Home Mortgage in Canada

Banks don’t lend to anyone. They want to make sure you are capable of paying back whatever you borrow so they ask two basic questions:

1. First, is your income large enough to cover mortgage payments and other expenses?
2. Second, do you have enough cash to cover mortgage closing costs and put some money upfront as down payment?

The answers to both questions should be YES to proceed with home mortgage qualification.

To learn in detail how credit score, income factors, down payment, monthly payment, documentation and closing costs affect home mortgage qualification, simply click the appropriate link:

• Mortgage and Credit Score
• Income and Mortgage
• Documents Needed for a Mortgage
• Mortgage Closing Costs
• Down Payment
• Mortgage Payments
• Mortgage Insurance

Do I Qualify for a Home mortgage?

Qualification is always relative to home value. Someone who qualifies for a $200,000 mortgage may not qualify for a $500,000 loan. The calculator below will help you determine if you qualify for a home mortgage. Enter desired mortgage amount, interest rate, mortgage length, and the Mortgage Calculator will estimate your monthly payments. Then add $100 to the amount of the eventual monthly mortgage payment calculated to cover taxes and insurance. Determine how much interest you will pay over the years with a Mortgage Calculator.

How Credit Scores affect Home Mortgage interest and payments

(Based on a $300,000 mortgage. Source: fico.com – Use this only as a guide.)

Important Considerations:

Minimum qualifying mortgage credit score is 580. Anything lower will be turned down by most lenders.

The higher your credit score, the lower your interest rates.

The lower your credit score, the higher your interest rates.

Being late on credit cards, mortgages and other loans, lowers your score.
Paying your bills late is also bad for credit.

Paying on time is one of the easiest ways to raise your score. For best interest rates, pay your credit cards and other bills on time.

Think of it this way: Raising your credit score is similar to losing weight: It takes time and there is NO quick fix. In fact, quick-fix efforts can backfire, according to fico.com.

Learn in depth about mortgage and credit score and how they affect interest rates, as well as payment factors that impact your score.

Home Mortgage Down Payment

The minimum downpayment is 5%. If you provide less than a 20% downpayment, you’re required by law to get mortgage insurance which can cost $60 to $175 per month. If you don’t have the cash for the downpayment, you can withdraw up to $20,000 from the Government of Canada’s Home Buyers Plan. Lenders also want to see an amount of deposited cash equal to at least a few months’ mortgage payments.

Learn more about mortgage down payment rules.

Income and Mortgage Payments

• If you provide LESS than a 20% down payment, the amount of your monthly income that can go towards monthly mortgage payments is restricted to 44%.
• If you provide MORE than a 20% down payment, then up to 50% – 60% of your monthly income can go towards monthly mortgage payments.

Learn in detail about mortgage payment and income rules.

Home Mortgage Closing Costs

Closing costs range from 2% to 6% of your mortgage. A down payment is not considered part of mortgage closing costs. Mortgage closing costs include lawyer fees, document preparation fees, home survey, government taxes and more.

Learn in detail about mortgage closing costs.

Documents You Need for Home Loan

• Official letter of employment from the company showing amount you’ve earned this year and length of employment.
• Copy of your most recent T1 Tax Form.
• Financial bank statements.
• Property details.
• Proof of asset ownership (i.e. ownership of your car, other valuables or properties)