COMMON
MORTGAGE QUESTIONS

How much do I need to buy a house?

The minimum down-payment on any purchase is 5%. Keep in mind that you will also be required to show that you have enough for closing costs as well. The usual requirement for that is 1.5% of the purchase price. So really, you will need to have at least 6.5% of the purchase available when you buy.

I’m self-employed, what are my options for getting a mortgage?

We are almost back to the dark ages for someone who is business for self wanting to buy a home. The key difference comes down to your tax return.

Are you telling the government exactly what you earn or is there any earned income that does not quite make it to your tax return? I’m not here to judge and I am not the taxman. So let’s have a look at all of the information and see what we can work out. There are still some very good programs available under the “stated income” banner.

What do the new mortgage rules change? Am I still qualified?

Currently the new mortgage rules affect one group of buyers more than others. Those with less than a 20% down-payment will need to qualify at a rate of 4.54% no matter what the actual interest rate is on the contract.

This idea of a “stress test” is designed to ensure that buyers will be able to comfortably afford the mortgage payment after the initial 5 year term expires as the rate at that time may be higher than what you agreed to this time around.

At this time, anyone with 20% or more to put down will still qualify at the contract rate except where a variable rate is chosen, a term shorter than 5 years on a fixed rate or anyone applying for a HELOC.

There are rate sites everywhere, why shouldn’t I just go with the lowest quote?

This is a case of “buyer beware”. Everyone wants the lowest rate available. Paying less just makes sense. The problem with a lot of the rate sites is that sometimes it can be a bit of a “bait and switch” scenario:

First, the lowest rates at any given time are always for insured mortgages so if you have 20% or more to put down, that is not going to be you.

Second, there are a lot of “no frills” mortgages out there right now. That doesn’t sound too bad though does it? Who needs a mortgage with frills? I know I don’t. However, what that no frills term is actually covering up is the often very high penalties attached to an early pay out. No one takes a 5 year mortgage expecting to pay it out early but that does happen. A lot more than you would believe. Extra penalty costs can be as high as $6,000 on a $200,000 mortgage. That is on top of the regular penalty. That is not to say that the no frills mortgages are bad, it’s just that you need to be fully aware of the consequences.

What is the difference between a mortgage broker and a mortgage agent?

Not that much really. Personally, I prefer the broker title – I think it sounds way cooler than “Agent” unless agent is preceded by “secret” of course. The real difference though is that a Broker can open and run his or her own Brokerage and an Agent must work for another Broker. There is a whole bunch of training required to get the Broker title, mostly regulatory stuff and not as much fun as it sounds. It does not mean that a Broker is more qualified to help you. There are lots of Agents who probably have more experience than some brokers.

The bank has declined my mortgage application, what are my options?

Your best option is to call a mortgage broker. There are many good mortgage choices from dozens of lenders and one of those may be a perfect fit for you. Or maybe you don’t qualify today and just need a little coaching to get you going in the right direction.

Mortgage brokers will often have more time to spend with you on things like that. Banks are profit centres, money factories if you will. If you don’t fit the mold they need to move on to the next in line. Stop being treated like a number.