Very often, the first question is “what can I afford”. To answer this for a person getting ready to buy, we need to know about what is happening now, income, bills, savings, credit score etc. There are many positive things that you can do in the year or two prior to buying.
It is always best to consult with a Mortgage Broker well in advance to get started on the right path to becoming a home owner. If you already have some savings set aside, then you already have a great head start!
Here are some simple notes and tips to get you well on your way.
Special Income Note:
If using commission, lenders want to see a 2 year average income for commission/bonus income to use it at all. So file your Taxes each year and keep your NOA, Notice of Assessment that is mailed to you.
Down Payment:
You need to have a minimum 5% of the purchase price Down Payment and 1.5% of purchase price in your own funds. This CAN be gifted from an immediate family member.
Ex.
$300,000 home = $15,000 minimum Down Payment, plus $4,500 for Closing costs
$200,000 home = $10,000 minimum Down Payment, plus $3,000 for Closing Costs
Co-signer or Co Borrower:
IF you can have a parent with good income and credit go on as a guarantor for your mortgage, then we can add their income to the file to strengthen your position.
IF you have a partner/co borrower, then their income, credit score etc. can be added to the mortgage as well to strengthen the file.
Budgeting – Try Mint.com – Free:
www.mint.com
Start tracking your expenses, start with what you think you spend and see/track the reality (1-2months!) Set up bill date reminders and get notifications on your cell phone when you go over budget!
Find and stop the bleeding; unnecessary spending that can add to your savings.
NOTE: 3% of all unsecured debt has to be used as payment – even though reality payment is lower. $10K on a credit card = $300.00 payment and nearly $75,000 less mortgage buying power!!!
Crazy…..pay them down as much as possible!
Saving in RRSPs :
Save on Income Tax for filing next spring, lock it away!
Able to use up to $25,000 each TAX FREE as a First Time Home Buyer on a qualifying home value. Once you know what you can save per month, we can make it automatic (like a bill payment) OR you can save organically and then deposit every month or two into your RRSP account.
CALL ME – I have access to full line of Bank Products; RRSPs, TFSAs, Lines of Credit, Visa etc.
Check your Credit Score:
Equifax Customer Inquiries 1-800-465-7166
Pull your own credit bureau. Identify any errors or issues and fix now. You can call me when you get it, we can review and I can provide some tips on how to improve if need be!
Pay all bills on time, more than minimum payments!
Use NO MORE than 50% of available limit on cards – Going over 65% of limit reduces your score – EVEN if you are NOT over limit! Easy TIP: Pay on time and pay down debt a bit over next few months….then call to increase your limits! This will lower your % of credit utilization immediately for free and be a plus to your credit score.
Become a Rock Star that any lender will want to work with!
I really hope that this helps you in starting forward progress – starting is the hardest, but then it quickly becomes normal. Remember – we here at Dominion Lending Centres are here to help!
Kris Grasty
Dominion Lending Centres – Accredited Mortgage Professional