22 Feb

MINIMUM DOWN PAYMENTS

General

Posted by: Hermon Mehari

MINIMUM DOWN PAYMENTS

Are you looking for that new dream home, or anything that will get you out of your current rental property so you can officially become a homeowner?

If so, what is the minimum amount you are required to put down?

Below are three different purchase price categories. Each one has their own minimum down payment requirements and we have included some important notes to also consider at those prices.

| $1-$500,000 | Minimum 5% Down Payment |

  • The lowest amount you need as a cash down payment for a purchase up to $500,000 is only 5% of the purchase price.
  • For a $300,000 home, this would be $15,000.

| $500,001 – $999,999 | Blended Down Payment |

  • The minimum down payment if your purchase price falls in this category is 5% on the first $500,000 and 10% on the remainder up to a million dollars.
  • For a $650,000 purchase price, you would be required to put down $25,000 (5% on amount up to $500,000) and $15,000 (10% of the amount above $500,000 [$150,000 in this case]) for a total minimum down payment of $40,000. This would be a 6.15% down payment.

| $1,000,000 + | Sliding Scale |

  • 20% requirement on entire amount up to $1,250,000 and 50% down payment on amount over $1,250,000 subject to a 75% loan to value.
  • A $1,100,000 purchase price would be a minimum down payment of $220,000 (20%).
  • $1,350,000 purchase price would require $250,000 (20% on $1,250,000) plus an additional $50,000 (50% of amount above $1,250,000 [$100,000 in this case]).
  • Some lenders may make different exceptions depending on the strength of an application but, for the most part, the sliding scale information above is quite accurate.

There you have it! The three most common sized purchase prices and their required minimum down payment. Please keep in mind that almost all lenders will require you to have an additional 1.5% of the property value available in cash to cover all closing costs which may include, for example, lawyer fees, property transfer tax, and insurance.

RYAN OAKE,

5 Feb

Documents you need for your mortgage pre-approval pre-approved

General

Posted by: Hermon Mehari

 

Being fully pre-approved means that the lender has agreed to have you as a client (you have a pre-approval certificate) and the mortgage broker has reviewed and approved ALL your income and down payment documents (as listed below) prior to you going house hunting. Many bankers will say you’re approved; you go out shopping and then they  say ‘sorry you not approved’ due to some factor. Get a pre-approval in writing!
Excited! Of course. You are venturing into your first or possibly your next biggest loan application and investment of your life.

What documents are required to APPROVE your mortgage?
Being prepared with the RIGHT DOCUMENTS when you want to qualify for your mortgage is HUGE; just like applying for a job or going for a job interview. Come prepared or don’t get hired (or in this case, declined).
I assist all my clients along the way to ensure any questions are asked and YOU are prepared UPFRONT and fully PRE-APPROVED before you go house hunting.
No stress, no running around, no surprises.

Why is this important?
You can have a leg up against the competition when buying your dream home as you can have a very short timeline (ie: 1 day to confirm vs 5-7 days) for “financing subjects”.
Think? You’re the seller and you know the buyer doesn’t have to run around finding financing and the deal may fall apart. This is the #1 reason deals DO fall apart. You will likely get the home over someone who isn’t fully approved and has to have financing subjects. The home is yours and nobody’s time is wasted.
If you just walked into the bank, filled an application and gave little or no documents, and got a rate – you have a RATEHOLD. This is NOT a pre-approval. This guarantees nothing and you will be super stressed out when you put an offer in, have 5-7 days to remove financing subjects and you need to get any or all of the below documents. That’s not fun is it? Use a Dominion Lending Centres mortgage broker ALWAYS. We don’t cost you anything!
When you get a full pre-approval, you as a person(s) are approved; ie: the broker did their work of reviewing (takes a few days) to call your employer, review your documents, etc. All we have to do is get the property approved, which takes a day or two. Much less stress, fastest approval…faster into your home!

Here is exactly the documents you need MUST have (there is NO negotiation on these) to get your mortgage approved with ease. Keyword here is EASE. Banks/Lenders have to adhere to rules, audit files and if you don’t have any of these or haven’t been requested to supply them…a big FLAG that your mortgage approval might be in jeopardy and you will be running around like a crazy person two days before your financing subject removal.
Read carefully and note the details of each requirement to prevent you from pulling your hair out later.
Here is the list for the “average” T4 full-time working person with 5-15% as their down payment (there is more for self-employed, and part-time noted below):

  1. Are you a Full-time Employee?
    Last 2 paystubs: must show all tax deductions, name of company and have your name on it.
  2. Any other income? Child Support, Long Term Disability, EI, Foster Care, part-time income? Bring anything that supports it. NOTE: if you are divorced/separated and paying support, bring your finalized separation/divorce agreement. With some lenders, we can request a statutory declaration from lawyer.
  3. Notice of Assessment from Canada Revenue for the previous tax filed year. Can’t find it? you can request it from Rev Can to send it to you by mail (give 4-6 weeks for it though) or get it online from your CRA online Account.
  4. T4’s for your previous 2 years.
  5. 90 day history of bank statement showing the money you are using to put down on your purchase.
    Why 90 days? Unless you can prove you got the money either a sale of a house, car or other immediate forms of money (receipt required)…saved money takes time and the rules from the banks/government is 90 days. They just want to make sure you aren’t a drug dealer, borrowed the money and put it in your account or other fraud issues. OWN SOURCES = 90 days. BORROWED is fine, but must be disclosed. GIFT is when mom/dad give you money. Once you have an approval for “own sources” you can’t decide to change your mind and do gifted or borrowed. That’s a whole new approval.

Down Payments
Own Sources: For example “own sources” include if you are a first time buyer and your money is in RRSP’s then, have your last quarterly statement for the RRSP money. If your money is in three different savings account, you need to print off three months history with the beginning balance and end balance as of current. The account statements MUST have your NAME ON IT or it could be anyone’s account. I see this all the time. If it doesn’t print out with your name, print the summary page of your accounts. This usually has your name on it, list of your accounts and balances. Just think, the bank needs to see YOU have X$ in your (not your mom’s or grandparents) account.

GIFT: If mom/dad/grandparents are giving you money…then the bank needs to know this as the mortgage is submitted differently (this is called a GIFT).

If you are PART-TIME employee? All of the above, except you will need to bring three years of Notice of Assessments. You need to be working for two years in the same job to use part-time income. You can have your Full-time job and have another part-time gig… you can use that income too (as long as it’s been two years).

If you are Self Employed?

  1. two years of your T1 Generals with Statement of Business Activities
  2. Statement of Business Activities.
  3. 3 years of CRA Notice of Assessments
  4. If incorporated: your incorporation license, articles of incorporation
  5. 90 day history of bank statement showing the money you are using to put down on your purchase.

KIKI BERG

5 Feb

Why can’t you port your mortgage?

General

Posted by: Hermon Mehari

 

 

Policies are always changing, and when you port a mortgage, a FULL application must be approved and completely underwritten with full, credit, income, property and policy review.
It’s a mistake to believe that just because you already had a mortgage, you will easily get a new one. Policies and rates are changing rapidly and you need a strategy to stay informed. SO BEFORE you consider a move, understand the worst case scenario of what you qualify for without porting your mortgage so you avoid disappointment of falling into the 70% of people that don’t end up porting. Mortgages can be made simple, when you are empowered with relevant information relating to the current market and your life stage. Depending on those factors, you might be happy to get rid of your old mortgage and get in with the new! We have a mortgage for that, and can help. On average less than 3% of mortgages are portable.
Let me list a few of the reasons why
1. Dates– most lenders have a different policy on the dates that will allow to port the mortgage; it can be weeks or months. Your closing date will determine that.
2. Amortization– porting a mortgage means you port the same amortization, so if you are moving up the property ladder, that may mean your payments are significantly increased making it less affordable or meaning you can’t qualify with your income.
3. Amounts– some have a 10% variance limit up or down, where the penalty will trigger or it’s no longer a fit within the policy.
4. Change in credit– depending on the credit score and outside debts you have will determine if you still fit the credit profile your previous mortgage had.
5. Income– if there has been a change in your income type or amount this will also impact the options.
6. Property type– some lenders only lend on single-family homes, or a particular zoning, or don’t do private sales- even if they did when you originally got your mortgage with them.
7. Rate– maybe the change in rates either way of the product type you took doesn’t allow for a port due to one or a few of the combined factors. For example, going from insured to uninsured comes with different policies.
8. Product– maybe the product you had no longer exists for your particular profile.
9. Inspections – maybe the lender approved it initially but after your inspection just as you wanted a reduction in price, they decide they are no longer going to lend on it or decide it doesn’t fit the profile or they wont do it under that program ( instead you need a purchase plus improvements or a hold back they may or may not participate in and maybe want a different fix that you or a strata council agree on.)
10. Bridge – if you want to buy before you sell, all the above factors come into play. Maybe the original lender doesn’t allow the length of time you need, there cost to bridge is much higher, or maybe they don’t approve that portion of the loan, which puts you back at square one.

Purchasing a home is complex, with many moving parts and needs to be understood as such. When you have an experienced Dominion Lending Centres mortgage broker by your side while lots of things can come up, we can guide you through what is best for your family, which is why we encourage you to be educated, and empowered so you are ready for your next part of your ownership journey.

ANGELA CALLA