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(Mark Blinch/Mark Blinch/REUTERS)
(Mark Blinch/Mark Blinch/REUTERS)

Earlier discussion

How to negotiate your first mortgage Add to ...

Doug Melville, Banking Ombudsman: Anthony, Buying a house to live in is a big long-term commitment and usually the single biggest financial decision a couple can make. Buying and selling homes involves costs that many first-time home buyers don't appreciate. If you are buying to live versus buying for an investment, that may affect your choices. You will want to discuss what your objectives are. Early in your professional lives and in debt, you are at a relatively vulnerable stage and therefore need to plan carefully.

My suggestion is you two take this opportunity to create a comprehensive financial plan which takes into account your debts, assets, projected income, expenses, investment/retirement plans and the changes your busy lives will go through over the foreseeable future. What kind of financial capacity you have, coupled with the flexibility you may need to move or accommodate unexpected expenses, may limit your options. Seek out financial advice, perhaps consult a financial planner. Ask lots of questions and consider the possibilities. Then you will be in a much stronger position to make the exciting decisions that lie before you. Good luck with your plans.

Sara asks: A multi-part question regarding approaching a mortgage broker regarding a mortgage pre-approval: What is the best way to select a broker? Can/should someone request pre-approval from more than one broker/bank? Does requesting a mortgage pre-approval tie you to a certain broker or bank, or can you search for the bank/broker that offers the best rate once you are ready to purchase? Thank you.

Doug Melville, Banking Ombudsman: Sara, In terms of both mortgage brokers and lenders, I think it is always a good idea to shop around and seek advice from those you trust. Getting pre-approved by one or more lenders lets you know what you can confidently purchase and not have to worry about lining up financing after you have committed yourself to a home purchase. Just make sure that you are not committing yourself to the lender and that no fees or other costs are being incurred by you in getting the "pre-approval".

Carolyn wants to know: I am a single parent about to make my first home purchase (I have never had a mortgage before). What is the most important thing I should consider when shopping around for a mortgage?

Doug Melville, Banking Ombudsman: Carolyn, I wish it were a simple answer for you. It isn't. The biggest issue to consider is your broader financial situation so that you are comfortable getting yourself into a mortgage in the first place. I suggest you seek financial advice on this first.

Assuming you have that covered off, you need to know that a mortgage is a complex agreement. You need to be very sure what you are getting into and there are many aspects of a mortgage that can be important depending upon your personal circumstances. Read and understand what you are signing. If you don't understand it, get someone to help you do so.

While many people focus on the mortgage rate, you also need to be aware of the term, amortization, flexibility to make changes to your payments, ability to make occasional extra payments to pay-down your mortgage faster, penalties for paying-out the mortgage if you need to move or sell your home before your mortgage matures. Getting the proper advice to help you match up your personal needs and preferences to a mortgage product will help ensure you get the best fit for you. Also be aware of the extra costs that can arise with home ownership like property taxes, insurance, maintenance which can be a surprise to some first-time buyers.

This is a very big step, make sure you take it with your eyes wide open. Good luck.

Roma Luciw, Globeinvestor.com: Thanks for taking the time to join us Doug. Our apologies to the people who sent questions we did not have the time to answer.

Doug Melville, Banking Ombudsman: My pleasure.

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