Answers to mortgage questions keeping some first-time homebuyers up at night.
It’s that time of year again. On the first warm weekend,
you can’t miss the “open house” and “for sale” signs in almost
every neighbourhood across the country. The home-buying urge
seems to be part of our national spring fever. But why should
you be left out? You’re renting now, but by summer, maybe you
could be in a home of your own. Is it possible? Are you wondering -
Q. How much house could my rent buy?
A. If you’re paying $1250 in rent each month, you could be
carrying a mortgage of $186,726. If you’re paying $1500, that’s
potentially a mortgage of $235,100. Paying over $1750 each month?
You could be paying off a mortgage of $283,475! How are the mortgage
payments so affordable? Firstly, right now we’re benefiting from
historically low mortgage rates. Secondly, you now have access to
longer-amortization mortgages that lower your monthly mortgage payment.
(These examples are based on that combination: a 5.3% rate and
40-year amortization, plus 3.70% insurance premium, property taxes
and heat of $285 per month).
Q. Can I really buy a house with no money down?
A. Yes! There are several excellent mortgages available with
zero downpayment required. In general, all you need to qualify
is a good credit record, and the ability to meet your payments
comfortably. If you have savings, you can keep that money for
other needs and wants, like moving expenses, or paying out debt.
Q. If I’m self-employed, do I have to prove my income to get a mortgage?
A. No, not in today’s mortgage world. You can now qualify
based on the income that you say you earn. This kind of mortgage
is known as “stated income” because the lender takes into account
the income you state, and not the income you can prove. The income
should be reasonable, of course, and the lender may want proof of
your self-employment, and may require 5% to 10% down. If you don’t
want to state your income, you can also qualify on the strength of
a strong credit history, rather than on your income. You’ll need
a good credit score and proof that you’ve been self-employed
for at least two years.
Q. Is it possible to buy a home if I’ve had past credit problems?
A. Even with some spotty credit and no proof of income, you
may qualify for a mortgage if you have some equity in your home
(at least 25%). For these mortgages, qualification is based on
your accumulated equity and the value of your home. If you feel
your credit rating is keeping you from accessing preferred mortgage
rates, take a year to fix it using an innovative one-year transition
mortgage. Then after that year, if you qualify, you can move to a
longer term preferred rate mortgage. You’ll reposition high-interest
debt to improve cash flow, fix your credit and save on overall interest.
Q. Where do I start?
A. Talk to a mortgage broker. Why? A mortgage broker deals
with over 50 lending institutions, including major banks, credit
unions, trusts and other lenders, which means they can put
significant negotiating power behind finding the best mortgage
to fit your specific situation. This service costs you nothing
(oac). Instead, the lender selected pays compensation for the
services and solution provided. And since a mortgage broker’s
business is built primarily through referrals from satisfied
customers, your positive mortgage experience is essential!
