Mortgage 101

By Tanya Laughlin 

I am a dairy farmers wife, mom of 2 boys, and a licensed Mortgage Agent with The Mortgage Advisors.  My passion for helping people with their finances started with my work experience at TD Canada Trust arranging mortgages, investments, and banking for nearly a decade.  As a mortgage professional I’m here to help you reach your home ownership goals, whether you want to buy, refinance or renew.

Mortgage Qualification Guidelines

To pre-qualify or get approved for a mortgage, there are three essential components to traditional qualification guidelines: your income, your credit and your down payment amount. Remember that these are just guidelines and everyone’s situation is unique.

The important thing when it comes to income is to demonstrate consistency and sustainability. If you are an employee of a company, the basic guideline is that you are employed full time with no probationary period with income or hours that are consistent and guaranteed. If you want to use overtime or bonus for your qualifying income, most lenders will want to see a consistent 2 year history. If you are self-employed, you can still qualify, but will require a track record of consistent income. The standard is a two year average of your net taxable income. Other sources of income can also be considered: pensions, child tax credit, seasonal income to name a few.

Before approving a mortgage, lenders will want to see how well you have paid your debts and bills in the past. To do this, they consider your credit history from a credit bureau report. This tells them about your financial past and how you have used credit. Typically, they like to see at least 2 records of debt repayment for at least 2 years, a credit card and a car loan are great examples, and that these credit records have been paid on time and not used over the limit. 

Down Payment:
The minimum down payment to buy a home in Canada is 5% of the purchase price up to $500,000. For homes over $500,000, you are required to have 10% down payment for the portion of the purchase price that is over $500,000. You only need 5% down payment for portion up to $500,000. For homes over $1,000,000 you are required to have 20% down payment. Your down payment can come from your savings, RRSP withdrawal under the Home Buyers Plan, sale proceeds from another property, or as a gift from an immediate family member. In addition to your down payment you will also be required to have 1.5% of the purchase price available for closing costs (legal fees, land transfer taxes etc).

After a review of the three essential components of mortgage qualifying guidelines, the amount of mortgage you may qualify for depends on two things: income and the amount of debt you are carrying. Financial Institutions require you to meet minimum income to debt ratios under regulatory guidelines and stress testing. 

If you want to know how much you could qualify for please reach out and I’d be happy to run some numbers and scenarios for you. 

Managing Financial Stress through the COVID-19 Pandemic

When unforeseen financial circumstances impact your ability to make regular mortgage payments, it’s important for you to take quick action. With early intervention, cooperation, and a well-executed plan, you can work together with your mortgage lender to find a solution to your financial difficulties. 

What Actions Can You Take?
If you find yourself facing financial difficulties, as a result of a recent lay off or family income reduction, it can be an overwhelming experience leaving you feeling uncomfortable and unsure of what to do.

The first step is to contact your mortgage lender before you miss a payment, at the first sign of financial difficulty. Many lenders have posted toll free numbers, email addresses and online forms to help with the influx of requests.

Be prepared to clarify and verify your full financial picture. In order to help your lender fully understand your financial situation, prepare a detailed list of financial obligations including any credit cards, loans, household bills with the amounts owing and their due dates. Be sure to include information about your current income situation, savings accounts, investments, and any other assets.

Most lenders are offering payment deferment options depending on your situation. Please understand that these payments are not being waived but rather added to the end of your mortgage term and interest will continue to accrue. If you do not need a payment deferred and are in a position to continue with your regular mortgage payments that is the best choice.

If you are not sure what to do, I’d be happy to review your options and point you in the right direction.

Thank you!

Tanya Laughlin
Mortgage Agent
The Mortgage Advisors
Licence# 11947