with some numbers to determine our magic mortgage percentages (Gross Debt Service Ratio and Total Debt Service Ratio), and how much we WANT to be spending each month, we both got our credit scores and were reassured that we are great little candidates for a mortgage.  It took until the next day for us to receive the formal pre-approval notification, but we were right on the mark with our budget.  With our downpayment of $40,000, we’re looking to buy a home that’s around $250,000, with a mortgage of about $210,000.  With bi-weekly accelerated payments over 25 years and a 5 year fixed rate mortgage at 3.34%, that puts our payments at $524.42, for a grand total of $1048.82 a month, which is just about $100 more a month than we are paying in rent right now.  Very doable.

We’re also smart buyers, and we asked what those payments will look like in 5 years when the interest rates are different, and here’s the answer:

4% – $561.99
5% – $621.37
6% – $681.55

Still doable, and with Dan’s business doing better every year, I predict that will still be in the range of comfortable 5 years down the road.

We also asked about that 3.34% since everyone and their chicken is offering 2.89% right now to compete with BMO.  The difference in payments for such a small change in percentage isn’t going to break the bank for us, but it would be nice to get the best rate we can get.  Our broker told us that the 2.89% is a promotional rate that only becomes available when you are actually placing an offering and buying a home, not in the pre-approval stage.  Again, I’m OK with the 3.34%, but we’ll push for the lower rate when we find a home we like.

Our pre-approval is valid until July, so I hope we can find something in the next 3 months.  There, that wasn’t so scary, was it?


About joeyandjanice

Two crazy kids trying to make sense of the jumble surrounding making the jump from renting to owning our first home. Join us here as we stumble towards the biggest purchase of our lives.
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