Home Purchase Frequently Asked Questions
- Receive professional negotiating expertise.
- Convenience and access to numerous new mortgage products.
- Unbiased knowledgeable advice.
- Access to unadvertised rates.
- I work for the YOU, not the bank.
- Is a Federal Government Program that allows home-buyers to use $25,000 for each purchaser from his/her own RRSP.
- You must not have owned a principal residence within last 5 years.
- You must intend to occupy your home as a principal residence.
- Minimum repayment is 15 equal annual instalments. This schedule can be accelerated.
- The funds to be withdrawn must have been invested into the RRAP for a minimum of 90 days prior to withdrawal.
- You must complete a Form T-1036.
- The home must be located in Canada and is to be occupied as your principal residence.
- You have from your own resources a down payment of at least 5% of the purchase price of home.
- Your mortgage payment must not exceed 32% of your gross household income. This includes payment of principal + interest + property taxes + heat + condo fees (if applicable).
- You must be able to cover closing costs equivalent to at least 1.5% of the purchase price.
- You meet the lender’s eligibility requirements regarding income, employment and credit worthiness.
(Closing costs are approximately 1.5% of the Total Purchase Price.)
- Appraisal Fee
- Legal Fees
- Title Insurance (if applicable)
- Survey Certificate (if applicable)
- Home Inspection (if applicable)
- Tax Adjustment (if applicable)
- Interest Adjustment (if applicable)
- Property Transfer Tax (if applicable)
Purchase Requirements Based on Income Type:
- Job Letter – Lenders use 100% of the income. Verification is made on company letterhead, signed by appropriate individual. If you are a recent hire, the letter should confirm that probation period has passed. Bonuses, car allowances, and other forms of remuneration should be mentioned in letter if applicable.
- Pay Stubs – Many Lenders will also require your most recent pay-stub(s).
- Pay Stubs- showing year-to-date income verification
- T4’s and/or Personal Tax Returns (T-1 Generals)- 3 years to take an average
- Notice of Assessment (NOA)- most recent to confirm no taxes owed.
- T-4’s and/or Personal Tax Returns – 3 years to take an average
- Job Letter- confirming position
- Notice of Assessments (NOA)- optional depending on Lender
- Financial Statements of Company – 3 years average net income used. Depending on Lenders policies, The add-back of various personal expenses run through company may or may not be allowed. (examples of allowable add-backs- Depreciation, Amortization, Capital Cost Allowance).
- NOA’s (Personal Notice of Assessments) – 2 year history
- Personal Tax Returns (T-1 Generals showing personal net income) – 2 year history
- Overtime will be used if there is a proven track record. 3 years evidence (T-4’s)
- Bonuses – Once again, a 3 year track record required
- Part-time job – should be in place for a couple of years before using additional income
- Tips- Generally not recognized unless declared
- Car Allowances – Varies from lender to lender
- Alimony and Support – Evidence that payments have been made regularly and a copy of divorce agreement is required. Investment Income – must be received continuously. This source of income is limited to interest, dividends, or some type of ongoing revenue. Capital gains, which result from the liquidation of an asset is a 1 time occurrence and can’t be used.
Do not hesitate to call or email with any additional questions.
If you are considering purchasing your first home, you are making a decision that involves what will likely be your largest financial investment and, if done wisely, will give you and your family security over the coming years. Making the leap from renting to owning can be intimidating — and financially burdensome. However, there are programs in place — such as a tax credit for first time home buyers — designed to motivate people to purchase homes rather than keep renting. The tax credit can ameliorate the total cost of buying your house.
So where should you begin? The pre-approval process helps you determine how much “house” you can afford. Just because you get a pre-approval letter for $800,000, though, doesn’t mean you have to limit your search to houses between $775,000 and $799,900, though. One trap that many first-time home buyers fall into is choosing the house that is absolutely at the top of their affordability spectrum. Then they run into trouble when they decide to upgrade in the car department or lose their job and have to take one that pays slightly less. Choosing a home that is less than your pre-approval maximum allows you to build some cushion into your budget. If you budget so that you’re making extra payments, you’ll have the house paid off sooner — and if your income drops, you’ll still make your minimum payments on time without running afoul of your lender.
Another reason to stay well below your pre-approval limit is that the Canadian mortgage process almost ensures that you won’t have the same interest rate for the life of the mortgage. Most people take between 15 and 30 years to pay off their loans, but they end up going through at least three or four mortgages, if not more, because you can’t sign a loan that has a term of more than ten years. At the end of a loan term, if you’ve been making your payments on time, the bank will likely renew it, but the interest rate can change to match new market conditions. Right now, interest rates are at historically low levels, which means that they are likely to be higher at the time of renewal, so you’ll want to budget for that increase in your payments — and make extra payments now so that you’re not a hostage to interest rates for the next three decades.
When you do get pre-approval from a lender and then find the house that you want, don’t feel like you’re bound to take the mortgage that the lender offers you. Instead, use that as leverage to shop the loan around. Different banks have different guidelines for their lending practices, and what sounds like a good deal from a lender can pale in comparison to what another bank would have to offer. Even a difference of a half-point in interest rate can save you tens of thousands of dollars over the amortization period of your mortgage. Remember that you are the person taking out the loan — you are the one bringing in money to the bank. The bank is taking a risk on your behalf, but you are paying the bank handsomely for it. If you buy a home for $750,000, if you pay over the whole life of the loan, you’ll likely end up paying at least $1.5 million to own it at the end, after you add in the cost of interest.
When you meet or talk with a potential lender, get all of the potential terms in writing. Remember that there is no rush. You might feel like you’re under the gun to get a loan approved so that you can go to closing, but also remember that you’re going to be paying for this house for the majority of your adult life. You don’t want to have to regret a deal that you signed because you felt rushed or pressured. Finally, don’t sign paperwork for a mortgage that is right at the maximum of what you can afford — or a little more. Too many people make that mistake and end up facing monthly stress to make each payment. It’s not worth it just to have a slightly nicer home.
If you manage these steps wisely, you’ll end up in a home that will one day be all yours, free and clear — and you’ll get there with a minimum of stress and frustration.
If you have just recently moved to Canada and are considering the purchase of a home, it is a good idea to familiarize yourself with the process and rules that New to Canada mortgage loans involve in this country. If you have just moved here from the United States, for example, the principal difference has to do with the length of a mortgage. While it is possible to amortize a mortgage payment schedule out over 30 years in Canada, in the U.S. it is possible to get a fixed rate on a loan for the entire life of that mortgage without a prepayment penalty. In Canada, the longest loan term that you can sign is 10 years, and if you want the option to pay early without a penalty, you would choose an open mortgage, which has a higher interest rate than a closed loan — so knowing the terminology is important.
Several Mortgage programs exist for new comers
The good news is that several programs exist for new comers seeking a new to Canada mortgage to help them purchase a home. Because many people new to Canada mortgage holders may have difficulty qualifying or a loan initially, institutions like Canada Guaranty have come up with special guidelines. When the loan-to-value ratio is 90 to 95 percent, the lender looks at scores from the international credit bureau or the past year of rental payments, backed by a letter from the landlord, as well as a year of bank statements that confirm those rental payments, as well as a year’s worth of utility statements confirming regular payment. When the loan-to-value ratio is 90 percent or less, the bank needs six months of verifiable bank statements from a bank in the immigrant’s country of origin or a recognized financial institution in Canada. Alternatively, a reference letter from the borrower’s bank in the country of origin confirming at least six months of a satisfactory banking connection works.
These programs are generally eligible for immigrants who arrived in Canada no more than five years ago, and at least 5 percent of the down payment must originate in the borrower’s resources. The borrower must have a valid work permit, landed immigrant status or permanent resident status. Unless the borrower has been relocated by his company, he must have worked full time in Canada for at least three months.
When it comes to lending requirements, though, Canadian banks are similar to those in the U.S. and other countries. Banks and other traditional lenders generally have three requirements: a down payment, a credit score within a certain range, and proof of a steady income. The down payment can be as little as 5 percent in some cases, but if you can put 20 percent down, you can avoid paying mortgage insurance for the life of the loan. The premiums for the insurance make each monthly payment more expensive without adding to your equity in the house. When it comes to verifying income, banks like third-party proof that you make enough money on a regular basis to pay your mortgage each month without creating a debt-to-income ratio that is too high, and without creating too high of a burden for housing cost within your total income. Third-party proof means verification from an employer and from tax documents, such as annual returns you filed in your last country of residence.
Of course, not everyone can provide all those items. Some people are self-employed, which means that their income may be ample but does not come in regularly each month, and that they cannot provide independent verification of their income. Self-employed people often have to provide a greater documentation of assets and other ability to pay the loan in order to gain bank approval. Still other people have a steady career that provides more than enough money each month to pay the mortgage — and a series of pay stubs and tax returns to prove it. They have also saved up enough to make a down payment, but they have had some financial setbacks in their past, such as a layoff or lengthy period of disability, and as a result they fell behind on a lot of their debts. Car payments, credit card payments and other debts that go unpaid can wreak havoc on one’s credit score, even for a few years after you’ve paid them off. This means that quite a few people who have the finances in place to pay for a home can’t get a bank to touch their application.
This is where Amansad Financial has helped many clients in western Canada. We refer people to “C” or private lenders if those potential clients have at least 25 percent to put down and have adequate income to make payments on the house. These mortgages cost more in terms of interest rate, but the shorter term of these loans (1 to 2 years at most) is designed to give you time to get your finances in order so that you can qualify for a bank mortgage by the time the loan comes due. In the meantime, many private lenders only require you to make interest payments, with the principal due at the end, giving you more flexibility to deal with remaining debts and add more to the amount you have saved for that next down payment. Other private lenders allow you to make payments on a 20 or 25-year amortization schedule.
If you are new to Canada and are worried about qualifying for a mortgage, get in touch with one of our private lending specialists today. We will provide a personalized analysis of your situation and make recommendations about the best way for you to invest in Canadian real estate for the first time.
For those who are seeking Mortgage For Self Employed in Canada, gaining approval for a mortgage is often a difficult process. The income verification process is more complicated when you do not have an employer to verify your work history and ongoing income. Self employment often leads to irregular salary, not necessarily in the sense that it is unreliable but that it is not the same from one month to the next. For lenders, irregular income means that the likelihood of default is greater, which means that your likelihood of approval is less. If you are self employed qualifying for Mortgage is still possible, but it is much easier if you follow these steps.
Self employed mortgage requirements:
Mortgage for Self Employed People: First, claim as much income as you can on your taxes. It is tempting to claim a lower level of personal income to keep your tax liability low. However, when your lender looks at your tax return, it looks like you aren’t making as much money. This severely limits the amount you can qualify for with a mortgage. Instead, state all of your self-employment income on your tax return so that your income appears as robust as possible.
Second, unless your own business is an accounting firm, hire a wise bookkeeper and accountant. When you have well qualified people running your books, you will handle your financial business more efficiently. You can spend your time worrying about marketing your company, while your accountant is worrying about keeping your financials straight. You’ll thank your accountant when your carefully kept financial records impress your potential lender, convincing the bank that you are worthy of a mortgage.
It is also important to stay current on your personal income taxes, as well as any property taxes on other real estate. A lien from the taxing authorities on your existing property or on your self employment income is often the kiss of death when it comes to gaining approval from the bank for your Self Employed Mortgage Loan. If you are delinquent on your taxes, the government has the option to slap a lien on your home, making it even more difficult for the bank even to foreclose on your home and get anything out of it. Make sure that your taxes are paid on time and in full.
Creating a strong credit profile is also important, even for those who are not self employed. However, having a strong track record of paying your bills on time can make lenders give you a little bit of slack for not having a regular income from a company, because an ability to meet your obligations even when your income is not perfectly regular (or reliable) is impressive to a potential lender.
When Getting Mortgage if your Self Employed it is also important to choose a home that suits your realistic income, not what you project into the future. Your credit report and your record of paying taxes is based on your historical income trends, not what you think you will be making six months from now. As a result, you should choose a house that matches what you can pay as opposed to what you think you might be able to pay a few months from now. This may sound like a subtle difference, but it is one that can keep your name out of the foreclosure listings.
When you apply for a mortgage, you’re asking a bank to take a significant risk on your behalf. Think about it — if you buy a house for $500,000 and have 20% ($100,000) to put down, you’re asking the bank to pay the other $400,000 for you. You will end up paying the bank back — and end up paying about $1 million all told for your house — you’re also getting access to $400,000 that you didn’t have in the first place.
This is why applying for a mortgage involves so much paperwork — and so many questions. If you want to qualify for a mortgage in Canada, there are four general factors that lenders consider: credit history, stable income, the down payment you have on hand, and affordability of the loan for you. In the area of credit history, Canadian lenders use scores from TransUnion and Equifax, two credit reporting agencies. If you don’t have 20% to put down on the loan, and you’ll be taking out what’s called a “high ratio” loan (meaning you’re borrowing more than 80% of the purchase price) you have to have a credit score of at least 600 from both bureaus. A recommended 24 months of credit history reporting with at least 2, but preferably 3 trade lines / accounts. If you want a 5% cash back mortgage, in which that 5% is credited to your down payment — or if you are borrowing your down payment from another source, such as a relative or friend, then you need to have a credit score of at least 650.
When you start looking for a mortgage, you’ll deal with a broker who will take a look at your credit history. If you have at least the minimum requirements for a mortgage, then you can start looking at the pre-approval process. If not, the broker will point you in one of two directions: helping you take steps to improve your credit score or (if you have a large enough down payment) referring you to a private lender to get your first mortgage started while you take steps to improve your credit score before that first mortgage comes due for renewal.
Determining if you have a Good Credit Score
When it comes to a “good credit score” mortgage, you need to have a score of at least 680 from both bureaus and a satisfactory credit history. If you have both of these in place, then you can qualify for interest rates that are significantly lower, no matter what term you want to have for your loan.
What if you have a solid income but can’t qualify for a loan? This usually happens because of one of three different scenarios. One involves a successful person who is self-employed, such as a dentist who owns some or all of a practice, or a novelist. He might be raking in a lot of money each year, but it’s not necessarily going to come in like a regular salary, which means that it could stop at any time (at least from the perspective of the bank).
A second scenario involves a person who went through financial difficulties in the past but now has a solid job with a high income. However, payment issues in the past mean that he still has a low credit score, and so he can’t get approval. A third scenario is someone fresh out of college who has a high income but hasn’t built up enough of a credit history. Both of these applicants can have a difficult time dealing with the banks.
If you’re in the first scenario, it’s important to have a solid credit history — a history of paying things like car notes and credit cards on time. Also, having bank statements showing a solid history of maintaining the liquidity to pay the mortgage helps. For people with little or no credit history — or who are repairing their credit — getting rid of negative items on the credit report is key. Sometimes this involves challenging erroneous items, and at other times this involves paying off old items to get them off the report. People who have no credit history should open a credit card or two — but then pay the balances off each month.
Home Mortgage Loans For People With Bad Credit
If you have a credit score above 650, at least 20 percent of the purchase price to put down and a steady income history, getting a mortgage is fairly easy. You’ll get the best rates from most banks, and approval shouldn’t pose any hurdles for you. Home mortgage loans for low credit scores are available.
But what about everyone else? What if you’ve had some bumps in the road, financially speaking? Plenty of people go through situations such as divorce, extended illness or unemployment, and as a result they fall behind a bit on their bills. If they have the means to pay for a mortgage, why shouldn’t they be able to get one?
This is where Amansad Financial comes in. Our business is to connect our clients with alternative lending sources and private mortgage funders who are willing to invest in people. Throughout western Canada, we have helped many people who struggled to find the mortgage they needed elsewhere get into the homes they deserved and make investments in real estate that helped them restore their financial fortunes.
Poor Credit Mortgage Loans
The purpose of a credit score is to give potential lenders an idea of how likely a borrower is to pay back the money he receives. Different lenders, such as credit card companies, auto lenders, retail card merchants and personal lenders, all have different parameters that they use to make their lending decisions. Because mortgage lenders are putting the most money on the table, they have the tightest requirements with regard to credit score.
In some cases, rejecting a potential borrower is the right decision. If you only have 5 or 10 percent to put down, no other appreciable savings, and you’re still several months behind on credit cards and your car payment, you should probably get those things in order before considering a home purchase. After all, if you think being a little behind on a car payment will hurt your credit score, having to go through a foreclosure will ruin your credit profile for seven years.
But what if you went through a divorce a few years ago, and your ex-wife left you with a ton of credit card to pay off? What if it took several months for you to get caught back up after you had to pay your attorney and set up your own household? Your credit score may have taken a major hit. Even now that you’re back on good terms with your creditors and have built up several months’ worth of living expenses in your savings, your credit score can still keep you from getting loan approval from the banks.
Amansad Financial has relationships that can help get home loans for poor credit by find the funding so that you can buy the house you want. While the alternative lending sources with which we are connected do charge interest rates that are somewhat higher than what the traditional banks and other sources charge, because of the elevated risks involved, but you can sign up for a term that’s short enough to allow you to improve your credit profile to the point where the banks will give you money.
There are two different types of lenders to whom we refer borrowers with less-than-perfect credit. The “Alt-A” or “B” group charges interest rates that are slightly higher than the traditional banks because they are more flexible when it comes to credit scores. If your score is too low for one of these lenders, we also have connections to the “C” market, also known as private lending sources. These are individuals and companies who want profits from the mortgage market. They can charge higher interest rates because of the elevated risk, but the short term of the loan (no more than two or three years in most cases) gives borrowers the chance to restore their credit while getting into the home that they want.
Get in touch with one of our lending specialists if the banks are turning your applications down, but you have enough money in the bank to put 15 to 20 percent down on the property you want. We can find a private lender to serve your needs in many cases. Our representative will discuss your situation with you and recommend a lending scenario that meets your needs and gets you on the path to home ownership years sooner than you might otherwise have thought.
Home Buying Checklist
What is required to make a Home Purchase:
- 1 piece on non-expired Government Issued ID (One must be photo – Driver’s or Passport) – may require a second piece of ID at a later date depending on lender
- Corporate Documents, GST Licence (if self employed)
- Job Letter – confirming position held, start date, rate of pay (hourly or salary – if hourly indicate hours worked per week)
- Current pay-stub
- Financials a/o Notice of Assessments (if self employed)
Note: Private Mortgages – sometimes income not required
- Separation Agreement (if applicable)
- Certificate of Full Performance – Consumer Proposal
- Certificate of Discharge – Bankruptcy
- Orderly Payment of Debt (ODP) – Agreement
- Rent-to-Own Agreement
- 3 months of your bank statements or Investment Statement
- Completed Gift Letter and Photocopy of gift cheque and deposit slip for gifted funds to your account
- Copy of Real Estate Contract of property being sold (if down payment coming from sale of property)
- Copy of Most Recent Mortgage Statement for property being sold (if down payment coming from sale of property)
- Full appraisal
- Recent Property Tax Assessment from assessment authority
- Purchase Agreement
- MLS listing sheet
- Copy of 6-month Strata Council Minutes (if applicable) – if purchasing a condo unit
- Annual General Minutes – (if applicable)
- Property Tax Assessment
- Property Tax Notice
- Recent Mortgage Statement
- Rental Agreement (if applicable)
- Name & Address of lawyer handling mortgage and conveyancing – will be required at later date
- Copy of “Void” cheque where mortgage payments will be withdrawn (if applicable) – will be required at a later date
Amansad Financial Process
Application sent to applicant(s)
Application returned & reviewed
Appraisal Completed & Commitment Issued
Commitment returned & sent to DLGN
Commitment signed by DLGN & instructed to Lenders lawyer
Most Other Brokerage Firms
Applicant sent to applicants
Applicant returned & reviewed
Applicant sent to 1 private lender for underwriting
Underwriter sends to Lending Committee for review
Commitment returned to brokerage firm if approved. If not approved, go back to step 3 with new lender
Commitment Issued by Brokerage firm to applicant(s) with summary of terms and conditions
Commitment returned to brokerage firm
Commitment sent back to Private Lender by Brokerage Firm
Lender Committee completes final review
File Instructed to Lenders Lawyer for closing provided key conditions are satisfied by applicants.
8 TOP REASONS TO USE AMANSAD FINANCIAL PRIVATE LENDING SERVICES
1. Fast & Efficient
Amansad Financial has a large DLGN (Direct Lender Group Network) that will fund mortgages throughout select provinces in Canada and will generally provide a response within 24 to 48 hours. Our process is generally 50% faster than most other competitors. From the initial assessment to closing with the lawyer, our transactions move extremely quickly.
2. Private Lending Expertise
Amansad Financial specializes in providing great insight and solutions for customers that do not qualify for traditional bank mortgages. A high majority of the customers we assist have either bad credit and/or simply require a fast mortgage.
3. Extended Lender Relationships
In addition to the DLGN, Amansad Financial also has established relationships with numerous MIC (Mortgage Investment Corporations) across the county that are able and willing to fund large amounts with fair terms.
4. No Upfront Costs To You
Amansad Financial does not charge an upfront fee to complete an initial review and assessment. We do not collect any monies direct from our customers. All applicable fees are deducted from the proceeds of the mortgage and completed by the lawyer.
Note: A Commercial Mortgage Application may be subject to a Letter of Engagement and a Retainer Fee after an initial review of the file.
5. Independent Legal Advice
Amansad Financial requires that all our customers get ILA (Independent Legal Advice) on all mortgages.
6. Transitionary Credit Improvement Services
In Cases where private lending is required primarily due to bad credit, we have strong relationships with 3 rd Party Credit Improvement Companies that will provide you the tools to improve your credit so that you can get back to traditional financing quicker. Private mortgages are not meant to be long term. A Private Mortgage is a means to get you from point A to point B.
7. Transitionary Mortgage Professionals
Amansad Financial Services has partnerships with excellent professionals within the brokerage firm; Brokers for Life Inc. They will be available to assist you to transition you from a private mortgage to a traditional or semi-traditional mortgage before your mortgage renewal.
8. Ongoing Communication
Even after your private mortgage is in place, Amansad Financial will stay connected with you and always be available to address any questions.
If you’re going to take out a private mortgage, you’re starting a relationship with a lender that will work a little differently than what you can expect from a bank or other traditional lender. Let’s take a look at some of the key differences, so you’ll know what you have in store.
Most people take out a private mortgage to get started on home ownership while they’re still repairing their credit. Private mortgages generally have short terms (often one to two years) and sometimes just allow interest-only payments. Private lenders do not have to renew mortgages when the term expires, so you want to keep your options open by making your repayments on time. Your credit score will improve (increasing your chances of a transition to a bank or other traditional lender at renewal). If you realize that you need to adjust your withdrawal date for a particular payment, give your lender at least a week’s notice.
If you change employers during the term of a private mortgage, there are no requirements mandating that you update that information. However if you do provide that update, you strengthen your relationship with the private lender, showing that you are serious about bettering your financial situation. Even if you haven’t notified your private lender of the change, that will be a requirement for extending or renewing the loan in many cases.
Improving Your Credit
If you took out a private mortgage while you intended to improve your credit, there are improvement counselors who can help you get that score up. The purpose of this is to help you qualify for a bank loan when the private mortgage term expires – which will save you tens of thousands of dollars over the amortization of the entire mortgage.
Obtaining New Credit
Try to avoid opening new lines of credit, and keep your credit inquiries to a minimum during the term of your private loan. These activities can affect your score adversely, which definitely will not help you when it’s time to shift from a private lender to a bank or traditional lender.
The Value of Communication
Remember – a private lender is entrusting you with a great deal of capital. The clearer your communication is, the stronger your relationship will be. Private lenders are much more willing to work with borrowers who are honest and upfront.
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