Housebuying step by step
Your Guide to buy a house in Canada
There is a few things to take into consideration when you are looking to purchase a house.
To begin, the bank will look at the credit. If you don't have any established credit, the first step is to get on that and get a small loan and a credit card. This is the number one thing that the bank will look at. If you had bad credit or collections, this also need to be taken care off before even contacting your Mortgage Broker.
Once the Bank/Lender accept the credit, they will look at the income and amount of debts or obligations. These debts includes, credit card, line of credits, car loans and student loans, property taxes and electric cost on the subject property. They don't include cell phone, insurance and other utilities. If your total debts including the Mortgage amount is under 42% the bank can qualify you for that Mortgage amount. The way to calculate that debt ratio is to take your Gross income and multiply it by 42%. Then, you remove all your payments and if you have some left, it means you can qualify for that Mortgage.
If the Lender accept to lend you, they will only lend you 95% of the purchase price. That mean that you have to come up with 5% down payment of either your own resources, gifted from immediate family or borrowed on credit in some case.
Accepted income and documents requirements
Full Time - Job letter and current paystub (Some bank will ask for the last Notice of Assessment
Part Time or Seasonal - Job Letter, Paystub, T4's and Notice of Assessments for the last 2 years.
Retired - T4's and Notice of Assessment for the last year accompanied with the last 3 months of bank statements to show direct deposit of pensions.
Disability Income - Letter from Disability insurance to state if it is Long Term accompanied with the last 3 months of bank statements to show direct deposits, last T4 and Notice of Assessment.
Down Payment Confirmation - If own resources, 3 months of bank statements to show accumulation. If gifted, ask for details.
Note - If you owe income tax, the lenders will condition for it to be paid off prior to close the transaction.
- Also very important to mention that we must be able to verify the bank statements ownership. Mobiles version usually don't show much information. In this case, profile must be provided to confirm ownership.