Ok, ok, ok. We all know that the mortgage rules have changed again.
It was well covered by the media and so we are not going to go into the ‘whys’ anymore. What does it mean for you going forward? Today we will look at what you need to do to set yourself up to be offered the best mortgage terms possible and maximize your purchasing power so that you can buy the home of your dreams.
The rule changes are going to require all Canadians to pause and reflect upon decisions in regard to their long term goals.
Gone are the days of buy now pay later as an inconsequential decision in your overall financial picture. Let’s examine four areas that we all need to keep in mind because you may rest assured that the people who are approving your mortgage application sure as heck are.
Savings – it will come as no surprise that you need to save money.
When it comes to the mortgage process the banks and the mortgage insurers really want to see that you have some savings for the down payment, the closing costs and furthermore we now hear that they want to know you have a fallback position.
The minimum down payment is 5% and the also need to see that you have 1.5% of the purchase price for the closing costs of the mortgage transaction.
On top of that they want to see that you have additional savings in case of a job loss or health issue.
Credit management. Each month your mortgage, credit card, line of credit, vehicle, cell phone, student loan and all other credit companies report on you to the two credit agencies in Canada namely Equifax and Transunion.
From this information you are given a credit score based on if your credit cards are maxed out, paid late, if you have too much available credit or if you have taken on a large vehicle loan obligation.
When it comes to your mortgage and your purchasing ability your credit is examined carefully. If you have too much outstanding debt, then you will not be able to purchase as much of a home.
If you cannot manage to pay your bills on time, they are rightfully concerned that you will not pay your mortgage. Pay your credit cards off as quickly as possible.
Carefully consider that new vehicle purchase if home ownership is one of your goals. And remember that two is the magic number when it comes to credit. You need to have two types of credit reporting on your credit bureau for two years to satisfy the minimum requirements of the mainstream lenders
Income stability. Not all income is created equal when it comes to qualifying for a mortgage. Two is the magic number here as well.
If you are self-employed, paid bonuses or overtime, receive shift differential or work seasonally then until you have two years verification of this income it will not be considered as verifiable for the mortgage qualification.
For those of you who are self-employed keep in mind that you may avoid paying taxes by writing your income as low as possible but the mainstream banks with their very low rates may not be offered to you.
If you are considering a change in position, know that if you want to purchase or refinance then you may be best served to hold off a bit until your mortgage is funded.
Knowledge. ‘I didn’t know’ just doesn’t cut it anymore. You are responsible for your choices and the banks are coming down harder than ever before when deciding if you should be offered a mortgage.
The Internet is full of information about all things financial. Well qualified mortgage professionals can be easily contacted to answer your questions before you make any decisions which could prevent you from buying.
So, save your money, keep your debts low and take the time to research how a decision now about a new vehicle or new job could negatively impact you down the road so that you are not adversely impacted.
Pam Pikkert is a mortgage broker with Mortgage Alliance – Regional Mortgage Group in Red Deer.