Where should I go first to get a Mortgage?
You can go to the Loans Department of your regular bank, or you can go directly to a Mortgage Broker. (Click on the Mortgage Company Ads on www.buildyourownhouse.ca to see if that's the easiest way for you to get the money you need... At the very least, it'll tell you how much you're qualified for, and the on-line Lenders have Rates the Banks have a hard time competing with. It's all about Saving Money, so check into it all, first -- it's a big financial decision! You can always take your information you've gotten On-line to the Bank -- if they can't or won't match it, there's your decision right there! ha,ha!).
Keep in mind that it is generally easier to work with a Broker, since they have the ability to be a lot more flexible than a conventional bank. Also, their rates will often be considerably lower than what the banks are offering, too, so shop around this could save you a fair bit of money. Brokers can often get a mortgage for clients that a bank won t even touch, and they ll do it at your convenience, for the most part, so you can have a more relaxed meeting with them.
What questions will a Broker ask somebody who s looking for a Mortgage?
There are three main things you will be required to provide:
i.Verification of Income
ii.How much and where the Down Payment is coming from
iii.Personal information for Credit Checks (Birthday, Social Security Number, Address, Job Letters, Pay Stubs, 3 years worth of Tax Returns, 3 months worth of Bank Statements, any current Retirement Savings Funds )
Your Banker or Broker will want to confirm your ability to qualify by doing a GDS Ratio (Gross Debt Ratio) and a TDS Ratio (Total Debt Ratio).
A Gross Debt Ratio is determined by taking the Mortgage Payment, the Property Taxes, and a Heat Component (really hot areas will be exempt from this, I m guessing!), which is usually around $50.00. These numbers are added together. That number is multiplied by 12, then divided by your Gross Income Amount. This number can t exceed 32% of your Gross Income. Some banks &/or brokers may have different criteria, but this is a commonly used method to see if a client can qualify for a mortgage.
The Total Debt Ratio takes the above information (the GDS Ratio) along with all other debts and payments (whatever else you have to pay per month credit cards, support payments, etc.) to make sure that the Grand Total of all of your payments, including the new mortgage and taxes, won t exceed 40% of your Gross Income.
N.B. Don t get too hung up on the math that s the job of the banker or broker. This is just info to give you a good understanding of how they get their numbers.
What if someone has a job that is technically referred to as Part-time , but they make a Full-time wage. Can they qualify for a Mortgage?
You can apply through a Mortgage Broker (probably your best bet) to see how much your Gross Income will allow you to qualify for. It is particularly beneficial if you have a solid work history (have been at the job for a few years, or more). A Broker will know how to present the documentation to help you get a mortgage. This is particularly important, now, since so many companies and Government Services hire Part-time or Contract employees. These can be career positions, and you can be there for fifteen years, and still be flatly turned down by the regular banks. Don t give up on your dream to own your own home because you re in a situation like this call a Mortgage Broker, and give it a shot. If that still doesn t work, try another one. What s the harm? At the very least, you can get an honest answer of what you need to do in order to become qualified. Either way, you ll be that much closer to owning your own place, and that s the goal!
Is there an easy way to calculate a Mortgage?
There s a formula that I use that is relatively accurate, give or take a hundred dollars, or so. At the very least, you ll get a ballpark idea of your monthly payment (not including the Tax portion), and whether you can qualify for that amount. Remember that when you re qualifying for Mortgage money, if you re even $80.00 over what they think you can pay, you won t get the mortgage. It s best to Pre-Qualify for a mortgage, and ask how much you will qualify for before you go house-hunting. Keep in mind that as the Interest Rates get lower, the more you ll be able to qualify for. Don t go crazy, though, since all the costs go up as you increase in house size, and the monthly operating costs might end up being higher than you thought, then you ve got a big house and a crappy lifestyle. Stay within your means; stay happy and comfortable.
The Formula remember, it s a ballpark number
On a 25 year Term, you would take the Percentage Rate (say, 5%) and multiply that out by the number of thousand (say, $100,000.), which would give you a mortgage payment of about $500./month (5 X 100 = $500.), plus Taxes. So if you ve found a house for $165,000.00, and the rate is 5%, (based on a 25 yr. Term), the payment would be around $825.00, plus taxes, per month. (5 X 165 = 825)
We use this formula all the time it s functional to see if you can even come close to being able to afford a particular property. If you always find yourself looking at the properties worth $300,000., when you can actually afford a $75,000. property, do the math, figure out what you can really buy, and get that. It s better to buy something already in your range, save your money, wait until your place has gained in equity, then make the move up. Have your Broker or Banker let you know how much you can spend, and have that up-dated every year, or so, depending on how long it takes you to find a place to purchase, especially when the rates are fluctuating so much. Also, your Broker will tell you the exact payment.