Tag Archives: First Time Buyer

Why Your Down Payment Matters

Is it actually that big of a deal?

All lenders assume that you will put some money down on your home purchase. The minimum down payment in Canada is 5 % of the purchase price. The amount of insurance expenses charged is relative to your best mortgage rate and your down payment amount. So keep in mind, the more cash you are able to save and put towards your down payment, the lower your mortgage monthly payments are going to be.

Down Payment Due Diligence

This ends up being considerably crucial if your credit history is less than spotless. Some lenders will likely disregard previous credit blemishes, not confirm earnings and various other financial conditions, if you have 35 % to 40 % of the purchasing price available upfront as part of your down payment.

What you may not know about your down payment is that this equity goes to the banks in the unfavorable event of foreclosure. For this reason, the bigger the down payment the more protection the banks have. Make sure to have your down payment available at least 30 days prior to applying for a mortgage loan.

Ways to Accumulate a Down Payment

If you have already spoken with low mortgage rate lenders and they have notified you that your down payment is not quite enough, make it a top priority to find a way to save your money such as postponing a brand-new vehicle or a vacation.

If you have sufficient equity in your RRSP, you are able to get a loan from this investment account in order to help improve your down payment. Canadians are allowed to borrow as much as $25,000 from an RRSP. In addition, down payment funds can be borrowed from a secured line of credit or can be given from a family member.

Typical Lending Criteria For The Self-Employed

Two things to keep in mind

Most self-employed persons have a more difficult time getting pre-approved for a mortgage. The ideal image of a borrower by most lenders is one who has a stable job and thus a consistent stream of income as part of a regular pay cheque. Self-employed individuals rarely have this luxury.

If you would like to maximize your chances of being pre-approved for a low mortgage rate loan while self-employed, here are just some of the criteria you need to look out for:

Good Credit Score

A respectable credit score will always provide a boost to your finances and enhance your chances of getting a good deal on your Canadian mortgage rate. However, self-employed individuals can benefit a great deal from a positive credit score– in some cases, a high score may even help them win the favor of some discriminating lenders. Therefore, keep close tabs on your credit. The better your score, the better your chances will be of getting the best mortgage rate, whether you’re self-employed or employed full-time.

Established Self-Employment

You need to be self-employed for a considerable period of time. Lenders are more apt to trust you with a mortgage as a self-employed borrower if you are able to show them your stability as a self-employed income-earner. Most lenders will require you to have at least a two-year track record working for yourself.

Your ability to provide sufficient documentation is also an important factor in getting a low mortgage rate. As much as possible, you need to be able to support your income records with income statements and tax returns so you can qualify for a better mortgage rate.

Should I Rent Or Buy?

Are you ready to take the leap into homeownership?

Weighing out the pros, cons, costs, and considerations is the best way to help you determine if you are ready to own a home.

Renting

Pros

Renting is a wonderful first step to living on your own. Given that it lacks long term commitment many rental agreements generally only last one year. Renting is an affordable and accommodating option for most people.

Cons

You’re essentially paying off someone else’s Canadian mortgage rate, as opposed to investing in your future. In addition to this, your rental agreement will have its own set of rules that you will be required to follow during your tenancy.

Buying

Pros

The current best mortgage rates enable you to borrow money cheaply right away. Furthermore, owning a home will help to provide you with a sense of security and comfort. You have freedom to update it as you please and improve on your investment.

Cons

You will need to be personally and financially prepared for homeownership. Expect your stress levels to increase given your monthly budget.

Costs

Renting

Renting provides low initial costs. Your costs are a predictable expense and thus easy to budget around.

Buying

Saving up for a down payment requires substantially more money. Also, there are hidden expenses that turn up unexpectedly. Finally, if you secure a low mortgage rate today, you will need to keep in mind that your payments may go up when it comes time to refinance.

Investment

Renting can be considered an investment if the money that you’re saving is going towards a future down payment. Buying a home can be considered a good investment only if the property value increases. It could also provide a possible source of income if you choose to rent out a room or convert the basement into an income suite.

Buying a home is a big investment. Make sure you’re ready to make the commitment. Contact a mortgage broker to learn more about the pros and cons of homeownership.

Mortgage Fundamentals: Pre-Approved Vs. Pre-Qualified

What’s the difference?

Loan App There are several stages of the Canadian mortgage rate approval procedure when you apply for a mortgage. It is essential to understand what they are and what they really mean.

What is Pre-Qualification?

This is the initial step of the low mortgage rate approval process wherein your mortgage broker takes a look at your overall earnings and financial obligation. The broker will determine your affordability by taking a look at your debt ratios (Gross Debt Service GDS and Total Debt Service (TDS)).

There are going to be a variety of conditions that you will need to meet in the pre-qualification before it is fully approved.

What is Pre-Approval?

Once accomplished, the mortgage broker will send your application to a lender who confirms your information with a certificate of approval. This generally includes a Canadian mortgage rate guarantee, which is typically valid for 60 and 120 days. You must comply with all the terms and conditions prior to approval.

What is Approval?

You have been fully approved for the mortgage at the best mortgage rate detailed in the agreement.

Advantages of a Mortgage Pre-Approval

A mortgage pre-approval enables you to lock in an interest rate. It offers additional security in understanding that you satisfy the initial financing requirements. It also enables any seller to understand that you are a serious buyer.

Most importantly, you understand clearly what you are able to purchase when you are buying a home.

Documents Required for a Pre-Approval

Personal identification
Income information
Bank accounts
Loans and other financial obligations
Proof of financial assets
Confirmation of the deposit and funds to pay for the closing cost

Each and every house hunt begins with a mortgage pre-approval. Start your quick online application today.

Preparing For Your First Mortgage

Four moves to make when getting ready for your first mortgage.

Step 1: Know What You Want

Should your mortgage be fixed or variable?

Fixed Mortgage Rate:

Enables you to “lock in” a predetermined rate for a set amount of time (term).

Variable Mortgage Rate:

This type of mortgage rate changes monthly according to the mortgage lender’s prime rate. Anyone handling a variable Canadian mortgage rate has to have the ability to manage modifications to their monthly payments.

Open or Closed Mortgage?

If you are not prepared to pay a sizable lump sum in the coming future, typically a closed mortgage would be the best option for you.

Open Mortgage:

An open mortgage is a versatile alternative that enables you to make substantial payments or settle the whole mortgage without a penalty. Open mortgage rates are more than closed mortgage rates. This form of mortgage allows you to settle large amounts of your loan prior to completion of the mortgage term.

Closed Mortgage:

Not too many individuals need the flexibility to settle their best mortgage rate prior to completion of the term. If you have a closed mortgage you are going to be penalized if you try to pay off the loan early and the charge can be rather substantial.

Step 2: Knowledge is Power!

Searching for the best rates can save you money on your low mortgage rate.

Step 3: Speak with a Mortgage Broker

Brokers are able to assist in determining what you will be able to manage, what your options are, and help you through the process.

Step 4: Discuss Your Mortgage

As soon as you have prepared, you are ready to put your mortgage broker to work by having them negotiate a rate.

Take the first step towards homeownership now. Get pre-approved for a low mortgage rate.

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