FAQ's

  

Q: What's my first step in getting a mortgage?
A: If you are serious about buying a home but are still in the looking stages, getting pre-approved is the first step. You will be required to fill out an application outlining your address, income and sources of income, length of employment, personal details, assets and liabilities. Once collected I will submit this information to a lender for approval. If approved, the lender will provide a "Rate Hold" which will outline your budget and state the interest rate to be paid on the loan and the length of time this rate will be guaranteed for (usually 90-120 days). It will also outline the conditions that will need to be met before the loan is advanced.

Q: What's Next?
A: At a later date, once you have found the home of your dreams and have an accepted offer, you will be required to substantiate all the details you provided on your pre-approval. Some examples would be proving the following: Income verification with employment letters, T4's and pay stubs, sources of down payments with bank statements, RRSP statements, gift letters (if money is gifted for the down payment), and that taxes are in order with Notices of Assessments. These are just the most common items that would require supporting documentation. All claims on the pre-approval would require some kind of documentation to support it.

Q: What is important to a successful approval?
A: You are measured on the 5 C's of credit:
Capacity - Borrower's cash flow/ability to pay
Collateral - Lending value and marketability of the security
Credit-Worthiness - Client's willingness to pay - based on how you've paid debt in the past.
Character - Financial maturity of the borrower
Capital - Financial reserves

Lenders will follow a set of industry guidelines. Ultimately the final decision will be left to the discretion of the underwriter.

Important - It is very important to be extremely accurate with the details on ones pre-approval. If any numbers are off, the discrepancies will eventually be discovered prior to funding and may result in the loan not funding.

Q: How does my credit history affect my chances of securing a mortgage?
A: A credit score is a rating given to the applicant by the credit bureau using credit history and repayment behavior information available to the credit bureau. Numerical weights are placed on different aspects of the credit report and a mathematical formula is used to arrive at a final score. This score is called a Beacon or Credit score. This score plays a large role in securing a mortgage.

Credit history will specifically record activity in bank loans, credit cards, lines of credit, collection agency activity, legal judgments, and bankruptcies during the past seven years. Each of these items will be rated by the Credit Bureau between one and nine where one (1) represents the best kind of rating, and nine (9) represents a bad debt.

Q: Do the qualifications for rental properties differ from principle residences?
A: Yes. Generally a larger down payment is required on rental properties. Depending on ones financial profile, the down payment may be 25% upwards. Usually around 35% can be expected.

Q: If I'm self employed and have limited NET income but solid net worth, how can I secure a loan?
A: In this situation, lenders will loan money without requiring proof of income if the purchaser can provide a larger down payment. Usually a down payment between 35%-50% would be required. A Notice of Assessment would also be required to prove that taxes are in order.

Q. How do you use your RRSPs for a Down Payment?
A. The federal government offers a tax-free withdrawal from a Registered Retirement Savings Plan (RRSP) as a down payment for first-time home buyers. There are specific guidelines for the buyer(s) to follow to qualify for this program:
1. Meet Canada Mortgage and Housing Corporation (CMHC) First-Home Buyer Program Definitions;
2. Each buyer may use up to $20,000 from their RRSP for down payment;
3. Revenue Canada defines this withdrawal as a loan to the buyer to be repaid in equal amounts within 15 years.
4. If less than 1/15th is repaid in one year, the difference from the amount paid and the 1/15th amount will be calculated as income and taxed.
5. The new property must be your principal residence and located in Canada .
6. A T1036 application is required to be completed, and taken to the institution that holds your RRSP. They will issue you a "Redemption Form" showing the amount to be withdrawn. The solicitor will require that you bring these funds with you when you meet so s/he can apply them towards your down payment.
7. This Program may be used with CMHC's First-Home Buyer's Program (5% down payment).

Disclaimer: The information on this website is intended to be as accurate and current as possible; however, readers should always consult with their lawyer to ensure there have been no recent legal modifications.

If you have any questions, please don't hesitate to call.