How to Prepare for Getting a First-Time Home Buyer Loan
Buying your first home is a substantial financial investment. For this reason, it’s essential to arm yourself with adequate information and a solid plan to help you balance your debt, income, and expenses. Contact us to learn more.
Here are a few tips you should know before applying for a first-time home buyer loan.
Saving a Down Payment
If you’re buying a home, focus your efforts on saving a minimum of 5% of the home’s price. Making a larger down payment lowers the loan amount you need to pay and will also decrease your monthly payments.
With a down payment of less than 20%, your first-time home buyer loan will require mortgage default insurance, which will be factored into the loan amount. Having 20% or more down payment saves you from paying default mortgage insurance.
Passing the Mortgage Stress Test
A stress test helps you determine how much you can afford when your circumstances change. What happens if you lose your income? What happens when the interest rates increase? The stress test also helps lenders determine if you can afford to pay off your first-time home buyer loan at a higher rate than you would pay.
Usually, being able to pay at least 2% above your contracted rate is sufficient to prove that you can afford your mortgage. Your income should be high enough, or your debts should be low enough to enable you to qualify for your first-time home buyer loan.
Whether you pay mortgage insurance or not, the stress test applies. Therefore, taking the time to analyze the mortgage you can afford with and without your current income is essential.
Timing Your Application for the First-Time Home Buyer Loan
As soon as you have decided you want to purchase your first home, talk to a mortgage broker and get pre-qualified. Your broker will let you know if there are any obstacles you need to overcome before you can get approved for a mortgage. It is never too soon to take a quick look at your financial picture to make sure that homeownership is in your future.
Applying for a Mortgage when You are Self-Employed
Whether you are incorporated or a sole proprietor, expect to provide extra documentation when applying for a mortgage. All lenders within Alberta require that your income taxes are filed and up to date. Any other bookkeeping or documentation should be readily available.
Getting Your First-Time Home Buyer Loan
It’s advisable to consult a Dominion mortgage broker to help you review your financial situation. With the right analysis, you can plan your first-time home buyer loan, and ensure that you tick off all boxes with your lender in Edmonton. Book your appointment with us today!Request Mortgage Info
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