1. What’s the best rate I can get?

• Your      credit score plays a big part in the interest rate for which you will      qualify, as the riskier you appear as a borrower, the higher your rate      will be. Rate is definitely not the most important aspect of a mortgage,      however, as many rock-bottom rates often come from no frills mortgage      products. In other words, even if you qualify for the lowest rate, you      often have to give up other things such as prepayments and porting privileges      when opting for the lowest-rate product.

2. What’s the maximum mortgage amount for which I can qualify?

• To      determine the amount for which you will qualify, there are two      calculations you’ll need to complete. The first is your Gross Debt Service      (GDS) ratio. GDS looks at your proposed new housing costs (mortgage      payments, taxes, heating costs and 50% of strata/condo fees, if      applicable). Generally speaking, this amount should be no more than 32% of      your gross monthly income. For example, if your gross monthly income is      $4,000, you should not be spending more than $1,280 in monthly housing      expenses. Second, you will need to calculate your Total Debt Service (TDS)      ratio. The TDS ratio measures your total debt obligations (including      housing costs, loans, car payments and credit card bills). Generally      speaking, your TDS ratio should be no more than 40% of your gross monthly      income. Keep in mind that these numbers are prescribed maximums and that      you should strive for lower ratios for a more affordable lifestyle. Before      falling in love with a potential new home, you may want to obtain a      pre-approved mortgage. This will help you stay within your price range and      spend your time looking at homes you can reasonably afford.

3. How much money do I need for a down payment?

• The      minimum down payment required is 5% of the purchase price of the home. And      in order to avoid paying mortgage default insurance, you need to have at      least a 20% down payment.

4. What happens if I don’t have the full down payment amount?

• There      are programs available that enable you to use other forms of down payment,      such as from your RRSPs, a cash-back product, or a gift.

5. What will a lender look at when qualifying me for a mortgage?

• Most      lenders look at five factors when determining whether you qualify for a      mortgage: 1. Income; 2. Debts; 3. Employment History; 4. Credit history;      and 5. Value of the Property you wish to purchase. One of the first things      a lender will consider is how much of your total income you’ll be spending      on housing. This helps the lender decide whether you can comfortably      afford a house. A lender will then look at your debts, which generally      include monthly house payments as well as payments on all loans, credit      cards, child support, etc. A history of steady employment, usually within      the same job for several years, helps you qualify. But a short history in      your current job shouldn’t prevent you from getting a mortgage, as long as      there have been no gaps in income over the past two years. Good credit is also      very important in qualifying for a mortgage. The lender will also want to      know that the house is worth the price you plan to pay.

6. Should I go with a fixed- or variable-rate mortgage?

• The      answer to this question depends on your personal risk tolerance. If, for      instance, you’re a first-time homebuyer and/or you have a set budget that      you can comfortably spend on your mortgage, it’s smart to lock into a      fixed mortgage with predictable payments over a specific period of time.      If, however, your financial situation can handle the fluctuations of a      variable-rate mortgage, this may save you some money over the long run.      Another option is to opt for a variable rate, but make payments based on      what you would have paid if you selected a fixed rate. Finally, there are      also 50/50 mortgage options that enable you to split your mortgage into      both fixed and variable portions.

7. What credit score do I need to qualify?

• Generally speaking, you’re a prime candidate      for a mortgage if your credit score is 680 and above. The higher you can      get above 700 the better, as you will qualify for the lowest rates. These days almost anyone can obtain a mortgage,      but the key for those with lower credit scores is the      size of the down payment. If you      have a sufficient down payment, you      can reduce the risk to the lender providing you with the mortgage.      Statistics show that default rates on mortgages decline as the down      payment increases.

8. What happens if my credit score isn’t great?

• There      are several things you can do to boost your credit fairly quickly.      Following are five steps you can use      to help attain a speedy credit score boost: 1) Pay down credit cards.      The number one way to increase your credit score is to pay      down your credit cards so they’re below 70% of your limits. Revolving      credit like credit cards seems to have a more significant impact on credit      scores than car loans, lines of credit, and so on. 2) Limit the use of credit      cards. Racking up a      large amount and then paying it off in monthly instalments can hurt your      credit score. If there is a balance at the end of the month, this affects      your score – credit formulas don’t take into account the fact that you may      have paid the balance off the next month. 3) Check credit limits. If your lender is slower at      reporting monthly transactions, this can have a significant impact on how      other lenders view your file. Ensure everything’s up to date as old bills      that have been paid can come back to haunt you. Some financial      institutions don’t even report your maximum limits. As such, the credit      bureau is left to only use the balance that’s on hand. The problem is, if      you consistently charge the same amount each month – say $1,000 to $1,500      – it may appear to the credit-scoring agencies that you’re regularly      maxing out your cards. The best bet is to pay your balances down or off      before your statement periods close. 4) Keep old cards.      Older credit is better credit. If you stop using older      credit cards, the issuers may stop updating your accounts. As such, the      cards can lose their weight in the credit formula and, therefore, may not      be as valuable – even though you have had the cards for a long time. Use      these cards periodically and then pay them off. 5) Don’t let mistakes build      up. Always dispute      any mistakes or situations that may harm your score. If, for instance, a      cell phone bill is incorrect and the company will not amend it, you can      dispute this by making the credit bureau aware of the situation.

9. How much will I have to pay for closing costs?

• As a general rule of thumb, it’s recommended that you put aside at least 1.5% of the purchase price (in addition to the down payment) strictly to cover closing costs. There are several items you should budget for when it comes to closing costs. Property Transfer Tax is charged whenever a property is purchased. The tax will vary from jurisdiction to jurisdiction, but I can help with the calculation. GST/HST is only charged on new homes, and does not affect homes priced at less than $400,000. Even homes that exceed the price threshold are only taxed on the portion that exceeds $400,000. Certain conditions may apply. Please contact you lawyer/notary for more detailed information. Your lawyer/notary will charge you a fee for drawing up the mortgage and conveyance of title. The amount of the fee will depend on the individual that you use. The typical cost is $900. If you’re purchasing a single-family home, you’ll need to give your lender a survey certificate showing where the property sits within the property lines. Some exceptions are made, however, on low loan-to-value deals and acreage properties. A survey will cost approximately $300-$350, but the lender will often accept a copy of an existing survey. Other costs include such things as an appraisal fee (approximately $200), title insurance and a home inspection (approximately $350).

10. How much will my mortgage payments be?

• Monthly      mortgage payments vary based on several factors, including: the size of      your mortgage; whether you’re paying mortgage default insurance; your      mortgage amortization; your interest rate; and your frequency of making      mortgage payments. You can view some useful calculators to find out your      specific mortgage payments: www.dominionlending.ca/mortgage-calculators