Buying your first home is an exciting yet challenging journey. We do our best to educate all our clients before going through the home buying journey. We know that first-time home buyers are likely to have a lot of questions and need extra guidance. We specialize in just that! Call us today to learn more or read on to get a glimpse into the first-time homeowner buying process.

Understand the Costs Associated with Homeownership

The second step in the first-time homeowner buying process is saving for the home. You need to put money aside for:

Down Payment: The minimum down payment required is 5% of the home’s purchase price.

Legal Fees: You will need to hire a lawyer to finalize your mortgage and all associated paperwork.

Property Taxes: You may be required to pay back the current homeowners a portion of the property taxes already paid for the months you will be residing in the house.

In addition to your mortgage payment, there are other ongoing costs associated with home ownership.

Mortgage default insurance: If you don’t have 20% or more for the down payment, you need to pay for CMHC default insurance. This amount is included in your monthly mortgage payment.

Insurance: Homeowners insurance protects your home from unexpected damage.

Condo and/or HOA fees: Some condos, townhouses and other community living properties require homeowners association fees to be paid each month in addition to the mortgage payment.

Repairs and utilities: You need enough cash to pay for your utilities and make repairs in your home.

Save Your Money & Invest Wisely

As you save money, you also need to be mindful of where you put your money. You can ease the first-time homeowner buying process by using the following accounts:

Tax-Free Savings Account: This is an account that allows you to save money without getting taxed.

Registered Retirement Savings Plan (RRSP): This account will enable you to save money for your retirement. You can access up to $35,000 under the Home Buyers’ Plan (HBP).

Investments: If you want to buy a home, you may want to keep your money in easily accessible investments such as low-risk mutual funds and short-term guaranteed investment certificates (GIC). Be aware of the lock-in term for your investments.

Check Your Credit

A mortgage is a loan, and as such, your creditworthiness affects the type of loan and terms you can access. Checking over your credit report with a mortgage broker makes your first-time homeowner buying process more manageable. It gives you a better understanding of your financial situation to help you plan. If your broker notices that you have too many debts, insufficient income, or unpaid collections, you will be advised on the steps you can take to improve your credit rating.

Know What You Can Afford

The most important step in the first-time homeowner buying process is knowing what you can afford. There are hundreds of homes in your desired locale, each with different prices. The best way to find out what you can afford is to speak with a mortgage broker regarding your income, assets, debts, credit score, and down payment to give you a mortgage pre-qualification estimate. With a figure in mind, you can find homes that you can afford while still managing other expenses.

Find Mortgage Experts for Your First-Time Homeowner Buying Process

Buying your first home is an overwhelming process that takes experience to understand fully. It helps to work with mortgage brokers for guidance and expertise during the first-time homeowner buying process. Brokers have access to a variety of mortgage options from many banks and lenders. On top of finding the best mortgage for your needs, they also help you navigate the paperwork associated with pre-approval and approval. Jamie Arthurs is here to help you understand the home buying process and qualify for your first mortgage. Contact her for more information.

If you are looking to buy a home, you have probably heard about a debt to income ratio for a mortgage. This is one of the many parameters that a lender will use to assess if you will be able to pay back on a mortgage easily enough. There is no official perfect number for this amount, and it will depend on your situation, including your credit rating and what type of debts you currently hold.

Debt to Income Ratio for Mortgage Calculation

The calculation is pretty simple; your lender will take all of the monthly debt payments you make and add them up, debt = D, your total monthly income = I, and X = the amount of the monthly mortgage payment they think you can handle.

(X + D)/I x 100% = Debt to Income Ratio

If you want a $300,000 home, your mortgage payments will be in the ballpark of $1,500 per month. Let’s say you paid off all of your student loans; have a balance of $5,000 on a credit card with a minimum payment of $150; and you also have a car loan that costs you $250 a month. In this case: X is $1500; D is 400, and X + D is $1900

In Canada, banks will usually accept a debt ratio up to 42% or 44% if you have really good credit. Different banks have different rules, making the knowledge of an experienced mortgage broker extremely valuable. Based on the debt load above, if you make $60,000 per year ($5000 monthly), then the formula looks like this: $1900 / 5000 X 100 = 38% Debt to Income Ratio. Generally, if you have good credit and the above formula matched your financial situation, there would be a good chance that you will get approved for the $300,000.

If you or your household only made $45,000 per year ($3750 Monthly), then the formula looks like this: 1900 / 3750 X 100 = 50.67%. A debt ratio of 50.67% would not get approved by a bank that had a maximum debt ratio policy of 44%. Basically, a debt ratio this high would mean that in the eyes of the bank, you cannot afford the payments and have money left for other living expenses. Your debt to income ratio is too high.

What if I Have a High Debt to Income Ratio?

Your best bet to lower your debt to income ratio is to start paying down your debts. Pick off the smaller balances first, then start to work on the larger ones, starting with the ones with the highest interest rates.

Earning a higher income will also be helpful in lowering the debt ratio. Doing both will have you in your own home in no time!

Jamie Arthurs can help you get into your own home, contact her today!

CREDIT! Yet another chicken and egg story of the real world!

I don’t have credit, but I need credit to get a loan, credit card, or mortgage. So, how am I supposed to get my first mortgage without any credit? Many young people have very little knowledge of their own credit and how credit works. You don’t need a well-established paper trail of formal credit in order to get a first mortgage. Read on, and your first mortgage will seem much closer than you initially thought.

Do I Need a Credit Card to Get My First Mortgage?

Having two credit cards for at least two years, that are used regularly, in good standing with no late payments on anything on your credit report is the best way to attain a high credit score. In the case that you are new to credit and still want your first mortgage, you still may have options.

The answer to the question above is no; you do not need a credit card to get your first mortgage. Mortgage Brokers can help you find banks that will look at other types of credit such as utility bills or cell phone bills, and negotiate with the banks to approve a mortgage to help you buy your first home.

Sometimes in cases like this, the mortgage lender will want twelve months of bank statements so that they can see your money management history. If there are a lot of returned cheques or charges it would be difficult to get a mortgage approved.

Build Your Credit

Once you get your first mortgage, you will be building your credit while living in your new home. Owning a home and not having late payments on your credit report will open up new credit options.

You will likely be receiving a lot more credit card and store card offers. It is crucial that you don’t get too enthusiastic with all these new offers. Your actual financial situation has not changed, you are just being offered more credit. Make sure that you don’t overextend yourself with exorbitant future payments because that could lead to bankruptcy and losing your home in the long run.

Jamie Arthurs can help you obtain your first mortgage and home. Contact her today to get started!

Homeowners have many options for obtaining the funds needed to renovate their properties – such as home equity loans, home equity lines of credit, personal loans, and mortgage refinancing. But what if you plan to purchase a home that needs fixing up? In this case, there is another frequently overlooked home renovation loan option: a purchase-plus improvement mortgage.

A purchase-plus improvement mortgage allows home buyers to borrow up to 10 percent of the purchase price to a maximum of $40,000.00 for home improvements. Purchase-plus improvement mortgages typically carry lower interest rates than credit cards, lines of credit, and other home renovation loan options.

How a Purchase-Plus Improvement Mortgage Works

Let’s say you’re planning to purchase a home for $250,000, and the renovations you plan to complete on the home would increase the property value to $275,000. You can apply for an extra $25,000.00 to be added to your mortgage, making the total amount that you can borrow $275,000 less your required down payment. This home renovation loan, is a great way to finance your dream kitchen in an otherwise perfect home for you.

How to Obtain a Purchase-Plus Improvement Mortgage

Your lender must approve of the amount you wish to borrow to make improvements on the home you’re buying. They will require quotes from a contractor for the desired improvements prior to approving the application. Once your home renovation loan is approved, the extra money is kept in trust until the agreed-upon improvements have been completed. After the work has been completed and appraised, the funds will be released to you.

Still not sure if a purchase-plus improvement mortgage is the best way to obtain the home improvement funds you need? Jamie Arthurs can help. Contact us for more information about whether this type of home renovation loan is right for you.

Mortgage refinancing involves taking out a new home loan to pay off your existing one. There are many reasons why a homeowner might consider refinancing, but the most common reason is to consolidate other debt or lower your interest rate. Not only does consolidating high interest debt save homeowners hundreds of dollars every year, but it also helps make monthly bills more manageable. But when is the right time to refinance? Here’s how to determine whether mortgage refinancing would be beneficial to you.

Consider Interest Rates on Unsecured Debt

A great exercise to do, is to add up all of the interest you are paying monthly on your high interest credit cards and loans. Do you have the ability to consolidate those loans into your mortgage? Circumstances vary, however, if you are paying over 10% on loans outside of your mortgage, there is likely enough savings to consider mortgage refinancing. Before applying for mortgage refinancing, be sure to contact a mortgage broker to see if this option will be beneficial to you.

Calculate Extra Costs

Refinancing can incur some administrative costs, including closing costs, mortgage penalties, and appraisal fees. Before seeking mortgage refinancing, it’s important that you take these extra costs into consideration. If you are consolidating debt, the savings are likely enough to recoup the closing costs on the new loan. If, however, you are only refinancing for a lower interest rate, it is important to take these costs into consideration and make sure the savings are still there and it still makes financial sense.

Refinancing your home loan can be a great way to reduce your interest rate, but it’s important to consider your financial goals and determine whether refinancing would be advantageous in your situation. Contact Jamie Arthurs to discuss whether mortgage refinancing is the right solution for you.

When your mortgage matures, it indicates the end of the current term of your loan. When your term is shorter than your amortization period, you have to go through the renewal process several times until you pay off the entire loan.

Before your term expires, your lender will send you a renewal offer. The offer includes a new term, and a new rate.

The renewal process is also an opportunity to find a new lender with more favourable rates and terms. When your mortgage is up for renewal, it can mean re-qualifying for your mortgage.

Let’s go through different scenarios to explain what you can do if your mortgage renewal is denied.

Why Your Current Lender May Deny Your Mortgage Renewal

One of the advantages of sticking to your current lender is that they typically don’t have to re-qualify you. However, your lender always has the ability to request details about your current financial situation before approving your renewal. The lender may verify that your debt to income ratios are still reasonable and that you still have the ability to make your payments. Though this practice is uncommon if your mortgage has been paid as agreed.

Why A New Lender May Deny Your Mortgage Renewal

If your current lender denies your renewal, you can look around for a new lender. You need to submit a new mortgage application and re-qualify for the mortgage.

Just as when you got your original mortgage, the lender will confirm income, credit, and mortgage repayment history. If any of these items do not fit their guidelines you may be denied by that lender.

What to Do When You Are Denied

If you are struggling to find a lender to renew your mortgage, you can look at alternative options with the help of a mortgage broker.

First, if your original lender was an “A” lender, then you can approach a “B” lender about your situation. “A” lenders are usually banks or credit unions, while “B” lenders are trust companies and equity lenders. “B” lenders are more likely to accept your mortgage renewal since they work with individuals with low credit scores and people with more debt than an “A” lender would handle. For this to be an option you will need at least 20% equity built up in your home. It is important to work with your mortgage broker to find the most suitable renewal.

Mortgage Renewal

To secure a great mortgage renewal, ensure you make timely monthly payments, and maintain a good credit score. If you are planning to renew your mortgage, contact Jamie Arthurs for expert assistance.

Buying a home is an exciting venture; it can also be overwhelming and stressful! There are many factors to consider, such as a mortgage broker. You want to find someone local who knows the market, so if you’re buying in Edmonton, you’ll want a mortgage broker in Edmonton, and likewise if you’re buying in Toronto, you’ll want a Toronto rep. The key is finding the right lender for your needs. Just a couple of decades ago, the only choice for a mortgage were big banks and credit unions. You were at their mercy for things like terms and interest rates. Today, much has changed, and consumers have more options; hence, more buying power.

A mortgage broker can offer you better deals, better choices and more flexibility when it comes to mortgages. Whether you’re looking for a mortgage broker in Edmonton, or the Yukon, brokers know how to get you the best mortgage for your specific needs. Here’s a look at brokers vs. banks:

Banks and Credit Unions

Typically, they offer limited mortgage products and they don’t always have your best interest in mind. Banks and credit unions are in the business of making money – and they will do anything they can to get it. That means offering higher interest rates, and pushing fixed-term mortgages, which ends up costing you more money in the long run. Once you’re locked in to a mortgage, it’s very expensive to change or get out of it if you come across a better deal. It could end up costing you thousands of dollars.

You’ll also have to shop around from bank to bank and do your own research as to which one offers the better deal. Each one will do their own credit checks, which could hurt your credit score.

Mortgage Brokers

Mortgage brokers work with many different lenders and do all of the leg work for you. They only do one credit check and will work on your behalf to get you the best deal possible for a mortgage. They also work with private and monoline lenders – lenders who only deal in the business of mortgages. They will not try to cross-sell you on other products and services like RRSP’s, GIC’s or savings accounts.

Many people prefer the flexibility and convenience of working with mortgage brokers, as opposed to a single financial institution.

If you’re ready to find your mortgage broker for your financial needs, contact Jamie Arthurs in Edmonton, Alberta today!

There are several reasons for wanting to refinance your home. Perhaps you’re looking to pay off your credit card debt, update your kitchen, or reduce your mortgage payments. Refinancing can make good financial sense; but there are things you should be aware of before you jump in to the first offer available to you. Mortgage refinancing should be researched thoroughly. Here’s how you can avoid the biggest mistakes when considering mortgage refinancing:

1. Don’t go to your bank first:

Many people do this because they think they will get a better deal as an existing customer. Actually, the opposite is true. They already have your loan, so why would they give you special treatment? If you do end up going to your present bank at some point, don’t tell them you’re shopping around; instead, tell them that you’re considering paying off your mortgage early.

2. Know what the interest rates are:

In the case of mortgage refinancing, knowledge really is power. Do your research and know what the current interest rates are. It’s also crucial to know what you’re paying now and what the terms of your mortgage are.

3. Know what your costs will be:

There will be a penalty for moving your mortgage and it could be three months’ worth of interest or more. Make sure you understand and account for this and any other related costs when mortgage refinancing.

4. Make sure you’re comparing apples to apples:

A quote for a 5-year fixed mortgage at one lender is very different than a 10-year fixed mortgage at another. Be careful that you’re comparing similar products.

5. Be careful to not overvalue your home:

Your home is your castle it’s true but try to be objective when evaluating its worth. A coat of paint in the kitchen will brighten things up but won’t add $10,000 to the value. It’s best to call a realtor, or research what similar homes sell for in your neighbourhood.

If you’re ready for a mortgage refinancing solution, contact Jamie Arthurs  today!

When your mortgage is up for renewal, do you know what you are going to do? You will receive a slip in the mail from your bank saying that to renew all you have to do is sign the form and mail it back in. Pretty easy, right? Banks are hoping that you will be too busy and too lazy to look into all of your options before sending that little slip of paper back in to them.

What Happens When I Send my Mortgage Renewal Back to the Bank As Is?

If you sign the paper and send it back to the bank, you are telling them that you are ready to stay with them on the new term that they have offered you. Often, this means that you are not getting the best rate that is available in the market. Your bank will change nothing except your interest rate, and there may be other terms that you may want to renegotiate.

What are my Other Options for Mortgage Renewal?

If you don’t want to take any money out or access your equity then a new bank will take over the mortgage, giving you a better rate and also covering the costs to put their name on your property title.

You also have the option of accessing some equity by refinancing. Seeking out the help of a mortgage broker at mortgage renewal time will ensure you are getting the best advice. Mortgage brokers have access to many different lending programs. They are also very knowledgeable in the industry.

How to Prepare for Mortgage Renewal in Edmonton

Your bank may or may not contact you in advance. It is important that you are proactive, by beginning to research your options approximately 4 months before your mortgage renewal date. Use this time to explore your options and if you can save money by going a different route. Again, finding the extra time to go to many banks is hard therefore go with a mortgage broker so they can do that work for you.

Jamie Arthurs Mortgages can help you find the best options for your upcoming mortgage renewal. Contact Jamie Arthurs today.

The Debt to income ratio (DTI) is the measure of the debt held by a household to the amount of disposable income. DTI ratio is calculated by summing up all the debt a household has (mortgages, car loans, credit card debt, personal loans) and dividing it by the annual income (before taxed and deductions). Contact Jamie Arthurs to learn more.

Why is the Debt to Income Ratio Important?

If you follow the news and read the papers, you are likely to have encountered articles about the rising debt to income ratio among Canadian households. The latest reports indicate the DTI is as high as 174%. The Bank of Canada is concerned because a high DTI ratio will result in the suffocation of financially struggling persons in Canada. According to the bank, the amount of debt held in Canadian households has been on the rise for the last 30 years.

The DTI, however, is not only a concern for the national bank and financial institutions. You should also be concerned with your debt to income ratio for mortgage. Why? Lenders use your DTI ratio to determine if you are deserving of loans. A high debt to income ratio for mortgage shows that you are financially vulnerable and are at a higher risk of defaulting. However, having a low debt to income ratio for mortgage will make you attractive to lenders.

If you care about your financial health, then you should regulate your debt to income ratio. A high DTI ratio throughout your life will hinder you from accomplishing any of your financial goals. If you have just started your life by purchasing a property in places like Montreal, Vancouver, or Toronto, then your DTI ratio will be high for some time. However, if you pay off your debt and increase your income, the DTI ratio will decrease.

How To Calculate Your Debt to Income Ratio for Mortgage

Numerous online calculators can help you find your debt to income ratio. But you can also calculate your DTI at home with your calculator, as explained below. First, compile the full list of income and debt that you and your spouse have. If you are alone, then gather your income and debts.

Income Sources

• You and your spouse’s monthly incomes
• Alimony (if any)
• Child support (if any)
• Pension
• Any retirement benefits

Debt Sources

• Mortgage(s)
• Car loan(s)
• Any vehicles, boats, campers, or snowmobiles.
• Credit margins
• Credit cards
• Student loans
• Personal loans
• Bills- utilities, medical or any unpaid bills

John and Susan are a couple. Their total monthly income is $150,000 before taxes. They own two cars with car loans of $40,000. They also own a house with a mortgage balance of $160,000. Their credit card debt is $30,000. In total, their debt is $230,000. When we divide $230,000 by $150,000, we get a DTI of 153% or $1.53 debt for every dollar of income earned.

DTS vs. TDS

The debt to income ratio should not be confused with the total debt service (TDS). The latter is a measure of the income dedicated to income payment. The TDS ratio is a comparison of the monthly fixed debt payments to the monthly income. Usually, the TDS ratio should be below 100%. Anything higher means that the debt payments are more than the income, which is unmanageable. It is advisable to maintain a healthy TDS ratio between 40-45%, but if you can go lower, it’s better.

How To Improve Your Debt to Income Ration for Mortgage

• Pay off your debts regularly.
• Increase your income.
• Avoid using your credit card for regular purchases such as gas, groceries, and shopping.
• Consolidate your credit card debt to get a better interest rate and pay it off.
• Buy a house you can afford.
• Don’t buy recreational vehicles.

Ready to Learn More?

If you are planning to buy a house, regulating your debt to income ratio for mortgage should be one of your priorities. To find expert advice in Edmonton, contact Jamie Arthurs today.