Purchasing your home is one of the biggest and most important decisions that you can make. Tammy Wandzura your Trusted Saskatoon Mortgage broker and the team at Elite Mortgage Choice believe that buying a home should also be an exciting experience with little to NO stress. By trusting your Mortgage Broker, you are ensuring that any stress you may have had in previous encounters can be eliminated!
Tammy truly believes that all you should have to worry about is opening the door to your new home for the very first time.
Tammy Wandzura Tips on How to Save for a Down Payment
Wanting to start preparing for HOMEOWNERSHIP? Wanting to PURCHASE your FIRST HOME? With the right advice – you are closer than you think!
4 Major Things to Consider:
#1: Well Established Credit
It is more important than ever to have your best Credit score possible going into the mortgage pre-approval process. Your mortgage rate and your pre-approval limit will be based on what your credit score is and how strong your past credit history is. There are some fairly basic rules for building a strong credit report from scratch (or after issues with your credit).
- Every lender and insurer prefers to see that you have TWO pieces of well-paid and well-maintained credit for TWO full years. *on exception, we can consider one year *but* ideally a strong 2-year history will give you the most flexibility.
- Ideally, it is best if you have TWO credit cards that have been reporting to the credit bureau for TWO years.
- NOTE: The lender is looking to see if the credit has been WELL PAID and WELL MANAGED
What Does WELL PAID and WELL MANAGED Mean?
On credit cards or a Line of Credit if you hold ANY balance you are required to make a minimum payment every 30 days. There are no exceptions and double payments do not count.
Example: If you have a credit card with a limit of $5000 it is important that if you are holding a balance it is LESS than 50% of the limit (in this example $2500 or less). As soon as the balance starts creeping up to the limit (or over) it will drag your credit score down quickly. (This means that if you go to your favorite electronics store and make a big purchase on your credit card with intentions of paying it off within a short period of time…BUT the credit bureau company collects the information on your file in the meantime -and you are at your MAX- you could affect your ability to qualify for a mortgage.) DO NOT apply for too much credit. Applying for credit regularly will damage your credit score and affect your ability to qualify for a mortgage.
CHOOSE the credit cards you apply for carefully. Some cards have hefty annual fees. If you do not plan to use your card you may want to consider a NO FEE card OR you may want to research the best cards on the market for collecting points. (Many people use their card regularly to earn travel/cash back or reward points. This can be a very good way to earn “free” rewards but it is important you are savvy and pay off your balance every single month.)
#2: Down Payment
Minimum down payment to purchase an OWNER-OCCUPIED home in Canada is 5%. Example: Purchase Price $300,000.00 x 5% = $15,000.00 Down payment needed. You are also required to have money set aside for “closing costs” (legal fees). These costs vary from Province to Province and are based on the purchase price of the home. On an average, the cost is approximately $3000 or less. You may be asked by your lender to prove that you have more available as “back up”. Typically, acceptable proof of down payment would be proof of savings/investments/RRSPs OR a GIFT from a family member.
How to Save when you have month to month bills??
Every little bit helps and the lenders and insurers see strength in applicants that have worked to save all or a portion of their own down payment. Let’s call it having “skin in the game.”
A FEW SIMPLE EXAMPLES:
Throughout her life she has always calculated each of her purchases (big or small) against Minimum Wage. That is what she started making when she hit the workforce and many people still do. When she is considering a coffee – She decides if she wants to make a cup at home and take it with her (.33c) or stop at Tim Horton’s ($2.75) OR …Starbucks… ($5++) AT $5.00 that would be approximately (give or take) a HALF HOUR of work! NOW- is that worth it (every day) Skip the Starbucks.
She has taught her kids this. When they were working part-time already they understood the “minimum wage” idea. For example, they bring a can of bug spray to soccer ($10)- lend it out to a friend and proceed to “lose it”. She gives them the example of ONE hour of work for that one can of bug spray…and somehow it magically appears next game. They made it a priority to find it because that one hour of work for a can of bug spray seemed outrageous (and) it is!!
Build the minimum wage mentality into your budget.
If you are earning Minimum wage think closely on how long it would take you to earn the money you plan to spend. If you earn more (or significantly more) it is still an amazing measuring stick to put yourself in check on day to day purchases. When she is buying groceries– It has taken her years to figure this out. Make a meal plan. Make the grocery list and then stick to it. Better yet- check out the online grocery services that Superstore has. You can go through ONLINE and price check your volumes vs price/brand etc. You are not tempted to throw things in your cart that you do not need. At the end when you check out if your bill is larger than you expected you can go back and remove things you may not need. Netflix vs Cable- She has Cable (her husband is a Sport’s guy) but they watch Netflix 99% of the time. Going 100% Netflix does not have to be a forever plan. It can be a right now plan to help you save towards your future goals. Remember every little bit helps.
Income, of course, is a MAJOR component in any mortgage approval. Some income and employment situations are very “black and white”. Others are UNIQUE. Ideally, they are looking for full time, guaranteed salary hourly employees. Every single family may have unique things we need to consider when looking at employment. Maybe MRS. is on MAT LEAVE. Maybe MR gets paid by the mile. Maybe one of the applicants is a Nurse but has a “casual” job status vs a “permanent” status.
THE KEY: Remember the lender(s) are looking for consistency.
In the examples, she gave above:
- Many lenders will consider “back to work income” to be used for anyone on a maternity or paternity leave.
- Paid by the job or mile? Lenders need to see what your 2 year T4 average looks like to consider using any income.
- Not a permanent employee BUT picking up full time (or more hours?) Still need that 2-year average to use your income.
- Self-employed? The 2-year average of your Line 150 Taxable income to Revenue Canada.
Generally speaking, if you do not have a full time, permanent guaranteed hourly or salary position you have to fall back on averages. They are here to help you wade through the lender guidelines, review your income and help you prepare for mortgage approval. In some cases, they have some flexible solutions or suggestions with the situations we are reviewing.
Considering an employment change RIGHT before starting the house hunting process? Talk to her first. Your new employment opportunity MAY affect your ability to qualify for a mortgage.
#4: Debt Load
There is not a topic that she is more passionate about talking about. DEBT LOAD is one of the biggest reasons most applicants are declined to qualify for a mortgage. One of the major pieces of the mortgage approval puzzle is your DEBT vs INCOME RATIOS.
The lender(s) and CMHC need to look at your current debt (car loans, credit card debt, student loan debt, boat loan debt etc.) + the new mortgage payment + the property taxes + a heat cost must be no higher than 40-44% of your overall Gross income. Most car payments will eat deeply into the average family’s monthly income. Did you know that if you have a Line of Credit that has (as an example) $15,000 owed on it- and your minimum payment is $100/month…they have to use $450/month (3% of the balance) to qualify your application???!??? (Government guideline every lender follows). When you are running your own numbers and affordability- it may be drastically different than what the bank will accept. Work hard to keep your debt LOW. BUY the HOME and then the car.
Work in the Summers- bring that student loan debt down as much as you can while you are a student so that it does not affect your ability to “start your life” when you choose to. She works with clients every day that have made decisions in the PAST that is seriously impacting their ability to proceed with FUTURE PLANS. Thinking of going to school? Consider this example below and be very cautious on “what” you are charging to your student loans. They can follow you for a long time if you do not put a good plan together from the beginning.
A young couple goes into the bank – banker is rude. Tells the young couple to come back when they are “making money”. The banker does not show them the numbers or explain things in detail.
Clients contact my office.
- I go through the full application
- MRS works at McDonald’s and is currently on Maternity leave. (overall annual income is fairly low)
- MR works in retail. (overall annual income is fairly low)
- They have one baby and one on the way.
- I run their credit….
- To find they have $131,000.00 in UNSECURED debt. (credit cards, lines of credit, student loans) and over $2390/month in minimum payments.
Moral of the story; these clients do not qualify to purchase a home and likely will not for many years. The issues with their scenario are how deep in debt they are. $84,300 in Student loan debt alone.
Want to make a plan to become a homeowner? That is what she is here for. Contact Tammy Wandzura anytime and she can review your current details, your future plans and tailor a plan to ensure you are on the right track!
Call Tammy Wandzura today at 306 933.3386 for all of your Saskatoon mortgage needs OR visit www.elitemortgagechoice.com
Make an appointment with Tammy Wandzura at TMG, #1-511 1st Ave N or check out her listing on the SASKATOON DIRECTORY in the SASKATOON MORTGAGES Category. She is a Trusted SASKATOON MORTGAGE BROKER Expert!