Who wants to rent?! Are you ready to make that leap from renter, to homeowner? Good call. You want a house, but need a mortgage. The first step is to find out how much you can borrow from a bank or lender. As your Mortgage Broker, I can answer this question for you, but I’ll need some information from you first. I’ll need:
- Completed Mortgage Application
- Job Letter and current pay stub
- Past two years Notice of Assessments
- Past two years T1’s
It’s best to prepare these documents before speaking with a mortgage professional, in order to make the most of your time together. Without this information, a Broker will not be able to give you exact numbers, and your mortgage options.
Listed below are some helpful pointers and tips to get you mortgage ready.
Income declaration:
Do you earn your income via commission? Lenders will want to see a 2-year average income for commission/bonus income in order to use it at all. File your Taxes each year and keep your Notice of Assessment (NOA’s) at T1’s. Your NOA is mailed to you by the CRA, and you can retrieve your T1 from your accountant or online tax service (simplyaccounting, Turbo tax, etc.)
Down Payment:
A minimum 5% of the purchase price is required for the down payment, and another 1.5% of the purchase price to cover closing costs. This CAN be gifted from an immediate family member. Note that if you put 20% down, some lenders will only request $1,000 instead of 1.5% of the purchase price.
For Ex.
$500,000 home = $25,000 minimum Down Payment, plus $7,500 for closing costs
Co-signer or Co Borrower:
A co-signer can be a parent/guardian willing to go on the mortgage contract and Title with you in order to borrow a larger amount of more funds. If you have poor credit, a Guarantor (with good credit) can go on the mortgage with you in order for you to be approved.
Budgeting – Use www.mint.com to keep track of your finances, and help you save for a down payment.
NOTE: 3% of all unsecured debt (credit cards, etc) has to be used as payment – even though in reality the monthly minimum payment is lower. To note, $10K on a credit card is equal to a $300.00 payment and nearly $75,000 less mortgage buying power. Wow!
Saving in RRSPs :
You’re able to use up to $25,000 each TAX FREE as a First Time Home Buyer on a qualifying home value. Therefore saving for a down payment via an RRSP account is very advantageous as it may generate a higher yield than having it sit in your savings or chequing account.
Check your Credit Score:
Call 1-800-465-7166 to contact Equifax Customer Inquiries
Pull your own credit bureau, identify any errors or issues and fix them now. You can always call me when you get it, we can review and I can provide some tips on how you can improve your score!
Helpful tips to increase your credit score:
- Remember to pay all bills on time, and more than the minimum payment!
- Use no more than 50% of available limit on cards – Going over 65% of your limit reduces your score – Easy tip: Pay on time and pay down debt over next few months, then call to increase your limit. This will lower your % of credit utilization immediately for free and be a positive to your credit score.
As always, I’m here to help.
-D