1 May

3 Key Mortgage Qualifying Factors

General

Posted by: Katya Murphy

When completing a mortgage application, there are 3 main factors that are looked at to ensure borrowers qualify. 2 of these factors are ratios helping determiner the borrower’s affordability and the 3rd factor is credit.


Gross Debt Service aka GDS
Gross debt service is a ratio that calculates the expenses of owning the home. This includes the mortgage payment, heat, property taxes and if buying a condo, ½ the monthly condo fees are included as well. After adding up the expenses we divide that by your income to determine the ratio. In order to qualify under ‘insured’ or “insurable” guidelines, this ratio generally cannot exceed 36-39%.


Total Debt Servicing aka TDS
Total debt service is a ratio that calculates all the same housing costs PLUS all your monthly finance expenses, such as lines of credit, car payments, credit cards, student loan etc.  divided by your income. In order to qualify under the “insured” or “insurable” guidelines, this ratio cannot exceed 42-44%.


Credit Score
Credit scores have a large impact in showing your credit ‘worthiness’. When applying for a mortgage your credit report will be run to help identify how well you manage borrowed money. Ie. Credit cards, lines of credit etc. Scores range between 300-900, 300 being poor and 900 being excellent. The higher your score the better chance you’ll be approved and given opportunity for lower available rates. The lower your score it’s likely you will be given a higher rate or even declined.


Pre-Approvals
When obtaining a pre-approval 90% of the time it is automatic, focusing on these 3 factors. To learn more in depth qualifying guidelines that lenders look through to determine the overall approval, click here!

If you have questions regarding qualifying for a mortgage or interested in buying your first home, contact me today!

1 Apr

Qualifying for your First Home & Mortgage

General

Posted by: Katya Murphy


When buying your first home, there are key things that lenders are going to evaluate to help determine if they would finance your mortgage. Each lender and each insurer have specific criteria and regulated guidelines they must follow when lending you money for a mortgage.  Here are key things that are looked at!

Credit & Credit History:


Lenders want to ensure that you’re capable of borrowing money and repaying it. To qualify for your first home lenders typically look for the following:
1.  2 active trades (2 Sources of credit, ie. Credit Card, line of Credit, Student Loan, Car Payment)
2. 2-year history (having both trades/sources of credit for at least 2 years)
3. Credit limits of $2000 or more for each trade.

Down Payment & Closing Costs:


When buying your first home, you must have the down payment and closing costs. The minimum down payment requirement is 5% of the purchase price. Closing costs are an additional cost to the down payment, approximately 1.5% of the purchase price. Many lenders accept fully gifted down payments or partial gifted down payments from family members. When putting less than 20% down you are required to have default insurance.

Qualifying Rate & Stress Test:


When qualify for your mortgage you’re required to qualify at a higher interest rate than what your lender would be giving you. This is known as the ‘Stress Test”. When putting 5-19.99% down you must qualify at 5.34% (subject to change). When you’re putting 20% down, you must qualify at the great of 5.34% or the contract rate +2%.

If you have any questions or concerns about buying your first home, please contact me and I’m happy to help. If you’re looking to dive right in, Start you no obligation application today!

27 Mar

Pre-Approval Expectation Vs. Reality

General

Posted by: Katya Murphy

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Expectation of a Pre-approval 
Many people believe having a pre-approval is the same as having a mortgage commitment or full approval, might as well have the keys and money in the bank! That is an understandable expectation because it is largely what is advertised and forced on many.

The Reality of your Mortgage Pre-Approval 
In reality; your mortgage pre-approval is a 30 second automated algorithm that looks at 3 Factors. 1)Gross Debt Servicing, 2) Total Debt Servicing and 3) Credit Score. These ratios and the Credit Score can likely be misleading if even the slightest bit of information is entered incorrectly, simply ‘guessed’, or if your credit report isn’t looked over carefully/at all. Interested in learning how to prevent this from happening? Keep reading…



How a mortgage broker can help 
A mortgage agent is going to spend time with you, gathering all the details to complete your application thoroughly. They will pull your credit report and identity if there any hiccups or potential road blocks to be aware of. They will request your income documentation up front to better qualify you and to minimize the chance of surprises down the road when submitting the application for your actual mortgage approval.
Lastly, if you don’t qualify for a home, a mortgage broker can help you determine what needs to change and what you need to do in order to qualify in the future. They are working with you and for you, not the bank.

Why is this this so important?
Gathering the information and getting to know you is apart of finding the right mortgage for you. We want to know about your goals and get a better understanding of what you’re looking for, both long term and short term. It will help us qualify you to start house shopping with confidence and have a better chance at turning into a live approval.

This is why it is important to talk to a mortgage agent, about getting a proper pre-approval and pre-qualification. You’ll have a better sense of what to do and you will truly get qualified in 25 minutes vs. a 30 second pre-approval that really doesn’t take the whole picture into account.

3 Dec

Homeowners have Options: Refinancing

General

Posted by: Katya Murphy

What is a ‘Refinance’?

Refinancing is the process of obtaining a new mortgage to replace your existing mortgage while the purpose is to access equity in the home. Homeowners have the ability to access up to 80% of the equity in their home!

 

Why Refinance?

There are several reasons why someone may want to refinance their mortgage:

  • Debt Consolidation (Pay off those high interest Credit Cards once and for all!)
  • Home Renovations
  • Large Purchases (House, tuition, etc.)
  • Obtaining a lower interest rate/Converting from fixed to variable

A Refinance is paid as a lump sum to the home owner, allowing them to use the funds as planned. Often the lender will pay out the debts themselves to ensure they are actually paid.

 

Costs/Fees

When refinancing there are a few fees to be mindful of. If you are breaking your current mortgage, (ex. Have a 5 year mortgage term, and going to refinance at year 3) there will be penalties involved.
These penalties will be calculated based the type of rate you have. If you have a variable rate your penalties will be 3 months interest.
If you have a fixed rate your penalties will be the greater of 3 months interest or Interest Rate Differential (IRD).
Other costs often associated with refinancing are:

  • Appraisal Cost
  • Legal Fees

Most importantly, before breaking your mortgage, call your lender to determine the penalty of breaking your mortgage. This is important because you don’t want to loose money, we want you to get ahead- no stress, therefore sometimes it is better to wait. Contact your DLC mortgage agent today to discuss if a refinance is right for you.