Your Credit Rating: The Four C’s.

Buying your first home is an incredible step in life, but it is not without its hurdles! One of which is demonstrating that you are creditworthy, which all comes down to your credit rating. This is how lenders and credit agencies determine the interest rate you pay, or whether you will qualify for a mortgage at all.

As mortgage rules continue to change, the credit rating is becoming even more important as a higher credit rating could mean a lower interest rate and save you thousands of dollars over the life of your mortgage.

If you’ve never given much thought to your credit rating before, don’t worry! It is not too late and we are going to take through everything you need to know. The most important of which is that, in order to qualify for a home, you must have a credit rating of at least 680 for one borrower.

There are several attributes that factor into your credit score, and these are commonly referred to as the “Four C’s” and consist of: Character, Capacity, Capital and Collateral. Let’s take a closer look at each:

character

The character component of your credit score is essentially based on YOU and your personal habits, which comes down to whether or not it is in your nature to pay debts on time. Some of the components that make up this portion of your credit score viability, include:

• Whether you habitually pay your bills on time
• Whether you have any delinquent accounts
• How you use your available credit:
  • Quick Tip – Using all or most of your available credit is not advised. It is better to increase your credit limit versus utilizing more than 70% of what is available each month. For instance, if you have a limit of $1000 on your credit card, you should never go over $700.
  • If you need to increase your score faster, a good place to start is using less than 30% of your credit limit.
  • If you need to use more, pay off your credit cards early so you do not go above 30% of your credit limit.
• Your total outstanding debt

capacity

The second component relating to your credit rating is your capacity. This refers to your ability to pay back the loan and factors in your cash flow versus your debt outstanding, as well as your employment history.

• How long have you been with your current employer?
• If you are self-employed, for how long?

Don’t be confused as capacity is not what YOU think you can afford; it is what the LENDER thinks you can afford depending on the debt service ratio. This ratio is used by lenders to take your total monthly debt payments divided by your gross monthly income to determine whether or not you are able to pay back the loan.

capital

Capital is the amount of money that a borrower puts towards a potential loan. In the case of mortgages, the starting capital is your down payment. A larger contribution often results in better rates and, in some cases, better mortgage terms. For instance, a mortgage with a down payment of 20% does not require default insurance, which is an added cost.

When considering this component, it is a good idea to look at how much you have saved and where your down payment funds will be coming from. Is it a savings account? RRSPs? Or maybe it is a gift from an immediate family member.

collateral

Collateral is something that is pledged against a loan for security of repayment. In the case of auto loans, the loan is typically secured by the vehicle itself as the vehicle would be repossessed and re-sold in the event that the loan is defaulted on. In the case of mortgages, lenders typically consider the value of the property you are purchasing and other assets. They want to see a positive net worth; a negative net worth may result in being denied for a mortgage.

Overall, loans with collateral backing are typically more secure and generally result in lower interest rates and better terms.

There is no better time than now to recognize the importance of your credit score and check if you are on track with the Four C’s and your debt habits. A misstep in any one of these areas could be detrimental to your efforts of getting a mortgage.

If you are not sure or want more information, reach out to me for a FREE review!

                         How to Teach Your Kids About Money.

“You’re teaching them way too young,” joked the man next to me and my three girls at the bank machine; clearly he assumed we were taking out cash, and thought it would be funny to tease me about that. “No, man,” I teased back warmly; “I teach my girls to make deposits.” He laughed, I laughed, and then I invisibly high-fived myself for actually teaching my kids how to do just this. Because it’s a skill, isn’t it, to be confident and capable in money and its management.

And too often, the learning curve feels steep even for ourselves, let alone to share the key messages with our kids.

The thing is, that teaching our kids to use and value money for the powerful tool that it is, is one of the most empowering gifts we can give them, from even an early age. How do you do it? It’s so much easier than you think; even if you grew up with a distorted view or approach to wealth and personal finance, here are our top five teaching tools for parents and kids to learn to speak the language of money, and develop a healthy attitude towards money straight away.

“It’s not too late to start right now!”

1. ALLOWANCE IS A TEACHING TOOL

Use it. Allowance is a fantastic hands-on learning tool to teach the actual process of money management. (Don’t give your kids money for chores – chores are a part of family life, and it is an expectation that they participate in them.) Give allowance because it shows your kids how to be responsible for their own saving, spending, and sharing, and give them the wide berth to make bad decisions in spending it; better to learn the lesson that the glow in the dark Beanie Boo was a bust as a seven year old, than to realize that the car they bought at 21 was a lemon.

Get them familiar with the pattern of reserving part of their money to share with others, to cultivate a spirit of generosity, and to reserve part for saving – this is crucial in developing a pattern and attitude of “I don’t spend all my money once I get it.”

2. MONEY IS A LANGUAGE

Speak it. If you are someone who grew up with a bitter taste in your mouth about money, more than likely there were messages and feelings of shame associated with it; stop that cycle with your kids, and open up the conversation in all of the age appropriate ways. Talk about saving for the mini Golden Doodle you all want as a family pet. Talk about the $25 budget at the toy store for their friend’s birthday present. Talk about the cost difference between a dance class and the competitive dance team. And have each of these conversations in a frank and open way, not of guilt or shame, just in a way that draws attention and awareness to the fact that there is an energetic cost to everything we do.

Are you into stocks? Show them bits of your portfolio, especially the visual charts, and let them in on the secret pattern that over time, it always goes up. Each of these micro-conversations plants an essential seed that you can continue to grow over the course of your child’s lifetime.

3. THE BANK IS AN EXPERIENCE

Take them. Chances are, unless you’re keeping your cash in a jar under your bed, the bank is the hub of your personal financial transactions. Include your kids in this area of daily life: let them not only “press the buttons” at the ATM, but take them to the teller, get them familiar with the processes behind daily banking, let them count cash when it comes out, and let them fill deposit envelopes with bills and cheques. Teach them to look at the balance on the receipt and say “thank you” for what’s there.

Let them know how grateful you are to have this wonderful tool in your life that enables a whole lot of freedom, and how it got there.

4. THE IMPORTANCE OF PAYING YOUR BILLS

And pay them together. There is something deliciously analog about getting a paper bill in the mail. I kid you not, when my girls see a bill in the mailbox, they actually say “Yessss! Bills are here!” Why? Because we have carved out a ritual in which we sit together one on one and pay our bills together. Show your kids to find the vendor, the amount due, and to circle that amount and write “Paid on [date].” As they gather that info from the bill, you can enter it into your own online payment system.

Not only is this much needed and celebrated time together, but it’s another conversation about personal finance: why do we pay a hydro bill? Why is this utility bill higher in the winter? Can you imagine a world without internet – let’s happily pay that one! These conversations draw kids’ awareness to the daily happenings of life, and connect them to their own resources.

If your attitude towards bills is “man, I’m so grateful to have a house that is heated in the winter and cool in the summer, with a one click connection to anywhere the world,” suddenly the entire experience is a joy for you, too. And where there is gratitude and joy, there is the cultivation of more gratitude and joy.

5. SOME THINGS ARE WORTH THE WAIT

So wait, and teach patience and a mentality of “earned, not given.” One of the greatest parenting challenges our generation faces is exactly this: how on earth do we teach patience and process while we live in an instant, on-demand world? Well, we simply teach it.

Just because we can access something instantly doesn’t mean we should; you know from your own experience how sweet a victory it is when you buy something with your own money, or hold something in your hands you know is irreplaceable. These feelings are part of healthy brain development, and in their absence we cultivate a near constant dopamine rush of instant gratification that becomes stronger, and harder to fulfill over time. It’s ok to say “no” to things, to hold out, and to appreciate the consumption of less, not more.

Children thrive when they feel like they are a real part of our family life, and respected enough to be included. Having these grown up conversations distilled into a child friendly way shows your kids that you have confidence in their abilities to handle it, and that they are valued members of your tribe. And in the same breath, you are teaching them an incredibly valuable life skill they will continue to hone and use over the course of their lifetime.

There is a little doubt that the biggest purchase of your life will be your home. When embarking on your homeownership journey, having the right support and information will make all the difference. Fortunately, a mortgage broker can help!

With access to more than 230 lending institutions including big banks, credit unions and trust companies, mortgage brokers are experts in mortgages. These connections allow them familiarity with a vast array of available mortgage products, and also ensures that the advice they offer is unbiased. Unlike banks focused on signing you for profit reasons, a mortgage broker is a third-party service who gets paid no matter which bank they sign you with. This means they can provide the best rate AND unbiased advice because they are focused on helping you achieve your dream.

It is estimated there are nearly 20,000 mortgage professionals in Canada. With so many choices, it is important to find a mortgage broker who works best FOR you.

With so much information at your fingertips on any given broker, it is easier to help narrow down the search. Especially with tools like the Dominion Lending Centres exclusive My Mortgage Toolbox app. Available on Google Play and the iStore, My Mortgage Toolbox makes it easy for potential homeowners to find a mortgage broker nearest them!

“The idea behind My Mortgage Toolbox was to make it simple for Canadians to manage the mortgage process by putting all the information they need into the palm of their hand,” noted Gary Mauris, Founder and CEO of Dominion Lending Centres.

Some features available through this application include a variety of calculators to help clients determine:

1. What they can afford
2. The minimum down payment required
3. Closing cost estimates
4. Total monthly ownership costs

Click here to download the app today!

While online tools and apps can give you pretty good insight into a potential broker, there are a few other things you might also want to consider to help make that decision a little easier.

While it is never a bad idea to go with an established professional with an abundance of clients and years of experience, you should also open to considering newer, hungrier brokers who are striving to make their mark in the mortgage space. At a busy firm, it is easy for you to feel like a small fish in a big pond, especially with a smaller portfolio, whereas a smaller brokerage can likely provide you more attention.

While brokers spend a lot of their time neck-deep in mortgages and tend to use industry jargon, a professional broker will understand if you are a first time homebuyer and will do their best to explain the terms and the process to you. Understanding is vital in your homeownership journey  so make sure to seek out a broker who is going to keep it simple for you and be honest, allowing you to understand exactly what you’re getting in your mortgage.

Ultimately, it comes down to the mortgage product but don’t be blinded by interest rates. It is important that your broker explains everything to you from term conditions to penalties, as well as why you qualified for the rate you need. It is also important to use caution if a broker is selling you on a rate and making promises to pay for fee; this is a red flag. If they say they’re going to pay for everything, they’re desperate for anything.

Of course, the rate matters, but the characteristics of your mortgage matter more and could end up costing you in the long run. You want a broker who’s going to listen to you and ask you about your needs and future goals. What are your plans five or ten years from now? Why are they so important to you as an individual? When looking at any mortgage product, consider that nearly 70 percent of mortgages are broken within three years. Even if you’re sure of today, life happens and tomorrow could be different. Therefore, you must consider the penalties for ducking out of your mortgage earlier and you should know if it is portable.

The best mortgage brokers in the business will make sure all of your bases are covered, and you’re fully aware of what you’re signing onto. The right broker will make the process easier for you, whether it’s buying your first home, shopping for a better rate, or even jumping into investment properties. No matter what stage of life you are in, we’ve got a mortgage product – and a broker – for that!

                             The Mortgage Financing Process

The number one question for any potential homebuyer or someone new to the mortgage process is “what does this process entail?”. The following is a simple outline to give you an idea of the process and help you understand what to expect as you embark on your home buying journey!

STEP 1 – BE PREPARED

Having the following information on hand before meeting with your mortgage professional will help them determine what you qualify for and help them determine the best mortgage product for you:

• Contact information for your employer and your employment history
• Proof of address and your address history
• Government-issued photo ID with your current address
• Proof of income for your mortgage application
• Down payment proof (amount and source)
• Savings and investments proof
• Details of current debts and other financial obligations

STEP 2 – GET PRE-APPROVED

One of the best things any potential homeowner can do when starting the home buying process is to get pre-approved. Mortgage pre-approval requires submission and verification of your financial history and can help you determine your price range, understand the monthly mortgage payment associated with that price range and provide the mortgage rate for your first term.

It is important to note that pre-approval does not mean that a lender has fully reviewed your documentation and you may still need the approval of a mortgage insurer. However, it does have a lot of benefits that can give you a “leg-up” in your search!

BENEFITS OF PRE-APPROVAL

Getting pre-approved not only makes the search easier by helping to determine your price range and budget, but pre-approval also guarantees the interest rate for 90-120 days while you search for that perfect home. Plus, the rate will automatically be adjusted down with any market reductions. Another benefit to pre-approval is that, when it comes time to purchase, pre-approval lets the seller know that securing financing should not be an issue. This is extremely beneficial in competitive markets where lots of offers may be coming in.

Quick Tip: Being entirely candid with your home-buying team throughout the process will be vital! Hidden debt or buying a big-ticket item during your 90-120 day pre-approval can change the amount you are able to borrow. It is best to refrain from any major purchases (such as a new car) or life changes (such as changing jobs) until after closing and you have the keys to your new home!

STEP 3 – HIRE A REALTOR

In today’s competitive real estate market, it can be very difficult to acquire property WITHOUT the help of a realtor. One of the reasons realtors are integral to the home buying process is that they can provide access to properties that never even make it to the MLS website. Realtors also gain access to information about homes that may come onto the market before a listing is even signed.

Most importantly though, a realtor understands the ins-and-outs of the home buying process and can tell you how to be successful in your endeavors to purchase a home by guiding you through the process from the first viewing to having your bid accepted.

STEP 4 – SHOP THE MARKET & MAKE AN OFFER

Once you have found the property that meets your needs, you’ll put in an offer that’ll be accepted or countered. This may go back and forth until you reach an acceptable price with the vendor. To start home shopping today, check out the listings on Rew.ca!

STEP 5 – OFFER IS ACCEPTED

Once your offer is accepted with the condition of financing, you will need to do a few things to finalize the sale:

• Ask for a realtor intro between your mortgage professional and realtor.
• An appraisal may be required, which will be determined and arranged by your mortgage professional.
• Send in any remaining documents required for financing (income confirmation, down payment confirmation, etc).
• Arrange a home inspection.
• Receive the lender’s approval on property and final approval letter.

STEP 6 – REMOVE CONDITIONS

At this point, your financing is in place and you’re ready to proceed with the purchase of the property.

STEP 7 – LAWYER’S OFFICE

You’ll be asked to provide any money that’s to be used as your down payment, which is not already on deposit with your realtor. Typically, you’ll go in 1-2 days prior to the completion date.

Before you start on your home buying journey, be sure to take advantage of the expert advice that DLC Mortgage Professionals can offer. As experts in mortgages, brokers can help walk you through the process and find you the best mortgage product to suit your unique needs! The best part? It won’t cost you a penny! Mortgage professionals are paid out by the lender when they register a new contract. Therefore, all that matters is finding YOU, the client, the best possible mortgage.

Are You Ready for Home Ownership?.

While most people know the main things they need to buy a home, such as stable employment and enough money for a down payment, there are a few other factors that may help you realize you’re ready – perhaps even earlier than you thought! In fact, there are four main things that can help you determine if you are ready for home ownership:

YOU CAN AFFORD YOUR DOWN PAYMENT AND ONGOING COSTS

It is easy for potential homeowners to get wrapped up in focusing on having enough money for the down payment and then forget about afterwards. It is important that you are not only financially able to afford the down payment, but that you can manage the monthly mortgage payments and ongoing maintenance as well. My Mortgage Toolbox app from Dominion Lending Centres has some great calculators to help you determine what you can afford on a monthly basis before you get in too deep. If you have enough funds in the bank for a down payment and are able to manage the monthly costs associated with the size and price range of home you would need, then you may be ready to start house-hunting!

YOU HAVE GOOD CREDIT

As most people know, credit score plays a major role in qualifying for financing to purchase a home. If you have a good credit score, which should now be at least 680 to qualify, then you have nothing to worry about! However, if your credit score is below this, it is more likely that you will be paying higher interest rates (and therefore have higher payments), or that you could be denied all-together. Before you begin your home buying journey, it is vital to have your credit score in order to ensure you can get the best mortgage product and rates. Working with a mortgage professional can help you get on the right track in the shortest time possible. Sometimes all that’s needed are a few subtle changes, or debt consolidation, to improve your credit score within a couple months.

NO OTHER LARGE, UPCOMING EXPENSES

Do you plan on buying two new vehicles in the next two years? Are you thinking of starting a family? Are you considering going back to school? Although you may think you can afford to purchase a home right now, it is vital to be honest about your future plans. What does your life look like in 1 year? 5 years? 10 years? If you know that you aren’t planning on incurring big expenses that you need to factor into your budget anytime soon, then that’s something that may help you decide to buy a home.

YOU ARE DISCIPLINED

One of the most important factors for purchasing a home is budgeting. You have to know what you can afford – and stick with it! It is easy to be tempted by a gorgeous 6 bedroom home or a backyard pool or private community, but at what cost? If going all-in is going to leave you scrambling each paycheck or derail any plans of future financial stability, it is worth rethinking. Understanding what you NEED in a new home, versus what you WANT, is a good step towards determining what you’re looking for and planning a budget that suits your needs so that you can continue to live comfortably.

These are just four signs that you may be ready to purchase a home. If you’re seriously considering buying or selling, talking with a Dominion Lending Centres mortgage professional can help ensure you have the best experience when it comes to buying a home!

Moving on UP!.

Life is constantly changing from your career to your family as we climb up the ladder of life. With these life changes, your current home may no longer be working for you. Whether you’re cramped in your tiny apartment or have a little one on the way, it may be time to look at moving on up!

Before considering the move to a larger home, there are some things to consider. For instance, whether or not you can afford to make the move and buy something bigger.

If you are wanting to upsize, and are doing so during your current mortgage cycle, you will be breaking the mortgage. As a result, you will have to go through the entire qualification process again. Keep in mind, there may be penalties depending on the term in your mortgage. Some are portable, which would make the transition smoother but you would need to check your mortgage agreement.

If you are unable to port your mortgage, you would need to re-qualify for a new mortgage. This would be done at the current rates offered by lenders and would be subject to government changes, including recent “stress test” rules.

If it has been a while since you bought your first home, you may be unfamiliar with the “stress test”. It was introduced in October 2016 for insured mortgages (down payments of less than 20%). Then, as of January 1, 2018 was updated to include all mortgages, regardless of down payment percentage. This test determines whether a homebuyer can afford their principal and interest payments, should interest rates increase. It is based on the 5-year benchmark rate from Bank of Canada or the customer’s mortgage interest rate plus 2% – whichever is higher.

The next thing to consider aside from re-qualifying, are fees and taxes. There may be large Property Transfer Taxes and you would also pay realtor fees on the sale of the home you are leaving behind. These fees are typically between 2-5% percent of the home’s selling price.

Beyond the costs associated with the sale of your current home and purchasing a larger residence, the costs of home ownership rise in proportion to the home you live in. If you are moving up from a condo or apartment to a single-family home, you will save on strata but will become responsible for all of the maintenance of your home. As a rule, it is best to save 1% of your new home’s purchase price, per year, for maintenance. For instance, if you purchase a $600,000 new home then you would want to ensure $6,000 a  year in savings.

Making the move to a larger home is both exciting and daunting! However, it is entirely doable with the right preparation! No matter what stage you are at with your home, a mortgage professional can help. Not only can they offer expert advice, but guidance as you move on up the property ladder. They also have your best interests at heart and will work to ensure future financial success so you can continue living the life of your dreams!

5 Approval Roadblocks.

When in the process of buying a home, there is nothing worse than having your mortgage broker or lawyer call and say “there is a problem”.

If you have found your dream home and negotiated a fair price, which was accepted, and you have supplied all the documentation to your broker, you probably assume everything is fine. The reality is that your financing approval is based on the information the lender was provided at the time of the application. If there have been any changes to your financial situation, the lender is within their rights to cancel your mortgage approval.

To ensure that you don’t encounter any last-minute issues on your home buying journey, there are five major approval roadblocks to be aware of and avoid for a smooth transaction:

EMPLOYMENT

When submitting a request for financing, whether a mortgage or car loan or to handle personal debt, one of the most important aspects the lender looks at is employment. If you were working at Company X for five years at $50,000 a year and – just before your deal is finalized – you change jobs, the lender will now require proof from the new job. This can include proof that probation for this new job is waived, or new job letters and pay stubs at the very least. If you change industries, they will want to see more proof that you are capable of keeping this job. For any employment involving overtime or bonuses, the lender often requests a two-year average, which you would not be able to provide at a new position. Another employment change that could hurt your financing approval would be if you decide to change from an employee to a self-employed contractor.

When it comes to financing, it is best to wait to make any major employment or life changes until after the deal has gone through.

DOWN PAYMENT SOURCE

As mortgage financing is based on the initial information provided, you will most likely need to do a final verification of the down payment source. If it is different than what the lender has approved, it could spell trouble for your financing approval. Even if you said that your down payment was coming from savings and, at the last minute, mom and dad offer  you the funds as a gift, it could affect your approval. This is an acceptable source of down payment, but only if the lender knows about it in advance and has included this in their risk assessment, but it can end a deal.

DEBT

A week or two before your possession date, the lender will obtain a copy of your credit report and look for any changes to your debt load. Since mortgage approval is based on how much you owed on that particular date, it is important not to increase your debt before the deal is finalized. Buying a new car or items for the new home must be postponed until after possession; even if they are “do not pay for 12 months” campaigns because you will need to fulfil those payments, regardless of when they start.

BAD CREDIT

One of the biggest roadblocks to mortgage approvals is credit card payments. When you enter the financing process, it is important that your credit score remains positive. If your credit score falls due to late payments, this can cause major issues with your financing. Even if you have a high-ratio mortgage in place which requires CMHC insurance, a lower credit score could mean a withdrawal of the insurance and removal of any financing approval.

MISSING IDENTITY DOCUMENTS

Before a deal is finalized, the lawyer must verify your identity documents and see that they match the mortgage documents. You may not think it needs to be said, but it is important to use your legal name when you apply for a mortgage. Even if you go by your middle name or a nickname, all legal documents should match.

Keep in touch with your Dominion Lending Centres mortgage professional right up to possession day. Make this a happy experience rather than a heartbreaking one.

Market Smarts: Home Buying Guide.

The Canada Mortgage and Housing Corporation (CMHC) is one of Canada’s three mortgage insurers. Beyond insuring mortgage, CMHC also offers consumer guidance in the form of a unique step-by-step guide for home buying Canada, which the organization has dubbed the “roadmap” to home ownership.

The 27-page guide, Homebuying Step By Step is available on CMHC’s website. This guide is a manual for homeownership, breaking down the phases potential buyers will need to consider when looking to get into the housing market.

what homebuyers should know

This guide focuses on preparation being the key to homeownership success, and touches on many things for homeowners to keep in mind. A few good guidelines when considering purchasing a home, including debt management, necessary documents, pre-approval, and more!

DEBT-TO-INCOME RATIO

According to the CMHC, a homebuyer’s monthly housing costs should never exceed 32 percent of their average gross monthly income. This includes monthly mortgage payments, property taxes, condo fees and heating expenses. It is also recommended that a family’s debt load, such as car loans and credit card payments, should never exceed 40 percent of the average monthly income. While this recommendation may be somewhat conservative, remaining within these guidelines will ensure that you will be able to afford your debts, while maintaining future financial stability.

NECESSARY DOCUMENTS

This guide also includes a segment regarding the documents a home buyer will need for a mortgage. When you meet with your lender or mortgage broker it is recommended that you have these documents handy, which include things like personal identification, proof of a down payment, proof of income, proof of savings and investments and details of current debt.

MORTGAGE PRE-APPROVAL

CMHC also recommends that people get pre-approved for a mortgage before they start looking for a home. Getting pre-approved can prevent future roadblocks when you find your dream home, and ensures that subject-to-financing clauses won’t be an issue. It also guarantees the rate for up to 120 days, so that you can access the best mortgage once you’ve found the right home.

SOURCES FOR A MORTGAGE

This guide also discusses the various sources for mortgages, which include: banks, trust companies, credit unions and pension funds. As always, it is recommended that you shop around before you make a decision. Hiring a mortgage broker is another great resource, as they are able to access rates for more than one lender. The guide advises asking real estate agents, friends or family members for recommendations on a lender or broker.

Along with the above, this guide also details information about your credit score, mortgage loan insurance, home considerations, the mortgage process and home management. There are also very detailed financial calculations, which factor in costs that many new homebuyers might not even think about, such as groceries, dining out and hobbies. In addition, you will find information about:

• Principles that help buyers determine how much they can safely afford to spend on housing.
• A list of the upfront and ongoing costs of homeownership.
• Information on how to prepare for a meeting with a lender or broker.
• Definitions of key terms to know when buying a home.
• Explanation of mortgage basics and tips for how to manage your mortgage.
• Tips on how to maintain your home and protect your investment.

The underlying theme of the guide is to prevent Canadians from getting in over their heads in debt when buying a home. This guide also shows just how far mortgage brokers have come in Canada, with them mentioned alongside banks throughout.

If you are looking to purchase your first home, contact me today for expert advice! It is our job to help find the best mortgage product for YOU.

Getting a Mortgage When You’re New to Canada.

Canada has seen a surge of international migration over the last few years. In 2019, we welcomed a total of 313,580 immigrants to the country! This is an increase of 40,000 individuals when compared to 2017 numbers.

According to planned immigration levels, it is estimated that Canada will receive 341,000 permanent residents in 2020. In 2021, we are expecting 351,000 and 361,000 in 2022. Federal Immigration Minister, Marco Mendicino, stated that by 2022, “the year’s new permanent residents in Canada will account for one per cent of the population”.

With all these new faces wanting to plant roots in this great country, we wanted to touch base on how new immigrants can qualify to be homeowners!

PERMANENT RESIDENTS

If you are already a Permanent Resident or have received confirmation of Permanent Resident Status, you are eligible for a typical mortgage with a 5% down payment – assuming you have good credit.

NOT YET PERMANENT RESIDENTS OR HAVE LIMITED CREDIT

For Permanent Residents with limited credit, or individuals who have not yet qualified for Permanent Residency, there are still options! In fact, there are several ‘New to Canada’ mortgage programs. These are offered by CMHC, Sagen and Canada Guaranty Mortgage Insurance, and cater to this group of homebuyers.

NEW TO CANADA PROGRAMS

To qualify for New to Canada programs, you must have immigrated or relocated to Canada within the last 60 months and have had three months minimum full-time employment in Canada.

Individuals looking for 90% credit, a letter of reference from a recognized financial institution. Or, you will be required to provide six (6) months of bank statements from a primary account.

If you are seeking credit of 90.01% to 95%, you will need to produce an international credit report (Equifax or Transunion) demonstrating a strong credit profile. Or you will need to provide two alternative sources of credit, which demonstrate timely payments for the past 12 months. The alternative sources must include rental payment history and another alternative. This could be hydro/utilities, telephone, cable, cell phone or auto insurance.

ALTERNATIVE LENDERS

Another option for New to Canada residents, depending on your residency status and credit history, are alternative lenders such as B-Lenders and MIC’s (Mortgage Investment Operation). If you do not qualify for the New to Canada programs, or a standard mortgage, reach out to a DLC Mortgage Broker and they can help you navigate the alternative options!

new to canada? before submitting your mortgage application

Utilizing a mortgage professional will ensure you understand your options. They can also help determine the best program and mortgage choice for you. Before you talk with a mortgage professional, there are a few things you need to know when it comes to submitting an application – and getting approved – for your first mortgage in Canada:

SUPPORTING DOCUMENTS!

If you’re new to the country but have weak credit, supporting documents will be needed. These may include: proof of income, 12 months worth of rental payments or letter from landlord, documented savings, bank statements and/or letter of reference from recognized financial institution. These documents all paint the picture of whether you are a safe investment for a lender.

BUILD YOUR CREDIT RATING!

This is one of the most important aspects to getting a mortgage! Your credit rating determines your reliability as a borrower. In turn, this will determine your down payment rate. A great way to build your credit is by getting a credit card to use and pay off each month. Paying other bills such as utilities, cell phones and rent can also contribute to your credit score and reliability.

START SAVING! 

One of the most expensive aspects of home ownership is the down payment, which is an upfront cost but is vital to securing your future. As mentioned, the down payment can either be 5% or 10% depending on your status. However, if the purchase price exceeds $500,000, the minimum down payment will be 5% for the first $500,000 and 10% of any amount over $500,000 – regardless of your residency status.

CHOOSE A MORTGAGE PROVIDER! 

Once you are ready to get your mortgage, you need get in touch with a local mortgage professional. They can help you review your options and find the best mortgage product to suit your needs.

Buying a house is an exciting step for anyone, but especially for individuals who are new to the country. As daunting as it may seem, purchasing a home is completely possible with a little knowledge and preparation. If you are new to Canada and looking to get a mortgage, connect with a DLC Mortgage Professional today for expert advice and options that best suit you!

Getting the Down Payment Down.

A down payment is one of the most essential aspects of every mortgage application and new home purchase. In Canada, home purchases require a minimum cash payment from your own funds that is put towards the purchase. This is your down payment and is considered your stake in the deal.

Many home buyers understand that a certain amount of money down will be required on a home. However, most don’t realize the ins-and-outs of down payments, such as where the funds are allowed to come from and ensuring a proper paper trail.

Here are a few things to keep in mind while preparing your down payment and working towards your perfect home!

SOURCES OF DOWN PAYMENT

Most home buyers are aware that they will require a certain amount of money for a down payment. What many do not realize, is that lenders are required to verify the source of the funds. This allows them to ensure that they are coming from an acceptable source. Sources that further contribute to indebtedness are less-likely to be considered (such as line of credit or credit card). Instead, the best and most traditional options for your down payment are:

SAVINGS ACCOUNT

The first and most traditional method is your savings account, where you have been pinching your hard-earned pennies to save up for this day!

If you are utilizing your personal savings for a down payment, note that lenders will require three months of full bank statements. This includes name, account number, transactions and balance history. For any large deposits made in that time (sale of a car, work bonus, etc.), explanations and supporting documents will be required.

GIFT FROM FAMILY MEMBER

If you are fortunate enough to receive help from the Bank of Mom and Dad for your down payment, there are certain requirements:

• A signed gift letter from the immediate family member contributing the fund
• Proof of the transfer into your bank account. This can be a bank statement documenting the money being moved from the donor’s account and into yours. The statements must include names, account numbers and the full transaction history during the time period in question.
• Important note: If money is being received from immediate family overseas, most lenders will require copies of the wire transfer. In addition, they may ask for account history.

RRSP WITHDRAWAL

Another option for down payment is the use of Registered Retirement Savings Plan (RRSP), but only if you are a first-time buyer. This is part of the Home Buyers’ Plan (HBP), which allows first-time buyers to borrow up to $35,000 from their RRSP’s (tax-free!) -as long as the money is repaid within 15 years. Please note: The minimum repayment is 15 equal instalments paid once per year.

HOW MUCH DOWN?

When it comes to putting money down on your new home, you need to consider the minimum down payment required as well as additional fees.

The minimum amount required in Canada is 5% for the first $500,000, with 10% down on any amount beyond that threshold. For example, on a $600,000 house you would need to put $35,000 down at minimum ($25,000 on the first $500,000 and $10,000 for the additional $100,000 purchase price).

Keep in mind, if your down payment is less than 20% of the price of your home, you will be required to purchase mortgage loan insurance in case of default. These premiums range from 0.6% to 4.50% of the total amount of your mortgage. Using the example above, this would mean $3,600 to $27,000 in mortgage insurance premiums.

If you are able to put 20% down on your new home (which is the recommended amount), you would be looking at an investment of $120,000 down with no mortgage insurance premiums required.

ADDITIONAL COSTS AND FEES

One component of the purchase process that homeowners often forget about, are the closing costs. These are typically 1.5% up to 4% of the purchase price. In order to get financing, you are required to show that you have enough to cover these costs, which include legal fees.

When you have collected the funds for your down payment and closing costs, you must ensure those funds remain in your bank account once you’ve provided confirmation. They should only leave your account when they are provided to your lawyer to complete the purchase. This is because lenders will often request updated statements closer to the closing of the sale, to ensure nothing has changed. If money has been moved around, or if there are new large deposits or withdrawals, they will all need to be confirmed and could affect approval.

The last thing that anyone wants when purchasing a property is added stress or for something to go wrong late in the process. Consider contacting a DLC Mortgage Professional today to help guide you through the process! Make sure you are upfront about your down payment amount, and where it is coming from. This will help a mortgage broker determine whether or not it is suitable, and allow them to find the best lender and mortgage product for you!