5 Steps to Get a Good Mortgage Now

With interest rates at historic lows and housing prices dropping, the thought of purchasing your first home – or trading up to a larger one – has likely crossed your mind. Before you sign on the dotted line, however, keep these tips in mind when hunting down the best mortgage deal:

1. Get your credit up to snuff

While interest rates are great right now, banks and lenders are tightening up their guidelines, reserving the better deals for homebuyers with a 700 score or higher. Order a free credit report from Equifax and TransUnion a few months before you start your house hunt.  This will give you time to ensure there are no mistakes – or outstanding debts – dragging down your credit rating.

2. Do your research

Knowledge is power. Understanding the basic mortgage terms and processes before talking to a professional will allow you to ask the right questions and make the right decisions. While there are a lot of resources on the internet, the Canada Mortgage and Housing Corporation (CMHC) has a great step-by-step guide for first-time homebuyers – although everyone can use it to brush up on the basics.

3. Meet with a mortgage broker – not your banker

While you may feel more comfortable with the brand name of a big bank guiding you through the home buying process, the best mortgage deals are typically found through a mortgage broker. While bank representatives are limited to their bank's own suite of products, brokers have the freedom to play the field. They have access to a wide variety of lenders, each of which has different products – and different rate deals – at any given moment.

With less recognizable names behind them, however, it's understandably difficult to find a broker that you not only trust, but one that suits your needs. It's important to fully interview a mortgage broker before agreeing to do business with them.

Try to meet with them in person to discuss your mortgage needs. You can learn a lot about a person by meeting them face-to-face rather than over the phone. Pay attention to how they introduce you to the process. Are they merely promising the best rate around, or are they taking the time to understand your needs – and explaining the variety of mortgage products and options available to you? Also, don't be afraid to ask for references. A good mortgage broker will have lots of them.

4. Get preapproved

With rates as low as they are, there really isn't anywhere for them to go but up. Get preapproved for a mortgage before you start house hunting. Not only will you get an idea of the budget you have to play with and speed up the buying process when you find your dream home, but you might save money as well. Most lenders will preserve your pre-approved rate for 90 days – so you have three months to shop for a home without worrying that rates will go up in the meantime. If rates go down, you'll get the lower rate.

Lenders also offer great deals for quick closings of 30 days or less. This is a great option for people who are purchasing their first home and have the flexibility to move in right away.

5. Consider your five-year plan

To make the most out of your real estate investment, it's best to think long term – at least five years down the road. Not only will this help you decide on what type of property you want to buy, but it will also help you evaluate your mortgage needs.

There are a lot of rock-bottom deals out there – including five-year fixed rate mortgages for 3.55%. But some of them might not be suited to your needs. A lot of the super-low rate products are 'no frills' mortgages – meaning, they don't feature some of the added features of products that are a little higher, say 3.85%.

The higher rate products allow you to make lump sum payments. That means if you come across some extra money within the next five years – like a bonus or a ton of wedding cash – you can put that against your mortgage for no extra fee. Some products also allow you to renew early, so if you think rates might skyrocket before your five-year term is up, you can renew for another five years at the current rate before that day arrives.

While these benefits might not appeal to everyone, they are features that aren't available with the 'no frills' products. That's why it's important to look into the future and see if you might need that added flexibility, or if you're at a point in your life where you can do without it.

Overall, acquiring a mortgage can be a scary experience – especially if you haven't had one before. But with the proper approach, and the right preparation, you can minimize the amount of time and money you put into it and own your home free-and-clear much sooner.