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Obtaining a Mortgage

It is always best to start working with a lender well before you start looking at homes.  Documentation will be required to obtain a mortgage pre-approval and it often takes time to gather everything you need from employers, etc.  Your banking representative will help you, or you can also contact a mobile mortgage specialist for help.  Generally speaking, a mortgage specialist will have a wider product selection to choose from and may offer more flexible terms and rates.   I have a few different specialists I can recommend who will help you get the highest mortgage possible but with payments that you are comfortable with.  This is an important process which requires thoughtful consideration.  There is nothing worse than being “house-poor” and you won’t enjoy your new home fully if you’re stressed to the max worrying about how to pay the mortgage.

Mortgage Types/Options
It is best to speak with a professional in the mortgage industry about all the options out there.  They’re changing all the time.  Don’t let 0% down fool you.  Money is always needed up front for your deposit, which is submitted with your offer.   For this, having a banking line of credit ready (or a lovely and generous family member with some extra cash to lend!) is a great comfort.

Ever hear of a 5% Down Payment?
The following is an excerpt from the Canada Mortgage and HousingCorporation website under the topic of “Mortgage Loan Insurance”:
Get into your home sooner. Mortgage Loan Insurance helps you do it. Put as little as 5% down.

When you need a mortgage loan that is more than 75% of the purchase price of your home, mortgage loan insurance is required. It protects the lender and, by law, most Canadian lending institutions require it.

Having mortgage loan insurance means that if you, the borrower; default on your mortgage, the lender is paid back by the insurer:  CMHC or a private company. With the risk of losing their money removed, lenders may then have the confidence to make mortgage loans of up to 95% of the purchase price of the home (subject to price ceilings).  This means your down payment can be as little as 5% of the house price. With mortgage loan insurance, many Canadians who might be unable to obtain a conventional 25% down payment may still be able to buy a home.

What does mortgage loan insurance cost?
There are two components: an application fee and an insurance premium.The application fee typically ranges from $75.00 to $235.00 (subject to change without notice) and mortgage loan insurance premiums range from 0.5%-3.75% of the amount of your loan (additional charges may apply), depending on the size of the loan and the value of your home. The premium can be added to your mortgage loan and paid off as part of your regular mortgage payments,or paid off in a lump sum at the time of purchase to save interest charges on the premium itself.

Where can you apply for mortgage loan insurance?
Ask your lender, who can obtain mortgage loan insurance from CMHC or a private insurer.

CMHC will insure mortgages of up to 95% of the home’s purchase price or the market value of the property, whichever is less. (Restrictions may apply).

Both new and resale homes are eligible. Here are some of the criteria that must be met:

The home must be in Canada and must be your principal residence. Housing payments, including principal, interest, property taxes & heating (P.I.T.H.), along with the annual site lease in the case of lease-hold tenure and 50% of applicable condominium fees, can’t be more than 32% of your gross household income (GDS ratio).
Your total debt load can’t be more than 40% of your gross household income (TDS ratio). Other criteria may apply and are subject to change.
A knowledgeable mortgage representative will help to put all this information into perspective for you and it won’t be so scary sounding for those of you researching this for the first time!  Right now, 3 million Canadians own homes with insured mortgages.

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