As a First Time Home Buyer the process can be overwhelming, but don’t worry, all your First Time Home Buyer Mortgage options are here. It is up to me to recommend financing solutions to get your mortgage approved at the lowest possible rate and best terms possible for you.
The first step is getting pre-approved before you start searching for a home. The quickest and easiest way to get pre-approved is to fill out our online mortgage application. Once this is received, I will contact to you to ask any questions and to let you know how much you will be pre-approved for.
How to Qualify for a Mortgage
There are a few things lenders require to approve a client for a mortgage, these are as follows:
- Employment – Income is required to ensure you can make the mortgage payments. A full time permanent position with no probation period is required in most cases but if you have worked in a part time position for at least two years we can also use that income to qualify. Income that includes over time, commission, bonuses or self employed earnings must have a minimum 2 year history in order to qualify. Your income level will determine how much you can spend. Are you self-employed? Learn More Here >
- Good Credit – You must be able to show you can manage money. A credit check will show us your score which is determined by how well you manage and pay credit cards, loans, and lines of credit. If you have late payments, collections, or other bad debts this will significantly hurt your chances at being approved. The lenders like to see a minimum 2 year history of credit and 2 active trade lines with good repayment history.
- Down Payment – A down payment is very important when buying a home. If you have very good credit it is still possible to purchase a home with as little as 5% down payment. If you have poor credit a much larger down payment of 20% may be required. In most cases with good or average credit a minimum 5% down payment is needed and will allow you to qualify for best interest rates.
If you have strong employment, good credit, and a down payment, there is a good chance you will be approved for mortgage financing. The down payment can come from a number of sources including savings, investments, RRSP’s (HBP), or even a gift from an immediate family member.
There are a number of government programs available to you as a first time home buyer.
First Time Home Buyers’ Tax Credit (HBTC)
The Home Buyers’ Tax Credit is a new non-refundable tax credit, based on an amount of $5,000, for certain home buyers that acquire a qualifying home after January 27, 2009.This tax credit is calculated by multiplying the lowest personal income tax rate for the year (15% in 2009) by $5,000. For 2009, the credit will be $750. However, if the total of your non-refundable tax credits is more than your federal income tax, you will not receive a refund for the HBTC.
RRSP Home Buyers Plan
The Home Buyers’ Plan (HBP) is a government program that allows first time home buyers to withdraw up to $25,000 from their registered retirement savings plan (RRSPs) to buy or build a home. The home must be used as a principle residence, and all funds must be withdrawn from the RRSP within 30 days of the property’s closing date.
Your RRSP contributions must remain in the RRSP for at least 90 days before you can withdraw them under the Home Buyers Plan, or they may not be deductible for any year.
Overall, all withdraws have to be repaid your RRSPs within a period of no more than 15 years. Each year, you will have to repay an amount to your RRSP’s until your HBP balance is zero. If you do not repay the amount due for a year, it will have to be included in your income for that year.