Things Your Mortgage Professional Wants Everybody to Know
There have been so many changes to the mortgage universe and the whole thing can be really confusing so let’s take a look at the some of the core things that mortgage professionals want you to know.
- You can buy your next home with as little as 5% down if you are willing to pay the mortgage default premiums again.
- We can only refinance a home up to 80% of its appraised value.
- You can use a gift, borrowed funds, savings of nearly any sort, sale of an asset to provide the down payment on a home
- All mortgages with less than 20% down must qualify at a rate of 4.64%, as of today, though the rate you will actually be given is lower. That is to ensure you can afford the mortgage payments when rates go up.
- The magic number is 2 as far as credit is concerned. You need to have 2 types of credit for 2 years with a minimum limit of $2000 to show that you can manage your credit well and be offered the best rates.
- Fallback is the new black. Gone are the days where they just need to know you have the 5% down plus the 1.5% for the closing costs. The lenders all want to know you have a cushion of savings for unexpected life events.
- The onus is on you to choose the best mortgage and they are not all created equal. Portability, prepayment privileges and penalties are a few things to compare. If you sign a mortgage then make sure you understand the specifics as compared to other mortgages. Penalties vary greatly lender to lender and not knowing is not going to get you out of a large penalty.
- If you are offered a $13,000 line of credit and a $54,000 car loan and you accept, you cannot later blame them for ‘letting’ you get yourself into trouble. A large credit balance and a high vehicle payment will dramatically affect your ability to purchase a home. That $13,000 line of credit or a $400/month vehicle payment will each decrease your purchasing power by $100,000.
- Cell phones report on the credit bureau as do mortgages, lines of credit, student loans, and installment loans like a vehicle payment. To keep your credit strong, make sure you make your payments on time, don’t exceed 50% of the available limit and have at least one credit card to give the lenders a full idea of your ability to manage credit.
- Disability is the number one reason for mortgage default in Canada. Budget for a good disability policy and maybe a job loss policy as well to protect your home. Going through a third-party provider beyond your bank is a good idea so that you don’t end up tied to your bank forever.
As always, a mortgage professional is your best bet to ensuring you have the best mortgage and they are a friendly bunch so feel free to ask your questions.