BUYING – What to know.
HAVE YOU BEEN PRE‐APPROVED?
Getting pre‐approved for a mortgage before looking at properties gives you a more realistic expectation of what you can afford.
However, keep in mind that the pre‐approved amounts can overestimate what you can actually afford to pay.
Pre‐approval does not guarantee you will be approved once you actually apply if market conditions, interest rates, or your personal circumstances change.
WHERE CAN YOU GET PRE‐APPROVED?
You can get mortgage pre‐approval from a traditional lender, such as a bank and credit union, or by working with a mortgage broker who acts as an intermediary between you and the lender. Mortgage brokers negotiate mortgage terms and rates on your behalf, and usually work with dozens of different lenders, including mortgage finance companies. Their fees are paid by the lender when your mortgage is signed.
WHAT DO LENDERS REQUIRE?
Mortgage lenders use two calculations
to help determine your eligibility for a mortgage – your Gross Debt Service (GDS) ratio and your Total Debt Service (TDS) ratio.
Your GDS ratio is the percentage of your gross monthly income used for mortgage payments, taxes and heating costs and – if you are buying a condominium – half of the monthly maintenance fees. As a general rule of thumb, your GDS ratio should not be more than 32% of your gross monthly income.
Your TDS ratio is the percentage of gross monthly income required to cover monthly housing costs, plus all your other debt payments, such as car loans or leases, credit card payments, lines of credit payments and any other debt. Generally, your TDS ratio should not be more than 40% of your gross monthly income.
FEDERAL GOVERNMENT PROGRAMS
HOME BUYERS’ TAX CREDIT
A $5,000 non‐refundable income tax credit on a qualifying home. The credit provides up to $750 in tax relief to assist first‐time buyers with purchase costs. For more information, check the Canada Revenue Agency’s (CRA) website: www.cra‐arc.gc.ca
HOME BUYERS’ PLAN
A one‐time withdrawal up to $35,000 from
a Registered Retirement Savings Plan (RRSP) by first‐time buyers to help purchase or build a home. Generally, you have to repay all withdrawals from your RRSP within 15 years. For more details, visit CRA’s website at: www.cra‐arc.gc.ca
CMHC GREEN HOME PROGRAM
When you use CMHC‐insured financing to buy or build an energy‐efficient home or make energy‐saving renovations, you may qualify for a premium refund of 25% on your mortgage default insurance. Check out CMHC’s website for more information: www.cmhc‐schl.gc.ca
TAKING THE NEXT STEP
Here’s your chance to be notified of all new listings that meet your criteria, absolutely FREE! Please complete and submit the form below. Not only will you be notified by email of all new listings that match your search criteria within our system, but your home search will also be compared against other participating agents’ listings within your desired area(s). All new listings added to the MLS system, that match your criteria, will be emailed to you up to 24hrs before it is listed on Realtor.ca
Buying a home is a big decision – one that I would love to help you with!
Provided by CREA, the above information is for information purposes only and is not legal advice or a substitute for legal counsel.