Buying a house is a real pain in the neck. Even for the most seasoned buyer - it's nearly impossible to be completely prepared for the journey...something ALWAYS comes up...and just when you think you have overcome every objection and provided every piece of paper possible...you find out "more information is required". It's frustrating and tiresome. So, how can someone prepare for the Joy's (HAHAHAHAHA...that's funny for so many reasons!) of becoming a homeowner?
While it's far from a complete recipe...here is a gentle nudge in the right direction. Keep in mind as you read this...this information is coming from a guy who has bought and sold numerous homes and has nearly a decade of being on the front line of the Mortgage process. While it seems a little "sharp" to read...it's probably close to the best information you can get. No sugar added - just 100% pure, unadulterated, FACT!
STEP ONE: Know what you can afford for a monthly payment...it's not what you think!
Just because you pay rent for $1200.00/month and are accustomed to it...doesn't mean that's what you can QUALIFY for based on the rules that exist...of which there are plenty! I can't stress this enough. Before you do anything else - sit down with a calculator and figure this out. Its actually not that hard. I will do my best to make it clear.
• Take your Gross (this is the number before deductions) MONTHLY income and multiply it by 42% - this gives you the MOST outstanding debt you can have that includes your mortgage, property taxes, condo fees, heat, credit cards, loans, lines of credit, etc. This is referred to as the Total Debt Service Ratio. An example will follow - stay tuned.
• Take your Gross ANNUAL MONTHLY income and multiply it by 32%...this will let you know the most you have to spend on HOUSING COSTS...Mortgage, Property Taxes, Condo Fees, Heat. This is called the Gross Debt Service Ratio.
Example: Gross Monthly Income: $5000.00 ($60,000.00 ANNUAL Earnings).
• TDS: $5000.00X42% = $2100.00
• GDS: $5000.00X32% = $1600.00 (This number may be revised based on other Credit Debt)
• Assume the following: $150.00/month for Property Taxes and $75.00/month for Heat.
• Assume the following DEBTS: Car Loan $320.00/month, Master Card at $90.00/month, and a Student Loan with $180.00/month payments.
Based on this scenario - the most this situation would permit for a Mortgage is based on the credit subtractions from the TDS...which will then marginally adjust the GDS. So take the $2100.00 and subtract all the credit items (2100.00 - 320.00 - 90.00 - 180.00 = $1510.00 Revised GDS). Now to figure out the mortgage (referred to as Principal and Interest) you have to take the Revised GDS and subtract the Property Taxes and the Heat costs (1510.00 - 150.00 - 75.00 = $1285.00 Principle/Interest MAX Payment).
That's anywhere from a $275,000.00 to $300,000.00 Mortgage Amount.
Of course there are some variables we still have to take in to account...such as size of down payment and whether or not we need the good folks at CMHC.
STEP TWO: Have the BASIC information at hand when applying for a Mortgage.
The most common documents are rather simple:
• A Letter of Employment that confirms your position, start date, annual earnings, work probation status, etc. Of course this letter should be on Company Letterhead and of course should be signed and dated by someone who can VERBALLY verify the contents of it should the lender call to confirm the details.
• A Pay Stub or two is also good to have on hand...preferably as current as possible up to 30 days old.
• Additionally - a VOID Cheque or Pre-Authorised Payment Form from the account you want to have your mortgage payments come from is also going to be required.
• A Solicitor accompanied by the Contact information is also good to have - don't worry, if you don't have one...most Brokers have multiple contacts for you to draw on.
Of course if you are Self Employed, or you make a ton of overtime or are commissioned based...there will be some other items requested in order to prove your income - best to actually speak to your broker to be totally sure what you need...doesn't hurt to call ahead. Be prepared with 2 most recent tax years (T1 Generals and NOA's)....it's lines 150 and 236 that we want to see!
STEP THREE: Realize that a Mortgage is a big deal...and must be treated as such.
In a world of microwave dinners and self serve checkout lanes built for your "convenience"...understand that your mortgage should not be treated in this fashion. If you want it done right - you want it done by the right person...a full time PROFESSIONAL. True, we can be mobile...but only to a certain degree...once we leave our office, we potentially leave a lot of our proverbial tools behind. We aren't plumbers...but hey for the amount a plumber charges for a service call, maybe we ought to be! And hiring a "Part Time" broker is probably the most detrimental decision you could make...when a problem arises, and that is entirely plausible, your broker better not be a stay at home mom cleaning up lego, or unavailable to you because they are working at their other job! It makes sense that your broker is available when it counts! Simply put - take the time to meet with your broker...if that means you have to schedule an appointment after work or you have to take time off work - it's important to understand that your Mortgage process is not the same as a Drive Thru. Quite honestly, you put yourself at risk by having a stranger over to your home...and more importantly the job is not likely to be done right the first time. While many people SELL themselves as professionals, and they may have plenty of education and know how behind them...you may get more than you bargained for...like really bad advice from truly unqualified people.
At FOCUS Mortgage Solutions - it's all about YOU! It's certainly not about us - because quite frankly we wouldn't be here if not for you. We are pleased that we have a large client base with over a 60% retention rate...and we hope you will be one of them!
Our service is Free - and we love what we do! We have the lowest rates in the country that the banks only dream they could offer...but we aren't in the sharing mood when it comes to them. There is a funny saying out there...how does it go againjQuery15203564789609444766_1336494858003 Oh yeah, "Give a man a gun and he can rob a bank. Give a man a bank and he can rob everyone!"
check out the TRUSTED Regina Mortgage brokers ...they are your REGINA MORTGAGE EXPERTS!