Having a budget is critical before you start looking to purchase.  Account for all your expenses including vacations and nights out if that is part of your lifestyle.  While you may be able to adjust your spending for a little while, it is difficult to give up things that are important to you long term.  Your budget will help guide you to the amount you are willing to spend each month for a house.

The best place to start is once you have an idea on your budget, speak to a Mortgage Broker to assess how much you might be able to borrow based upon your down-payment and the size of mortgage you may qualify for.  Your Mortgage Broker should be able to provide a general understanding on what an estimated monthly principle and interest payment might be for a mortgage of the size you might qualify.  Then you can assess that information relative to your Budget to determine an approximate purchase price that may be practical to start looking.

Once you have an idea of the budget you have for a purchase, then you should be in a good position to speak to a realtor about properties you may want to look at.

The amount required for a down payment depends on how much you expect to pay for a home.  To calculate the required minimum down payment, for the first $500,000 you require 5 percent or $25,000 anything over $500,000 you require 10 percent.  For a $750,000 purchase you would require $25,000 for the first $500,000 and $25,000 for the remaining $250,000 for a total of $50,000.  However, anything over $1,500,000 purchase requires a 20 percent downpayment.

Yes!  You’re not obligated to take the full amount you may qualify for up front, you only need to take what you require to payout the existing mortgage if you have one, look after any liabilities which must be paid or satisfy the minimum amount of the initial draw, usually around $25,000.  The remainder stays on account for you to access through subsequent advances as you need the funds within some minor minimum requirements.  The important aspect of this is that interest only accrues on the amount you have drawn.  If you qualify for a $500K mortgage and only need $200K at the start, only the initial $200K accrues interest until you request additional funds.

The best time to start looking into a mortgage is as soon as you’re starting to think about purchasing a house.  Simply put, any Mortgage Broker or Bank should be able to help guide you through the process and assist in determining the mortgage amount you might qualify.  Many people think they can use either more or less income than can be used depending on a variety of factors.  Therefore, this is more effective than the online calculators given it is important to assess how much income we can use along with assessing credit score and down payment.

The obvious answer that everyone knows is personal savings like; savings accounts, FHSA, RRSP up to $65,000 per person and other investments.  Things people don’t normally think of but are becoming more common, financial gifts or pre-inheritance gifts from parents or grandparents.

However, sometimes you may be offered a no or low interest loan from a family member which is acceptable but, we then need to calculate a payment based upon lenders criteria and include the payment in the ratios to determine how much you can qualify.

Frequently, when lenders advertise rates, they are quoting a rate which is an insured rate.  That is where you have less than a 20 percent Down payment or equity.  That rate is usually lower than if you have 20 percent equity because while the rate is lower a default insurance premium is added to your mortgage increasing the amount you borrow.  Depending on the size of mortgage the premium being added will be thousands of dollars.  The other potential Is a low-rate option that comes with enhanced penalties if you break the mortgage early or limitations that make them unattractive once understood.

Credit score is a critical component of qualifying for a mortgage.  When you apply for a mortgage, you will be asked to sign a consent form as part of the process which gives the Mortgage broker permission to pull credit.  Credit scores range from 300 to 900 where the magic score required to get best terms and rates is 680 or above.  Most Mortgage Lenders rely on Equifax while most services that consumers draw from through services such as Credit Karma or many free bank services is TransUnion.  While TransUnion provides a guide it does not necessarily equate to the score on Equifax.

The Credit Rating Agencies are essentially data collection and analysis companies where each has their own algorithm to analyse the data.  Certain factors towards having a good credit score are important; no missed payments, don’t over utilize extended credit have at lease two credit items such as credit card(s), Car loan, student loan etc. as this shows responsible use of credit.

Many people feel they wat a credit card with a low credit extension such as a card with a maximum limit of $2,500.  A scenario where this can be bad is you limit your ability to spend but typically spend $2,000 per month but pay it off completely when it is due.  This will have a negative effect on your credit score because you’re using in excess of 70-75 percent of the extended credit even though you pay it off every month.

You would be better having a credit card with an extended credit of $5,000 and spend $2,000 every month and pay it off since your utilization of the extended credit would be well below the trigger point.

As a Mortgage Broker, I can never recommend placing an offer without a condition however this is your option as the potential purchaser.  However, if you choose to enter a Purchase and Sale Agreement without a condition, please understand that is it is accepted by all parties, you are legally bound to close the transaction without exception.  If you can’t close the transaction, your best-case scenario is you will lose any deposit you placed on the house at the time of the agreement.  However, the seller does have the ability to sue you for any damages resulting from the failure to close the transaction in addition to claiming the deposit placed with the offer.

A condition on the Offer provides you with time, usually 5 business days, to ensure you can receive a mortgage approval and the property values at least at the value you’re offering.  If for any reason during that time, you can’t get a final approval or you change your mind, you can then cancel the offer and receive your deposit back by not waiving the condition.