Frequently Asked Questions

I am self employed, what income documents do I need to get approved?2017-04-30T19:03:39+00:00

If you are self employed, depending on how to earn and report income, a lender could request these documents:

– Last two years T1 Generals and statement of business activities

– Last two financial statements

– Last two business licenses

– Incorportation documents or partnership agreements

What type of down payment options do I have?2017-04-30T19:02:48+00:00

A down payment can come from several different resources.

1. You can use your RRSP’s as a down payment.  You are required to pay them back within 15 years but you can deduct them tax free when using an RRSP as a down payment on a home as a first time home buyer.

2. Your down payment can come from your savings.  A lender would ask to see your last three months bank statements to confirm the money has been in your account for a number of months.

3. You can have your down payment gifted from a direct reletive.  A lender would require a signed gift letter and a bank statement confirming the deposit.

4. Your down payment can come from the sale of your current or previous home.  A lender would want to see a signed sale agreement and a proceeds of sale statement as well as any mortgage statement to confirm what amount you have available after selling your home and paying out your existing mortgage.

How much will I have to pay for closing costs?2017-04-30T17:21:39+00:00

As a general rule of thumb, it’s recommended that you put aside at least 1.5% of the purchase price (in addition to the down payment) strictly to cover closing costs.

There are several items you should budget for when it comes to closing costs. Property Transfer Tax is charged whenever a property is purchased, unless you are a first time home buyer. The tax will vary from jurisdiction to jurisdiction, but your Mortgage Broker can help with the calculation. GST/HST is only charged on new homes, and does not affect homes priced at less than $400,000. Even homes that exceed the price threshold are only taxed on the portion that exceeds $400,000. Certain conditions may apply.

Please contact you lawyer/notary for more detailed information. Your lawyer/notary will charge you a fee for drawing up the mortgage and conveyance of title. The amount of the fee will depend on the individual that you use. The typical cost is $900. If you’re purchasing a single-family home, you’ll need to give your lender a survey certificate showing where the property sits within the property lines. Some exceptions are made, however, on low loan-to-value deals and acreage properties. A survey will cost approximately $300-$350, but the lender will often accept a copy of an existing survey. Other costs include such things as an appraisal fee (approximately $200), title insurance and a home inspection (approximately $350).

Should I go with a fixed- or variable-rate mortgage?2017-04-30T17:20:57+00:00

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. Finally, there are also 50/50 mortgage options that enable you to split your mortgage into both fixed and variable portions. Talk to your Mortgage Broker about more specific details regarding the best option for your needs.

What will a lender look at when qualifying me for a mortgage?2017-04-30T17:20:05+00:00

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.

What amortization will work best for me?2017-04-30T17:18:58+00:00

While the lending industry’s benchmark amortization period is 25 years, and this is the standard that is used by lenders when discussing mortgage offers, and usually the basis for mortgage calculators and payment tables, shorter or longer time frames are available – to a maximum of 30 years. The main reason to opt for a shorter amortization period is that you’ll become mortgage-free sooner. And since you’re agreeing to pay off your mortgage in a shorter period of time, the interest you pay over the life of the mortgage is, therefore, greatly reduced. A shorter amortization also affords you the luxury of building up equity in your home sooner.

Equity is the difference between any outstanding mortgage on your home and its market value. While it pays to opt for a shorter amortization period, other considerations must be made before selecting your amortization. Because you’re reducing the actual number of mortgage payments you make to pay off your mortgage, your regular payments will be higher. So if your income is irregular because you’re paid commission or if you’re buying a home for the first time and will be carrying a large mortgage, a shorter amortization period that increases your regular payment amount and ties up your cash flow may not be the best option for you.

What are pre-payment privileges?2017-04-30T17:18:01+00:00

Most lenders offer pre-payments privileges, which allow you to put money down to your principle mortgage amount and pay out your mortgage sooner. The amount of pre-payment every year varies from 10% to 25% of the original mortgage amount depending on the lender. You can also double up your regular mortgage payments.

I’ve been dealing with my bank for years now, will I get the lowest rate from them?2017-04-30T17:17:14+00:00

You might receive the lowest rate your ‘bank can offer’ to it’s loyal customers but unfortunately this does not mean that this will be the lowest rate available in Canada . Typically, your bank will offer a mortgage broker an even a lower rate because we do many mortgages and are competitive with our rates. So before you sign your bank’s rate offer, give your Mortgage Broker a call just to see if we can get you a better mortgage to suit your needs. The reality is your bank is here to make money, even on its preferred customers and they always try and sell you a higher mortgage. We give you our best mortgage the first time, no games.

How do lenders look at my unsecured credit card and line of credit limits, balances and payments?2017-04-30T17:14:21+00:00

As a Mortgage Brokerage, we have seen a lot of changes in this regard as of late. In most cases, we can ignore 0 balances on available credit and use just the balance on the credit card or line of credit when qualifying. Many financial institutions, on the other hand, often have to take into account all available credit, regardless of whether it’s being used.

Another big change we’re seeing a lot of lenders making is using a 3% payment on the balance you carry, which can greatly affect the amount for which you can qualify. We still have a few lenders who’ll use minimum payments on credit cards and lines of credit, although these lenders are getting to be few and far between. Contact one of our fully licenced and trained Independent Mortgage Brokers today to find out what you may qualify for without all the imaginary payments a lender may include in your home purchase or refinance picture!

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