There have been so many changes to the mortgage universe and the whole thing can be really confusing so let’s take a look at the some of the core things that mortgage professionals want you to know.
1. You can buy your next home with as little as 5% down if you are willing to pay the mortgage default premiums again.
2. We can only refinance a home up to 80% of its appraised value.
3. You can use a gift, borrowed funds, savings of nearly any sort, sale of an asset to provide the down payment on a home.
4. All mortgages with less than 20% down must qualify at a rate of 4.64%, as of today, though the rate you will actually be given is lower. That is to ensure you can afford the mortgage payments when rates go up.
5. The magic number is two as far as credit is concerned. You need to have two types of credit for two years with a minimum limit of $2,000 to show that you can manage your credit well and be offered the best rates.
6. Fallback is the new black. Gone are the days where they just need to know you have the 5% down plus the 1.5% for the closing costs. The lenders all want to know you have a cushion of savings for unexpected life events.
7. The onus is on you to choose the best mortgage and they are not all created equal. Portability, prepayment privileges and penalties are a few things to compare. If you sign a mortgage then make sure you understand the specifics as compared to other mortgages. Penalties vary greatly lender to lender and not knowing is not going to get you out of a large penalty.
8. If you are offered a $13,000 line of credit and a $54,000 car loan and you accept, you cannot later blame them for ‘letting’ you get yourself into trouble. A large credit balance and a high vehicle payment will dramatically affect your ability to purchase a home. That $13,000 line of credit or a $400/month vehicle payment will each decrease your purchasing power by $100,000.
9. Cell phones report on the credit bureau as do mortgages, lines of credit, student loans, and installment loans like a vehicle payment. To keep your credit strong, make sure you make your payments on time, don’t exceed 50% of the available limit and have at least one credit card to give the lenders a full idea of your ability to manage credit.
10. Disability is the number one reason for mortgage default in Canada. Budget for a good disability policy and maybe a job loss policy as well to protect your home. Going through a third-party provider beyond your bank is a good idea so that you don’t end up tied to your bank forever.
As always, a mortgage professional is your best bet to ensuring you have the best mortgage and they are a friendly bunch so feel free to ask your questions.
Pam Pikkert is a mortgage broker with Dominion Lending Centres – Regional Mortgage Group in Red Deer.