So, you’re wanting to get a mortgage but aren’t quite sure where to begin. There is tons to know and prepare for before you apply, so we’re going to lay it out for you. It is important that you are aware of everything associated with getting pre-approved, and we’re here to help you make your home buying experience as stress-free as can be!
Where do you go / Who do you see?
There are some different options for you here, as you can go straight to your financial institution like a bank or credit union and apply through them, or you could seek out assistance directly from a mortgage broker. There are many different agencies where you will find mortgage brokers, but one person to inquire with is your REALTOR® as they may have some recommendations, or there may even have a mortgage broker right in their office to make it all one convenient stop for you!
- Must provide a verifiable down payment. This can be done with a bank statement reflecting a 90-day history.
- Minimum down payment needed for an owner occupied home is 5%. A 5% down payment is available to all home buyers, not just first-time home buyers.
- A mortgage with a lower down payment is known as a “high-ratio mortgage”. It is mandatory for high-ratio mortgages to pay CMHC fees.
- A higher down payment will lower your mortgage loan amount, lower your CMHC fees, and therefore lower your overall mortgage payments. Which is a smart choice. Here is a link to the CMHC premium calculator so that you can see the difference.
- A down payment of 20% or higher allows you to avoid CMHC fees altogether by giving you access to what’s called a “conventional mortgage”. Financially, this is a really good move if you are able to save up.
- You can use a “Gift” from a family member as a down payment. This must be in writing signed by both parties stating that it is a gift and not a loan. Click here to download and print off a pre-made form which you can use.
- Your RRSP can also be used as a down payment under the Home Buyers’ Plan (HBP). Click here to learn about the HBP.
- As a Saskatchewan resident, you may be eligible for an interest-free loan through the Graduate Retention Program. These loans can go up to $10,000 to use towards the down payment for your first home. Click here for more information and to apply.
- You can use the proceeds from the sale of your current/previous home, you just need to provide a statement of adjustments from your lawyer for confirmation.
- “Zero Down” or “Borrowed Down” mortgages are still available. However they are effectively 2 loans: One loan for your 5% down payment, plus a regular mortgage for the other 95%. You will need to have a much higher income and have a much higher credit rating to be eligible for this type of financing.
- Full-time employment and proof of income. You will need a letter from your employer that states your length of employment, position, and income.
- Notice of assessment
- Most recent paystub
- Pension statement, or T4A
- If you’re self employed you will need to provide your most recent 2 years income as well as a full T1 outlining your business activities, as well as your Notice of Assessment. You will also need proof of self-employment by providing GST returns, business license, etc.
- In addition to your income being verified you will also need a good credit rating in order to get pre-approved.
- Must not have a large amount of outstanding debt that would interfere with your ability to pay your mortgage should you get approved for a loan. These debts include car loans, student loans, lines of credit, credit cards, etc.
The banker or mortgage lender will also want to verify that in addition to your down payment you will also have cash available to close the transaction and complete your home sale. This is often referred to as “closing costs” and it consists of a wide variety of expenses that will crop up during the home buying process such as:
- Lawyer’s fee
- Miscellaneous charges incurred by your lawyer (example: title searches, tax search, mortgage registration, photocopying, courier services, etc.)
- Land Titles transfer fees / ISC Registration
- buyer’s portion of property taxes
- buyer’s portion of any rental equipment on the property being assumed (example: Hot Water Tank, Alarm System, etc.)
- Interest on your mortgage between possession date and when ISC registers the transfer
- Any professional services or inspection fees requested by you or your mortgage lender for due diligence (example: furnace inspection, appraisal fee, fireplace inspection, sewer inspection, water quality tests for acreages, etc.)
- Fee for title insurance if required
- Utilities, hook-ups and deposits
- Insurance on your new home
- For new construction, GST and/or PST (if appicable)
- For Condominiums, any outstanding Condo or Strata fees.
What Not To Do
- Submit any new credit card applications
- Start / apply for any new loans such as cars, boats, lines of credit, etc.
- Open any new accounts
- Take money out of your bank and keep cash on hand; they want to see it in there!
- As a first time home buyer you will be eligible for a non-refundable provincial income tax credit up to $1,100 for moving costs as well as a non-refundable federal income tax credit up to $750 for moving costs.
- Once you get approved, your pre-approval is typically valid for 60-90 days
- For a referral to an ethical and competent mortgage professional in your area contact us.
Thanks for reading!!
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