10 Things to Consider Before Buying a House
10 Things to Consider Before Buying a House Like every decision you make to
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A Good Credit Score:Â You will generally need a 650 to 720 Credit score or above. Any co-borrowers, on your mortgage application, will also need good credit. Like anything else, there are exceptions to this. But the more exceptions you require, the lower your chances of getting the best rate.
 Employment Tenure: If you just started your job, you may not qualify with some of the mortgage lenders. Many mortgage lenders prefer to see at least a one-year job history if you’re salaried.
Clean Credit:Â Lenders want to see no derogatory items on your credit report. You want to make sure that no missed mortgage payments show on your credit report as lenders will not be comfortable lending at the best mortgage rates if this is an issue on your credit report. Also one missed payment in three years might be okay; five missed payments are not, especially if they went to collections.
Provable Income: A lender will usually ask you to prove your full income with tax documents and/or employer pay stubs. This is important you make think your income is fine, but you will need a two-year history of any bonus income, commissions, tips income or part-time income in order to be able to use it as part of your mortgage application.Â
Reasonable Debt Ratios: If your monthly housing and payment obligations are more than 44% of your gross monthly income, you’ll seldom get the best rates. It is important to note that, your monthly housing costs (mortgage payment, property taxes, heat, and half your condo fees) cannot be more than 39% of your gross monthly income. That 39% limit usualy requires a 680+ credit score.
To qualify for the lowest mortgage rates, you’ll have to pass the federal government’s mortgage stress test. All that means is that the lender will calculate your debt ratios using an inflated interest rate. If the lender is offering you a 3.25% rate, for example, it might stress test you to see if you can afford payments at a 5.25% rate.
Insured mortgages, often referred to as “High Ratio” with a downpayment of less than 20%, usually have the lowest mortgage rates. These mortgages are called high-ratio mortgages, are generally insured by the CMHC or a private mortgage insurer. Due to the lower risk, the insurance protects lenders and is willing to offer lower rates for these mortgages. However, you will have to pay CMHC insurance premiums on top of your mortgage which can more often than not cost more than your potential interest savings compared to a 20% downpayment option.
Mortgages with a downpayment of 35% or more also tend to have lower mortgage rates than a 20% downpayment mortgage. This is called risk management by the lenders; the larger downpayment gives a bigger buffer for the lenders and their risk, which lets them offer a lower mortgage rate.
Be sure to review all your options and speak to a mortgage agent to ensure you are making the best choice based on your mortgage needs.
10 Things to Consider Before Buying a House Like every decision you make to
With impending government action set to introduce a stricter stress test for uninsured
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10 Things to Consider Before Buying a House Like every decision you make to
With impending government action set to introduce a stricter stress test for uninsured
Ultimate Guide: Life Insurance for Kids in Canada Children Life insurance is a plan
Comparing mortgage rates over the past few years can be exceedingly helpful nowadays, especially
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5.40%
4.29%
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Pre-approval
Lump sum pre-payment