Liza Lambert

Whether you are building your own house, buying a new property, gathering funds to do a renovation project, or Refinancing your current Mortgage at a much Lower Rate, you’ll be looking for Funding -- Money, Money & More Money! Here are some commonly asked questions regarding funding for a Mortgage or a Home Improvement Loan.

Where should I go first to get a Mortgage?

Keep in mind that it is generally easier to work with a Broker, since they have the ability to be a lot more flexible than a conventional bank. Also, their rates will often be considerably lower than what the banks are offering, too, so shop around – this could save you a fair bit of money. Brokers can often get a mortgage for clients that a bank won’t even touch, and they’ll do it at your convenience, for the most part, so you can have a more relaxed meeting with them.

What questions will a Broker ask somebody who’s looking for a Mortgage?

There are three main things you will be required to provide:

i.Verification of Income

ii.How much and where the Down Payment is coming from

iii.Personal information for Credit Checks (Birthday, Social Security Number, Address, Job Letters, Pay Stubs, 3 years worth of Tax Returns, 3 months worth of Bank Statements, any current Retirement Savings Funds…)

Your Banker or Broker will want to confirm your ability to qualify by doing a GDS Ratio (Gross Debt Ratio) and a TDS Ratio (Total Debt Ratio).

A Gross Debt Ratio is determined by taking the Mortgage Payment, the Property Taxes, and a Heat Component (really hot areas will be exempt from this, I’m guessing!), which is usually around $50.00. These numbers are added together. That number is multiplied by 12, then divided by your Gross Income Amount. This number can’t exceed 32% of your Gross Income. Some banks &/or brokers may have different criteria, but this is a commonly used method to see if a client can qualify for a mortgage.

The Total Debt Ratio takes the above information (the GDS Ratio) along with all other debts and payments (whatever else you have to pay per month – credit cards, support payments, etc.) to make sure that the Grand Total of all of your payments, including the new mortgage and taxes, won’t exceed 40% of your Gross Income.

N.B. Don’t get too hung up on the math – that’s the job of the banker or broker. This is just info to give you a good understanding of how they get their numbers.

What if someone has a job that is technically referred to as “Part-time”, but they make a “Full-time” wage. Can they qualify for a Mortgage?

You can apply through a Mortgage Broker (probably your best bet) to see how much your Gross Income will allow you to qualify for. It is particularly beneficial if you have a solid work history (have been at the job for a few years, or more). A Broker will know how to present the documentation to help you get a mortgage. This is particularly important, now, since so many companies and Government Services hire ‘Part-time’ or ‘Contract’ employees. These can be career positions, and you can be there for fifteen years, and still be flatly turned down by the regular banks. Don’t give up on your dream to own your own home because you’re in a situation like this – call a Mortgage Broker, and give it a shot. If that still doesn’t work, try another one. What’s the harm? At the very least, you can get an honest answer of what you need to do in order to become qualified. Either way, you’ll be that much closer to owning your own place, and that’s the goal!

Is there an easy way to calculate a Mortgage?

There’s a formula that I use that is relatively accurate, give or take a hundred dollars, or so. At the very least, you’ll get a ballpark idea of your monthly payment (not including the Tax portion), and whether you can qualify for that amount. Remember that when you’re qualifying for Mortgage money, if you’re even $80.00 over what they think you can pay, you won’t get the mortgage. It’s best to Pre-Qualify for a mortgage, and ask how much you will qualify for before you go house-hunting. Keep in mind that as the Interest Rates get lower, the more you’ll be able to qualify for. Don’t go crazy, though, since all the costs go up as you increase in house size, and the monthly operating costs might end up being higher than you thought, then you’ve got a big house and a crappy lifestyle. Stay within your means; stay happy and comfortable.

Can I qualify for a Mortgage based on the lowest rates out there?

Different Lending Institutions will have different rules, but you will generally have to qualify under their 3 Year Rate, which will be higher than the lowest rates available. Some institutions will use the 5 Year Rate (primarily regular banks).

What’s the difference between an Open and a Variable Rate Mortgage?

An Open Mortgage is one that can be paid out at any time, but you will pay a higher Rate for this privilege. This is a good choice if you’re not sure how long you’ll be staying in the home. You’ll save on the possible Penalty Payments you would have to pay if you had a Fixed Rate Mortgage, and had to move before the pre-chosen Time Period had elapsed.

Summary

Just so you know, a Real Estate Lawyer will be very pleasant to deal with ... they don't seem to deal with a lot of animosity, like many other types of Lawyers, and that probably accounts for their serene expressions! ha,ha,ha! They're there to help you get into or out of your home, so don't worry -- it won't hurt a bit!