The Steps to HOUSE OWNERSHIP
1. Learn what your credit score is. The banks and other mortgage lenders are looking for people with credit scores of 650 for higher. Find out what your credit score.
2. If you credit score needs strengthening then here is what you need to do the fix that:
a. pay off your credit card debits
b. learn to pay bills on time
c. resolve any credit disputes or delinquencies
A stronger credit score will help you to get a lower interest rate on your mortgage.
3. Once your score is over 650 then apply to a mortgage lender to find out how much you qualify for.
Make sure it is a pre-approval not a pre-qualification. What is the difference?
Pre-qualification means the bank is estimating what you can afford and hasn't looked at all you financials. This is common mistake and can cause you to lose a home you really want.
Pre-approval means the bank has looked at your financials and is willing to give you a certain mortgage
24 hour pre-approval
4. How much down payment do you have?
Do you have 5%, 10%, 15%, 20% down payment?
Buyers with less than 20% down payment must have their mortgage insured through CMHC.
The larger the down payment the less the insurance interest rate will be.
This is added to your mortgage. You will pay tax on the insurance.
5. Find out what debt ratio is being used to qualify you for your mortgage.
28% to 36% is commonly used.
Meaning 28% of your gross income can be used for housing (mortgage, insurance, taxes,)
Then no more than 36% of your gross income can be used to pay for all other debts. This is combined with your mortgage debts.
6. How much down payment do you have?
Where is it coming from?
The money must be in the RRSP for 90 days before you can take it out. If you have a RRSP loan on the money then you can only take out the portion which has been paid back.
Some people qualify for zero down mortgages and can get a loan for the down payment.
Zero Down Mortgages
The parents must state whether this is a gift or whether they expect repayment.