December 2003 Issue

Dear Home Buyer,

As As your first home purchase specialists, we work on your behalf to find the home and mortgage that suits your needs. Best of all - our service is "FREE"*. 

Note: This newsletter is designed to be a general overview of topics encountered in the home buying process.  It is not to be construed as legal advice.  Please consult a professional.

If you find this email useful, feel free to please pass it on. 

In this Issue


  • Do you need a guarantor?
  • New immigrants and high-ratio mortgages
  • Sample forms used in mortgage applications

Do you need a guarantor?

You may need a guarantor if you don't earn enough to support the mortgage, lack job stability, have poor credit, or do not have sufficient down payment.   

A guarantor becomes liable for the mortgage if the primary debtor defaults.   Thus, it is important that a guarantor fully understand the consequences of his/her decision. In many cases, the lender may ask that the guarantor obtain  independent legal advice.  Acting as a guarantor can also affect the guarantor's ability to obtain a mortgage for themselves.

Given these implications, many individuals find it difficult to ask a parent or sibling to act as guarantor.  This may prevent them from purchasing their dream home.  If this is the case, borrower may want to get their mortgage from lenders that have a "early release" guarantor policies.  These policies allow for release of the guaranty after 12 months provided the borrower is up-to-date with his/her mortgage payments and has good credit.   Asking someone to guaranty your mortgage is made much easier.

New Immigrants and High-Ratio Mortgages

What do you do if you are new to the country but would like a high-ratio mortgage.  If you have a job, then here are some guidelines you need to know.

As a general rule of thumb, CMHC requires one year of job stability for the 5% down payment program.  Naturally, the longer the better, especially if there are weaknesses in the proposal such as a low credit score and/or gifted down payment. 

The one year minimum requirement is not a hard and fast rule, however, and may be reduced at the discretion of the lender/CMHC.  There are other factors that are considered.  The job type is important.  For example, a job as a professor at UBC carries more weight as compared with a person stocking groceries at Safeway.  Secondly, because lenders/brokers have the ability to pull a US credit bureau, immigrants from the US may be able to qualify for a 5% down payment mortgage sooner.

If the borrower is able to increase their down payment, their chances of obtaining a high ratio mortgage increase significantly.  A borrower who has been on the job for only a month, but has 15% to put down may very well qualify for a high ratio mortgage.  In this case, given the borrower may not have a long credit history in Canada, the lender may require a credit reference from their bank in the country of origin to determine the customer's paying habits.

 

Sample forms used in mortgage applications

Here is a list of common forms needed for your mortgage application (click on the link to download):

1) Salary letter  (Microsoft Word document)- Letter signed by your employer that states your employment status, length of employment and income on the job;
2) Gift letter  (Microsoft Word document) - This is used if all or part of the down payment is being gifted to you.
3) Home Buyer's Plan form  (pdf document)- used to withdraw funds from your RRSP under the first time home buyer's program. 

Resources:

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