Buying a property often feels overwhelming. It's a significant investment that will likely take many years to pay off. Before looking at properties, most people elect to get pre-approved for a mortgage. This process involves providing your lender with information about your financial situation. The financial institution will then provide you with a pre-approval letter saying that if your finances are truthful and you don't accrue any more debt, then your lender would agree to give you the mortgage.

There are many choices to make with mortgages and finding the right one can get stressful. There are a few critical concepts that you need to keep in mind when applying for a mortgage.

You don't need 20% down

Paying Points

Many advertised interest rates reflect very low interest rates but charge a high amount of points.  The more points you pay upfront, the lower the interest rate over the life of the loan.  But what if you only plan to keep the loan in place for 5 years instead of the full 30 years? It is important to compare the lower cost options with the higher cost options to find out when your break even point meets.  Then ask yourself, do you plan on keeping that loan in place for longer than that timeframe? If so, it could may sense to pay the additional points but if not, it may make more sense to choose the lower cost, higher rate option.

Is your lender explaining what to expect

It is important to work with a lender that explains the interest rates, payments, closing costs and process to you.  Many lenders only explain only one piece because they are in a hurry and then you are left with surprises when it comes time for you to purchase your home. Ask questions.  Never feel bad for asking all the questions you have and fully understand the process and what to expect.