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HOME BUYING FAQ

Can I buy a home with damaged credit?

Bankruptcy filings are at an all time record high. Many consumers have amassed large amounts of debt and have gotten behind in their bill repaying ability. Many think that there is no way they could qualify for a home loan how ever this is no longer necessarily true. A poor credit history, while unfortunate, does not eliminate the possibility of obtaining a mortgage loan. Many people have experienced credit problems over the past several years. In response to the growing number of potential home buyers with credit problems several lenders have now made available loan programs to assist those individuals with getting back on track with their credit profile. Lenders today have helped thousands of people with credit problems get into a home that they thought they could never qualify for. What bad credit does is impact the rate that you are going to pay and the amount of equity that you will have to have in the property. A few credit blemishes will slightly raise your interest rate over the current rate. Mortgage professionals are not qualified to advise you on correcting your credit. A legal professional or someone specializing in that field should handle this. However, many times, due to common last names, or an error of onenumber on a social security card number, credit files can be merged inaccurately. You should request a credit report to better prepare you before applying for a mortgage. That way if there are any errors you can work on correcting them before completing an application.

How Are Pre-Qualifying And Pre-Approval Different?

Pre-qualification is an informal way to see how much you may be able to borrow. You can be “pre-qualified” over the phone with no paperwork by telling a lender your income, your long-term debts, and how large a down payment you can afford. Without any obligation, this helps you arrive at a ballpark figure of the amount you may have available to spend on a house. Pre-approval is a lender’s actual commitment to lend to you. It involves assembling the financial records and going through a preliminary approval process. Pre-approval gives you a definite idea of what you can afford and shows sellers that you are serious about buying.


How Many Homes Should I Consider Before Buying?

Visit as many as it takes to find the one you want. On average, homebuyers see 15 houses before choosing one. Just be sure to communicate often with your real estate agent about everything you’re looking for. Don’t jump into the 1st house you see, shop compare and then make your offer.


Do I Need Private Mortgage Insurance? (PMI)

Some lenders require 20 percent of the home’s purchase price as a down payment. However, many lenders now offer loans that require less than 20 percent down—sometimes as little as 5 percent on conventional loans. If a 20 percent down payment is not made, lenders usually require the home buyer to purchase private mortgage insurance (PMI) to protect the lender
in case the home buyer fails to pay. When government-assisted programs such as FHA (Federal Housing Administration), VA (Veterans dministration), or Rural Development Services are available, the down payment requirements may be substantially smaller.

Ask about the lender’s requirements for a down payment, including what you need to do to verify that funds for your down payment are available.

Ask your lender about special programs it may offer. If PMI is required for
your loan, Ask what the total cost of the insurance will be.

Ask how much your monthly payment will be when including the PMI premium.

Ask how long you will be required to carry PMI.


Can we make changes to the mortgage application, such as length of term, repayment frequency, etc., once the application has been submitted?

Yes. Your ideal mortgage formula has probably already been created, but if you want to consider a change let’s review the possible benefits and implications.

Is GST paid on a resale home?

There is no GST unless the house has been renovated substantially, and then the tax is applied as if it were a new house.*

What is an IAD or Interest Adjustment Date?

If your transaction is due to close in the middle of the month, but your regular mortgage payments are set for the start of the month, your first mortgage payment could be delayed for several weeks. To cover this, a date is set as the IAD and an amount is collected on closing to cover this Interest Adjustment Date period.

How much of a downpayment will I need?

The downpayment usually represents between 5-20% of the total price of the property.

What is the difference between High Ratio Mortgage Insurance and Mortgage Life Insurance? High Ratio Mortgage Insurance protects the lender against payment default by the home buyer. It is required by most lenders if the home buyer has less than 20% downpayment. An insurance premium will apply. Mortgage Life Insurance protects your dependents and loved ones in the event of your death.

When the mortgage lender pays the Property Taxes, how are payments calculated? The estimated amount of your Property Taxes can be added to the mortgage payment and paid on your behalf at the appropriate times. Depending on the balance in your tax account, it may be necessary to increase or decrease the amount of monthly payments to reflect the timing of Property Tax payments.*

* Tax information consists of general comments only, for full details see the applicable legislation or review with your advisor.