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Mortgage FAQs |
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Q.Why use a mortgage consultant? Q.How much does it cost? Q.Should I wait for my mortgage to mature before I consider renewal? Q.What is mortgage loan insurance? Q.What is a conventional mortgage? Q.What is a high-ratio mortgage? Q. What can I use for a down payment? Q. What is the minimum down payment needed to buy a home? Q. What determines how much I can borrow? Q. How does bankruptcy affect my ability to qualify for a mortgage? Q.What do I need to bring to my initial consultation? Q.What documents will the lenders require to approve my mortgage? Question not here? Email me!
Q. Why use a mortgage consultant as opposed to a bank? A. When dealing with a bank, you are limited to their product line and their rates, which may not be the best product for you. But they won't tell you that, because it's their job to sell you their products. As well, the bank has to look out for their bottom line and at times clients suffer by getting much higher rates than they deserve. When dealing with a mortgage consultant, it's much different - I can provide you with a much wider range of mortgage products designed to fit your needs, and you can benefit from all the lowest rates, all without haggling. You can also rest assured that I will be looking out for your best interests - that means convenient access, expert advice and NO FEES oac, o&oe for the service - the bank pays my fees, so there is almost always no broker costs for you! Q. How much does it cost? A. In most instances, as long as you qualify, the bank pays my fees...that means no fees for you! However, If you cannot qualify due to issues with credit score, job instability or weak income, there is more work involved so a brokerage fee will be required. All fees will always be disclosed to you prior to proceeding. There is never a cost for an initial consultation. Q.Should I wait for my mortgage to mature before I consider renewal? A. Second opinions should be considered at all times! Allow me to review your current mortgage to see if you can save by renewing immediatley. As well, it is smart to begin shopping around for best interest rates at least 120 days before your mortgage matures. This is because most lenders will guarantee their interest rate up to 120 days. As well, many lenders will allow you to repay your mortgage 90 days early without penalty...this can add up to huge savings for you. Securing a great rate eliminates any worries when rates start to rise and if rates drop before the actual maturity date, the lender will adjust your interest rate to the lowest rates have been since the application was submitted, its called a "look back guarantee". Trust me, your bank will not be doing this for you, so allow me to save you money. Q. What is mortgage loan insurance? A. Mortgage loan insurance is provided by Canada Mortgage and Housing Corporation (CMHC), Genworth or AIG United. This insurance protects the lender in case the borrower defaults. This insurance is required by law for loans obtained with less than a 20% downpayment, but can be required by lenders for larger downpayments as well. The insurance premiums, ranging from .50% to 6.4% are paid by the borrower and are added to the mortgage amount. This is not the same as mortgage life insurance. Q. What is a conventional mortgage? A. A conventional mortgage is usually one where the down payment is equal to 20% or more of the purchase price; a loan to value of less than 80%; and does not normally require mortgage insurance. Q. What is a high-ratio mortgage? A. A high-ratio mortgage is one where the downpayment is less than 20% of the purchase price or appraised value. High-ratio mortgages require mortgage loan insurance mortgage insurance. Q. What can I use for a down payment? A. Most common:
Q. What is the minimum down payment needed to buy a home? A. 6.5%. A minimum down payment of 5% plus 1.5% for closing costs is usually required to purchase a home, but there are exceptions. For instance, through Mortgage Intelligence I have access with several lenders that will actually lend you 100% of the purchase price or the appraised value. However to qualify for this, your credit score must be over 650 and you cannot have a negative networth. Regardless of the down payment chosen, you must be able to show that you have 1.5% of the purchase price available to cover closing costs (Legal fees, appraisal fees, survey certificate, etc). Q.What determines how much I can borrow to buy a home? A. 2 methods: i. Most lenders will allow you to use 44% of your income towards debt and housing costs. So take your gross yearly income, divide by 12, then multiple by 40%. This figure will show you the maximum you can "debt service". $48000 per year is $4000 per month. 40% of $4000 is $1600. So that means all mortgage payments, credit card, line of credit and car payment plus city taxes, 1/2 strata fees must be less than $1600. ii. Take your available downpayment and divide by 6.5% (downpayment plus closing costs). This will show you the maximum house purchase your availabel cash will allow you to buy. $15000 in the bank, divided by .065 is $230770. Your credit score will have an effect on the percent lenders will allow you to debt service. This can range from 32% to the 44% you see above. Q. How does bankruptcy affect my ability to qualify for a mortgage? A. The simplest answer - you will need 24 months of re-established credit, no late/ missed payments in that period and a minimum $2500 in total credit limit. To re-establish credit, you may need to access a secured credit card through your bank for 6 months, then apply for a Canadian Tire Card or gas company card like Esso. Re-establishing credit after a bankruptcy can be a long road, so be patient. Q. What do I need to bring to my initial consultation? A.Just bring yourself! However, it is helpful if you bring a job letter, recent paystub, last year's NOA from Revenue Canada, the BC Assessment for any properties you own and any other documents yuo think may be helpful. Q.What documents will the lenders require to approve my mortgage? A. Basically, the documents serve to prove the information provided on the application. So, we will be asked to show documented proof of whatever we list on the application. Below is a list of the most commonly requested documents:
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