Frequently Asked Questions
*applies to owner occupied properties*
What down payment do I need?
5% is the minimum down payment on a home up to $500,000. If you exceed $500,000 then 10% down is required ONLY on the amount over $500,000.
Will I need any other money available?
Yes, you will also need to show approx .5 - 1.5% of the purchase price (dependent on the lender) available to cover closing costs. In some cases we can add this amount as a debt into the application.
Can the down payment be gifted to me?
Yes but it typically must come from an immediate family member. The lender would need to see a completed gift letter (we provide you with) and then verification that the money was deposited to your bank account.
Can I borrow my down payment?
Yes, please contact Nikole for details.
Can the down payment come from my RSP?
Yes, if you are considered a first time buyer under Revenue Canada's First Time Homebuyers Program then you can draw up to $35,000 from your RSP tax free with 15years to repay the money.
Click Here for eligibility and program details
Are there any other programs for First Time Buyers?
Yes, click below for more information.
Click Here for eligibility and program details
What is a lender looking at when considering my application?
What if I don't qualify right now?
Then we plan. Nikole will give you the info you need to attain your goal and remains a point of reference along the way. This is a huge purchase, our largest asset and debt, there is nothing wrong with some planning time.
How do brokers get paid?
The lender pays, it is based on the mortgage amount and term you take (the longer the term, the higher the pay). 1% of the mortgage amount is a fair (but estimated - sometimes more, sometimes less) number less brokerage fees that I am paid for assisting you to approval.
I keep hearing the term "Insurer"? What does this mean?
In Canada when we put less than a 20% down payment, we are required to purchase default insurance from one of the Insurers (CMHC, Genworth, Canada Guaranty). This premium is mandatory but is added into your mortgage. This insurance protects the lender from a consumer defaulting on the mortgage.
What are "Servicing Ratios"
The Servicing Ratios determine the amount of mortgage you qualify for. There are 2 and both need to be under their maximum.
Gross Debt Service (GDS): Shows home affordability (home costs/income)
Total Debt Service (TDS): Shows home and debt affordability (home and debt costs/income)
What are my maximum ratios?
It depends on credit rating, down payment and sometimes on the program you need.
What is the "Stress Test Rate"?
In September 2016 the Government implemented a rule that all insured mortgages (less than 20% down) must qualify using the current "benchmark rate aka stress test rate". This rate is higher than the actual rate you will receive from the lender and is used only to qualify you.
While using a higher rate to qualify does reduce our purchasing power, the intent is to be sure that an increase in interest rates down the road would still be affordable.
As of January 2018, conventional mortgages (20% down or more) also have a rule change where federally regulated lenders must qualify these applicants on the higher of:
1) current stress test rate
2) 2% over the clients chosen contract rate
The People Involved in Your Purchase
Below are some of the professionals who will be involved in your home purchase:
Mortgage Broker - Your Broker will assess your pre-approval amount, review the mortgage process, lenders, rate options, mortgage products and what the lender and insurer (if applicable) will want from you to complete approval. This service is free.
Realtor - I always recommend having a Realtor in your corner. That agent has property expertise, they can determine if the property is fairly valued, will ensure you are protected when writing an offer, they negotiate on your behalf, etc... There are MANY reasons to have a realtor working for you and for buyers, the service is free.
Lender & Insurer - Once you have an accepted offer to purchase, Nikole submits your file and supporting documents into the lender. An underwriter reviews the application first to determine it meets the lender guidelines. From there, if it will be an insured mortgage (less than 20% down) then it is forwarded to the insurer for review/approval as well.
Inspector - This is the professional that will check the property condition (general fixes, shingles, hot water tanks, water damage etc...). Cost varies but you can expect approximately $500-$600.
Lawyer - You will need a lawyer to complete your purchase. The lawyer will check over your legal documents, make sure closing happens on time, be there for your questions, make sure title is in proper order etc... Cost varies by firm / property value / additional work required etc... but generally you can expect around $1500 after fees and disbursements.
From time to time other professionals may be required such as an Appraiser or Professional Condo Document Advisor...