…and what you need to know to get you started toward buying your 1st home!

People fear what they don’t understand.  A good example is the purchase of a home.  The average consumer knows very little regarding the home buying process.  Between finding the right house, making sure it won’t fall apart the day after it is purchased, and finding the best financing, it is no wonder that so many people are afraid to purchase homes. 

Buying a home is one of the most important financial decisions an individual will make.  For a first-time homebuyer, the decision to purchase a home can be daunting.  It will represent a major step forward as the individual/family will be assuming potentially its largest responsibility.  As with any major decision, it is important that everyone, especially first-time homebuyers, take full advantage of the information and training that is available to more clearly understand the home buying process.

To prepare, you should do research and be fully informed before beginning the search for a dream home.  Here are six steps to get started:

STEP 1: Before you start your house search, think carefully about what it will be like to be a homeowner.  For most people, homeownership can be one of the most significant financial turning points in their lives.  The advantages (tax benefits, pride of homeownership, financial investment) far outweigh any drawbacks.

STEP 2: Your credit history is one of the first things a lender will look at in making a decision on your loan.  Visit www.equifax.ca to obtain a credit report.  Review it carefully to be sure all the information is correct.  If you find discrepancies, you should work with the credit agencies to resolve them.

STEP 3: Saving for a down payment can be one of the biggest barriers to homeownership.  Mortgage lenders recognize this dilemma and many now offer low down payment loans.  Five percent is usually the minimum requirement for a down payments.

STEP 4: Before you begin working with a realtor, find a mortgage broker you can trust and ask them to pre-approve (not prequalify) you for a mortgage.  Getting a pre-approval is easy. You just call a mortgage broker, provide some basic financial information, ie. documentation to confirm your employment, the source of your down payment and other aspects of your financial circumstances.

Most lenders will provide this service free of charge.  Pre-approval will let you know exactly how much you can spend on a home purchase BEFORE you start your search.  A preapproval in hand also makes you a more attractive buyer when you are ready to make an offer on a home.  Home sellers are more likely to accept an offer from a buyer who can demonstrate the ability to secure financing.

STEP 5: Many mortgage lenders, nonprofits, and even realtors offer homebuyer education guides to prepare you for homeownership.  Some of the topics covered are how to apply for a loan, find the right realtor, make an offer on a home, and the advantages and responsibilities of homeownership.

STEP 6: The mortgage broker vs. banks and mortgage companies. A mortgage broker has many different banks, savings and loan companies and mortgage companies that they “broker” their loans to, something like a stockbroker or independent insurance agent.

Since a mortgage broker does business with lots of banks throughout Canada, they can:

·      Send the loan to many different underwriters   

·      Shop for the best rates and programs

Save you money by not charging loan origination fees

So, what’s in it for you?

You can finds ways to get out of the “trap” of paying rent. 

You are confident that you made the right decisions about your mortgage.

Nobody rushed you into the wrong mortgage program because you had to apply for your mortgage within 3 days of signing your purchase agreement.

Is 3 days long enough for you to make a decision that could last for 30 years?

Your desire to own a home, combined with my knowledge, will increase your chances dramatically.

Most banks want to “cherry pick” the easy ones.

Not me, because I have so many more options than they do.

Well, I hope I got you thinking.

You probably have some questions.

However, we guarantee that you can save thousands of dollars.  Your time is precious too, so we won’t waste that either.

We can give you a detailed analysis of how much you will save by owning instead of renting.

Please give me a call while this is fresh on your mind and you are excited about the possibilities.

Even if you are skeptical, which is only natural, a phone call can’t hurt.

The worst that you will do is spend a few minutes learning.

The best you can do is have “peace of mind” and save yourself lots of money.

Or, if you wish, we can send a pre-approval package out to you today, or fax information to you.

What are you waiting for…give me a call and lets get started!

P.S. Think about it.  Now is the time to escape from endless rent payments. We can mail you a Pre-Approval Kit to get you started on your road to homeownership today!

P.P.S. More people who are renters now qualify to become a homeowner.  Don’t let fear or ignorance stand in your way.  Our job is to educate and advise you.  Call us today to take one step closer toward realizing your dream of one day becoming a homeowner.

1. What’s the best rate I can get?

• Your credit score plays a big part in the interest rate for which you will qualify, as the riskier you appear as a borrower, the higher your rate will be. Rate is definitely not the most important aspect of a mortgage, however, as many rock-bottom rates often come from no frills mortgage products. In other words, even if you qualify for the lowest rate, you often have to give up other things such as prepayments and porting privileges when opting for the lowest-rate product.  Check to make sure you are getting great the best mortgage products with your low rate.

2. What’s the maximum mortgage amount for which I can qualify?

• To determine the amount for which you will qualify, there are two calculations you’ll need to complete. The first is your Gross Debt Service (GDS) ratio. GDS looks at your proposed new housing costs (mortgage payments, taxes, heating costs and 50% of strata/condo fees, if applicable). Generally speaking, this amount should be no more than 32% of your gross monthly income. For example, if your gross monthly income is $4,000, you should not be spending more than $1,280 in monthly housing expenses. Second, you will need to calculate your Total Debt Service (TDS) ratio. The TDS ratio measures your total debt obligations (including housing costs, loans, car payments and credit card bills). Generally speaking, your TDS ratio should be no more than 40% of your gross monthly income. Keep in mind that these numbers are prescribed maximums and that you should strive for lower ratios for a more affordable lifestyle. Before falling in love with a potential new home, you may want to obtain a pre-approved mortgage. This will help you stay within your price range and spend your time looking at homes you can reasonably afford.

3. How much money do I need for a down payment?

• The minimum down payment required is 5% of the purchase price of the home. And in order to avoid paying mortgage default insurance, you need to have at least a 20% down payment.

4. What happens if I don’t have the full down payment amount?

• There are programs available that enable you to use other forms of down payment, such as from your RRSPs, a cash-back product, or a gift. 

5. What will a lender look at when qualifying me for a mortgage?

• Most lenders look at five factors when determining whether you qualify for a mortgage: 1. Income; 2. Debts; 3. Employment History; 4. Credit history; and 5. Value of the Property you wish to purchase. One of the first things a lender will consider is how much of your total income you’ll be spending on housing. This helps the lender decide whether you can comfortably afford a house. A lender will then look at your debts, which generally include monthly house payments as well as payments on all loans, credit cards, child support, etc. A history of steady employment, usually within the same job for several years, helps you qualify. But a short history in your current job shouldn’t prevent you from getting a mortgage, as long as there have been no gaps in income over the past two years. Good credit is also very important in qualifying for a mortgage. The lender will also want to know that the house is worth the price you plan to pay. 

6. Should I go with a fixed- or variable-rate mortgage?

• The answer to this question depends on your personal risk tolerance. If, for instance, you’re a first-time homebuyer and/or you have a set budget that you can comfortably spend on your mortgage, it’s smart to lock into a fixed mortgage with predictable payments over a specific period of time. If, however, your financial situation can handle the fluctuations of a variable-rate mortgage, this may save you some money over the long run. Another option is to opt for a variable rate, but make payments based on what you would have paid if you selected a fixed rate.  

7. What credit score do I need to qualify?

• Generally speaking, you’re a prime candidate for a mortgage if your credit score is 680 and above. The higher you can get above 700 the better, as you will qualify for the lowest rates. These days almost anyone can obtain a mortgage, but the key for those with lower credit scores is the size of the down payment. If you have a sufficient down payment, you can reduce the risk to the lender providing you with the mortgage. Statistics show that default rates on mortgages decline as the down payment increases.

How does a Separation or a Divorce affect your Mortgage?

It is a very difficult time going through a separation or divorce especially if you have children.   Your home is your most valuable asset and stability for your children.  Decisions regarding possession, division of equity and liability for repayment of the mortgage loan are all tied together. Once your relationship has come to an end there are two basic options:  one, is to sell your property, split the proceeds and go your separate ways; or two, is for one of you to keep the home. 

Do you buyout your spouse and keep the house?

In a buyout the person who remains in the home refinances the mortgage and pays the other spouse his share of the equity.  A Separation Agreement may specify that one spouse make the mortgage payments, but if both spouses’ names are on the mortgage, both are liable even if the paying spouse defaults on the loan.  Also do not assume that because you transferred title to the property to the other that you have been released from your mortgage obligations.  Make sure to get a release or letter from the bank releasing you of your obligation.

The person who chooses to remain in the home can either assume the mortgage or refinance the home in their sole name.    As your mortgage professional I will find out your options on your existing mortgage as not all mortgages are assumable or if you decide to refinance I will work with you to meet the credit and income requirements to qualify you for that new mortgage.  Let me do the homework for you to find out what works best for your situation.

 Reapplying for that Mortgage

After a separation or divorce, you must provide the lender with your Separation Agreement or Order if you have one.  You may also be required to have an appraisal or valuation of your property done. You will have to prove to the lender that you are capable of covering the mortgage payments on your own, without the help of your spouse because the lender is under no obligation to remove the other from the mortgage unless you can demonstrate you can afford the payments on your own.  Even if you do qualify for a mortgage on your own you may want to consider borrowing more in order to buyout your spouse.  Spousal and child support will also impact your mortgage qualifications so you will have to consult with me, your mortgage professional, to determine your specific situation.

Get Pre-Approved

If you plan on keeping your home or purchasing a new home, get a mortgage pre-approval to see how much you can afford to spend.  It is likely you will have a good down payment for your next home if you have enough equity in your previous home and you receive funds from either the sale or a buyout.  As a mortgage professional I will analyze your situation in detail to get you the best financing that suites your needs. 

Credit Rating

A separation or divorce can get very messy.  Try to keep your credit rating as clean as possible during this difficult time.  Joint debts during your relationship are considered to be the responsibility of both parties.  Even if the other person is responsible for that debt during your separation and they miss a payment your credit rating could be affected.  Make sure any joint debts are handled in a timely fashion.  Try to close all joint accounts and credit cards.  Put a freeze on any accounts you cannot close and try to make the minimum payment in the meantime until you can transfer the joint debt to the other or pay it out.

If you do not have a credit history, it is important that you start to establish one independently of your spouse.  Begin by applying for your own credit card, even if it’s for a small amount of credit and make sure you make your minimum payment on time. I can help you with getting a credit card through our Dominion Lending Centres.  We have a variety of different cards that suites your needs.

Bad credit?  Let me work with you to help you improve your credit score before applying for a mortgage. 

Connect with me, my service is absolutely free (250) 218-2184 cell or agaudet@dominionlending.ca.