Friday, March 23, 2012

10 Most Commonly Asked Mortgage Questions - Week 2

In continuing with our series on the 10 most commonly asked mortgage questions this week we look at down payments & qualifying.  The blog is written by our guest blogger, John Eivindson, from Dominion lending, who services Gabriola, and has provided a wealth of information on lending practices.

How much money do I need for a down payment?

     The minimum down payment required is 5% of the purchase price of the home. And in order to avoid paying mortgage default insurance, you need to have at least a 20% down payment.

What happens if I don’t have the full down payment amount?

     There are programs available that enable you to use other forms of down payment, such as from your RRSPs, a cash-back product, or a gift.

What will a lender look at when qualifying me for a mortgage?

     Most lenders look at five factors when determining whether you qualify for a mortgage: 1. Income; 2. Debts; 3. Employment History; 4. Credit history; and 5. Value of the Property you wish to purchase. One of the first things a lender will consider is how much of your total income you’ll be spending on housing. This helps the lender decide whether you can comfortably afford a house. A lender will then look at your debts, which generally include monthly house payments as well as payments on all loans, credit cards, child support, etc. A history of steady employment, usually within the same job for several years, helps you qualify. But a short history in your current job shouldn’t prevent you from getting a mortgage, as long as there have been no gaps in income over the past two years. Good credit is also very important in qualifying for a mortgage. The lender will also want to know that the house is worth the price you plan to pay.

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