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I would like to purchase my first home, but have not been able to save
a large down payment. Can I get financing with no money down?
By Triston Rans of The Mortgage Group
Saving the required down payment can be a huge obstacle for many new
homebuyers, despite having great credit and steady income. Lending
institutions and mortgage insurers have realized that these potential
homebuyers are valuable to the housing market. This is why they now offer
qualified buyers mortgages with “No Money Down” - and, in some cases, also
with the most competitive interest rates in the market!
If you have good credit (minimum 2 year credit history required), your
employment is steady (minimum 1 year in same line of work; schooling counts
in this time frame), and your income is sufficient to support your mortgage
payment, you could qualify for this type of mortgage.
It is important to keep in mind that you will need some funds available
during the purchase transaction. A deposit must be included with an offer to
purchase at the time it is presented to the seller. The size of the deposit
is typically $1000 - $5000, and it can be borrowed from a family member,
line of credit or even a credit card. The deposit monies will be paid back
to you once the mortgage has closed, shortly after the possession date.
You will also require monies to cover the “closing costs” of the purchase
transaction. These include the lawyer’s fee, registration, property tax and
interest adjustments, and are all calculated by and given to your lawyer.
The deposit monies are a “credit” to your closing costs, however, if the
deposit is not enough to cover the closing costs, then the remainder will
need to be paid to your lawyer approximately two weeks prior to your
possession. The lenders rule of thumb is to have 1.5% of the purchase price
available to cover the closing costs. With today’s rising housing prices,
0.5% - 1% is a more realistic range of what your closing costs actually may
be.
Although 100% financing is typically reserved for the “A” credit population,
there are lenders that will also allow those with slow or bruised credit to
take advantage of this opportunity, but be prepared for higher interest
rates (you can obtain your credit report at
www.equifax.ca ). Every
mortgage situation is unique. Consult with a mortgage specialist who can
personally navigate your credit report and help determine which type of
financing program is best suited for your particular needs.
For more advice on your personal mortgage needs, please contact Triston
Rans, The Mortgage Group, at 571.8142 ext. 237 or email
tristonrans@mortgagegroup.ab.ca |
