Here is my handout that I give to first-time home buyers when I hold gatherings for first-time home buyers in Ottawa.
I hope this helps and of course if you have any questions, email me at nick@mortgageinottawa.com or call me at 613-294-4475.
What is a mortgage agent? How am I different from banks?
– I work for you for free, dedicated only to help you with financing with the biggest purchase so far in your life. I used to work for banks until I learned their practices. I make the process so much easier (quick responses 7 days a week, easy transfer of documents (online) rather then many trips to bank, search for the best product that meets your needs, best after service question answering, annual checkups)
– Who I work with (Which Lenders and Why)
The importance of getting pre-approved before searching for your first home:
– Makes sure you do not get excited about the house but then financing falls through
– I do a much more thorough pre-approval for this reason( make sure documents are verified, employment works (part-time, probationary periods)
– What are the different down payments (RRSP, Savings, Gifts)
– Factors that could effect the pre-approval (Credit Check, Employment tenure, House too expensive vs income)
– Make sure that if you do use CMHC, that you know about the 1.5% of the cost of home on top of the regular down payment.
My process
– Making sure there is a clear budget set keeping in mind of Courtesy loan to pay for the home’s initial or monthly payment stands among the essential steps among all. Secondly is coming up with the “all-in” monthly amount that would allow you to live comfortably. There is nothing worse than being tied down to a home, which is why make sure to opt for long term loans from reputed sites with verified lenders like https://www.citrusloans.co.uk/long-term-loan/, using which you can keep your dream house under your name and slowly pay off the loan.
– Understanding everything you are getting into. Going from renting there are so many extra costs, and even if you use Investors Choice Lending of Boston or another structured lending office, there’s a lot of new fees/problems to handle such as (CMHC fees (1-2.75% based on the Loan to Value of the House), the HST at time of closing, closing costs, condo fees, maintenance fees, heating, property tax, appraisals).
–Make sure you know your insurance options (CMHC Mortgage Default insurance is different then life and critical illness insurance)
After pre-approval complete, what happens?
– You work with your realtor until there is a firm sale then I get the MLS and condition waived purchase and sale agreement.
– I make sure we still have best rate with best lender for you
– I then collect any documents I haven’t received yet (3 month down payment confirmations, any updated employment information, lawyer information)
– We then meet again to go over the commitment (the final document), sign it and I answer any final questions you may have
– It then goes to your lawyer
Hypothetical Situation
$250,000 condo, $200/month condo fees, $2500 annual property taxes, 50$/month Heating, 5% downpayment, 25 year amortization (Length of time to pay off home at present mortgage rate), 2.89% 5 year mortgage (current rate as of today). What would monthly cost be?
1. There would be CMHC fees as it is under 20% down payment, the fee would be 2.75% or $6531.25 which is added to the mortgage bringing a total mortgage of $244,031.25. PST(8% in Ontario) on the CMHC fee will have to be added to the closing costs at the end that you pay the lawyer ($522.50)
2. This brings the montly total of the mortgage payment to $1141.14, plus condo fees of $200.00, Heating of $50.00, and property taxes of $208.33 (must be payable to the lender) Therefore the monthly total would be $1599.47.
3. Bi-weekly would be $526.34 for the mortgage payment, accelerated bi-weekly means that you essentially make one month of mortgage payment per year and it greatly reduces the amount of interest that you end up paying the lender. For example, you take the monthly cost of $1141.14 divide it by 2 and that is your bi weekly payment, you make 26 of them rather then the 24. In this case it would be $570.57 and if you can spare the extra 43$ a month, makes us for huge savings.
An example of the TDS (Total Debt Service Ratio)
It is a percentage of your monthly gross income divided into your total monthly debt service. It is calculated by dividing your gross monthly income into your monthly housing expenses plus all other debt service, including car payments, student loans and credit cards. Most lenders do not want it to exceed 40-44%.
Borrower A has gross income of $6,000, and the following other expenses:
$1,300 Housing costs (mortgage principal and interests, 50% of condo fees taxes and heating costs)
$ 100 Credit card monthly payment
$ 300 Auto loan payment
$ 100 Student loan payment
This equals a total debt service of $1,800. Dividing the total debt service by gross income gives the borrower a TDS ratio of .3. With other factors being favorable, the borrower should be able to qualify for Home Mortgage Services and if necessary, for private mortgage insurance through the CMHC.
The TDS ratio is a useful tool to not only determine whether the borrower may qualify for a mortgage, but how much of a mortgage the borrower can obtain. To do so, the borrower can simply multiply their gross income by .4 and then deduct the non housing related debt. In the example above, the borrower’s target total debt service should be no more than $2400. ($6000 * .40) Since the borrower has $500 per month in other debt service, the borrower should seek a mortgage with housing costs not exceeding $1900 per month, in that case, the home loan purchases in boise id would be the best option.
Hope this helps! Please share with family and friends!
