Buying your first home will likely be one of the largest financial investments you will make in your life, so it’s important to ensure you are fully prepared beforehand. If you are unsure of where to begin, we at Cedarglen Homes have provided you with some helpful information. Before beginning your search, we recommend you first take time to visit your bank or find a mortgage broker who will assist you the pre-approval process. A mortgage pre-approval will help you gain a clear understanding of the maximum loan amount you could qualify for. The approved amount will be dependent upon a few factors including how much you are willing to put as a down payment, the amount of debt you have (if any), and if you also have a home to sell.
What Information Do I Need to be Pre-Approved?
In order to obtain your pre-approval, you will need to provide the lender with your personal identification information, employment records (i.e. T4 slips or previous notice of assessment from Canada Revenue Agency), current financial details such as any relevant debts or financial obligations (i.e. credit report and credit history, student loans, loans or credit card debt), current monthly expenses and any information on possessions that you may own such as a car.
What is the Stress Test?
In order to qualify for a mortgage at any bank in Canada, you will need to pass the government enforced stress test. Ultimately, this means that you must qualify at the Bank of Canada’s conventional five-year mortgage rate regardless of the interest rate the bank offers you. The reasoning behind this stress test is to ensure that homeowners can afford the necessary payments at the qualifying interest rate.
What is CMHC Mortgage Insurance?
If you plan to make a down payment of less than 20% of a homes total purchase price, you will be required to get mortgage insurance. Mortgage insurance protects the lender should you not be able to make the mortgage payments on your new home. This is beneficial to you as it allows you to put a minimum deposit of 5% down and still receive a reasonable interest rate.
What are the Benefits of Getting Pre-Approved?
Obtaining a mortgage pre-approval can save you plenty of time in the home buying process as you will have a better understanding of how much you can afford for a new home. A home builder will also require a formal mortgage approval letter when accepting the offer to purchase.
If you are still unsure if renting or buying is the best option for you, try taking this online quiz by clicking here.
For more information on mortgage pre-approvals, or to chat with our preferred lender feel free to contact our Cedarglen Homes financial expert;
If you are looking for more information on purchasing your first home, check out our First Time Home Buyer's Guide below.
Have a wonderful weekend,