The process of buying a home can be intimidating if you’ve never been a homeowner before. When seeking out first-time mortgage information, it’s more valuable to speak to an expert – someone who earns a living providing this guidance and resources. And, since finding the right mortgage has changed so much in 2023, most mortgage applications are treated on a case-by-case basis as each application is unique. This list will outline first-time mortgage information that is important to first-time buyers in 2023 and 2024.
First Time Mortgage Information:
- Credit: What is your credit score range (excellent, good, fair, poor, and bad)? The number score is important, as is the activity on the report. Banks put less emphasis on the actual score and more emphasis on what the activity looks like (re-payment habits, number of active trades, credit tenure, inquiries, etc.).
- Down Payment: Once determining how much of a down payment you need, the bank will need to know where the money is coming from (this is an important requirement as the anti-money laundering act plays a big role now). For example, they will need to trace your down payment within the last 90 days, and large deposits that happen within that 90-day period will be questioned. Acceptable sources of down payment include personal savings, RRSP, FHSA, investments, gifted money, inheritance, equity from another home). The minimum down payment required by any bank in Canada is 5% of the purchase price (as long as the purchase price is under one million).
- Employment: Are you employed, self-employed, contract or commission-based? Do you need your bonus or part-time income to make the deal work as well? Employment status is the next most important factor in determining if you can afford the mortgage you’re seeking. More complex types of income (self-employed, part-time, commission) require further proof of stable income by way of additional supporting documents. Job tenure is also very important. Banks will put emphasis on how long you’ve been at your current employer and depending on the nature of the employment, they may ask for previous employment information for further validity. Standard documents that might be required are letters of employment, pay stubs, notice of assessments + T1 generals, bank statements, T4s, and business registration documents, among others.
- Debt: How is your debt load? Do you already carry a lot of debt, each with its own monthly payment obligation? Debt impacts your 2 qualifying debt servicing ratios (GSD & TDS). These are the two ratios used by every bank/credit union to underwrite each deal. They cannot exceed a certain percentage (each bank will have its own guidelines and restrictions). Things that will impact your ratios significantly are car loans, student loans, high credit card balances, lines of credit, personal loans, payday-type loans, other mortgages, etc.).
Finding consistent first-time mortgage information is harder these days – as banks become stricter with their lending guidelines the government tightens banking rules. This is especially true in times of economic uncertainty, such as 2023 and 2024, where so much is changing, so quickly. For that reason, the first-time mortgage information you need is not as black & white as it used to be. There is much of a grey area that most consumers now fall under.
Be fair to yourself by speaking with a professional such as CMS. Share everything you can in the early stages as it will be of most benefit to you in the later stages of the process as we can cater the first-time mortgage information you need to your specific scenario. Call us when you’re ready at (905) 455-5005.