Vicki Borenstein

Affordable Condos

Co-ownership Explained

Affordable Features

Yonge & Bloor Favourite

Co-ops Explained

Real Estate Buying Guide

Condo Buying Guide

Taxes & Rebates

Extra Buying Costs

Calculators

Buyer Beware!

About Vicki

Travel Industry Today

Last Minute Club


REAL ESTATE BUYING GUIDE

Page Contents:

HOW TO MORTGAGE SHOP

MORTGAGE RATE WATCH

FREE CREDIT REPORTS

CMHC INSURANCE

USING YOUR RRSP


 

   HOW TO MORTGAGE SHOP

 
HOW LENDERS QUALIFY BORROWERS?

Will I Qualify? What is GDS? What is TDS? What is LVR?

How large a mortgage will you qualify for?

Once the lender has determined the applicants’ gross income and expenses
they'll calculate if the applicant can afford the mortgage based on their ability to carry the costs.

Costs include:
1.      
The Mortgage Payment
2.      
Property Taxes
3.      
Condominium Maintenance Fees

Gross Debt Service Ratios (GDS)

The GDS ratio is the ratio between gross income and shelter costs.

As a rule most mortgage lenders say that your monthly housing
expenses should not exceed 30% of your monthly gross family income.
If the sum of the mortgage payment, property taxes, condo fees and
heating costs exceeds the lenders Gross Debt Service Ratio, the
mortgage will likely be declined.

Total Debt Service Ratios (TDS)

Lenders have a second calculation which is the TDS ratio. 

The lender is concerned with your ability to carry your costs
other than simply the shelter payments. Generally, the maximum
for both shelter and non shelter financial obligations combined is
set at 40% to 42% of your family gross income.
Non Shelter Financial Obligations include:

Car Payments
Credit & Charge Card Payments
Personal Loans 
Lines of Credit
Finance Company Loans 
Long Term Leases (more than 1 year) 
Tax loans 
Long term RRSP catch up loans (more than 1 year


Final Consideration Is The Property Appraisal Value
(Most loan commitments are conditional on the appraisal value)

The home is the collateral for the mortgage loan.
The lender must determine that the property offers adequate
value as security in relation to the mortgage loan amount.
To make this decision the lender hires a professional real estate appraiser.
The appraiser will submit a report detailing their estimate of the value
of the residence based on the recent sale of comparable properties in the area.

Loan to Value Ratios (LVR) is calculated by dividing the
mortgage (s) by the property value. 

Conventional Mortgages have a loan to value ratio of 75% or less.

Underwriting Conclusion
After the lender has reviewed the application, there can be four outcomes:

1. Approval. If the loan is "picture perfect", the loan will be approved.

2. Approved with conditions (the most common response)
(a) If the underwriter needs additional documentation before a decision can
be made, a conditional approval will be given. An example of a condition
could be submitting pay stubs to validate the borrower's income.
(b) The loan can be approved, but a "prior-to-funding"condition must be met.
In this case, the loan documents will be prepared and sent to the lawyer,
but the lender will not fund the loan until the condition has been met.
An example of a "prior to closing" conditional approval could be proof of sale
of existing home where the equity will be used as the down payment.

3. Suspended. In this case there is insufficient documentation of verification
to decide whether or not to approve or decline your application.

4. Denial. Lenders will be unable to approve a loan if the loan file has
substantial deficiencies and does not meet their minimum standards.


 
 
MORTGAGE RATE WATCH

  Lowest mortgage rates in Canada.

 

Click here for a complete list of bank
 and trust company rate updates.


 
 

HOW IS YOUR CREDIT RATING?

Is It Accurate? Probably Not!
Don't take a chance-
Check First.

 
 
Just like the old saying - a stitch in time saves nine-by getting 
a copy of your credit report before you apply for a mortgage 
you may be able to avoid surprises and delays in having to 
answer questions about your credit report. Because the report
contains information about you, you have a right to inspect a copy of it.

 Equifax, Canada's largest credit bureau, will mail you a free copy
of your personal credit file. Mail or fax a written request with copies
 of two pieces of identification. *Do not phone as they will not provide 
information over the phone. In a couple of weeks, they will mail you your report
.
 

Can't Wait. For a $15.00 fee you can check your personal credit
bureau report on line.
Find out how your credit looks right now.

Another  important qualifying factor is your creditworthiness.

Past and existing mortgage debt. A good payment history on mortgage debt
 is important. Payments 30 days past due are reflected in the report as late.

Credit balances. Payment amounts on your revolving and installment debts.
Revolving credit refers to department store and bank credit cards.
Installment credit refers to longer term credit, such as car loans.


 
 
 
CMHC MORTAGE INSURANCE

How much will it cost? Do I need It?

 
 

CMHC Mortgage Loan Insurance is an insurance that covers
your lender’s risks associated with financial loss that can occur when
a condo owner or home owner defaults on their mortgage loan.

You will be required to purchase mortgage insurance through your lender.

and is required if you have a "high-ratio" mortgage. 

As with any insurance, there are Insurance Premiums to be paid.
The amount varies and can range between 0.65% and 2.75%
depending upon how much of the purchase price is financed.  

Mortgage loan insurance is not to be confused with mortgage life insurance
which guarantees that your remaining mortgage at the time of your death
will not be a burden to your estate
.


 
 
USING YOUR RRSP TO BUY A PROPERTY


RRSP Home Buyers Plan

TAX FREE Withdrawl $40,000. per couple.

 
RRSP Loans to purchase property
 
Up to $35,000. per person could be withdrawn tax free from your RRSP to buy
 your dream condo. Couples which includes common-law will be able to withdraw
$70,000. with the government's
 "Home Buyers Plan" (HBP)
.

Follow the link to get all the qualifying details.

 
 
 

Vicki Borenstein, 

Vicki@VickiBorenstein.com 

www.VickiBorenstein.com