Mortgage FAQs: Your Guide to Home Financing

Navigating the world of mortgages can be overwhelming, especially if you're a first-time homebuyer. To help you understand the key aspects of mortgage financing, we’ve compiled answers to some of the most common questions.

1. 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. Exploring these options can help you enter the housing market sooner.

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

Most lenders consider five factors: income, debts, employment history, credit history, and the value of the property. A steady employment record, responsible debt management, and a strong credit score can increase your chances of mortgage approval.

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

Your mortgage qualification depends on two key ratios: Gross Debt Service (GDS) and Total Debt Service (TDS). Generally, your GDS ratio should not exceed 32% of your gross income, and your TDS ratio should stay below 40%. Getting a mortgage pre-approval can help you determine a realistic price range for your home search.

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

The minimum down payment required is 5% of the purchase price. However, if you want to avoid mortgage default insurance, a 20% down payment is necessary.

5. What credit score do I need to qualify?

A credit score of 680 or higher will make you a strong candidate for a mortgage with the best interest rates. If your score is below this threshold, you may still qualify, but a larger down payment may be required.

6. What’s the best rate I can get?

Your credit score plays a major role in determining your mortgage interest rate. While low rates are appealing, some ultra-low-rate mortgages may come with restrictions like limited prepayment privileges. It’s important to assess the overall terms and benefits of your mortgage product.

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

If you prefer stability and predictability, a fixed-rate mortgage may be best for you. If you’re comfortable with some fluctuations and potential savings in the long run, a variable-rate mortgage could be a better choice. Some lenders also offer a 50/50 split mortgage to balance both options.

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

If your credit score is lower than ideal, you can take steps to improve it. Paying down credit cards, avoiding maxing out limits, keeping old credit accounts active, and disputing errors on your credit report can help boost your score.

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

Closing costs typically range from 1.5% to 4% of the home’s purchase price. These include legal fees, property transfer tax, home inspections, and appraisal fees. Factoring these costs into your budget ensures you’re financially prepared for homeownership.

10. How much will my mortgage payments be?

At EzyLoan, we’re here to simplify the mortgage process and help you make informed decisions. Contact us today for expert guidance on your home financing journey!