Have you applied for a mortgage and had the heart wrenching response, "DENIED"! Or, simply just don’t know how to go about the first steps of purchasing?
Well let me be your guide into getting you prepared to buy your first home.
First off let me tell you a little about my past. Like most, come end of high school I was bright eyed and ready to concur the world. I left the parental nest and headed to Vancouver. To which I started my career in carpentry. I spent a year of my life in that city, with about 340 days out of the 365 days working in the rain :) to my great joy I headed back to the sunny Shuswap were I became a fourth year carpenter. I decided once again for a change of scenery so north to Alberta I went.
THE BIG BUCKS!
This is where my first attempt to home ownership came. (Keep in mind I was self-employed which created most of our hurdles) My wife and I had applied thinking with the mass income we earned it would be no problem for us to purchase. A week after our application... That’s right you guessed it. "DENIED"
The harsh reality of "self-employment". It doesn’t matter about the coin coming in. The banks want stability. Which, turns out to be 2-3 year minimum proof that we could consistently make the money. Now fast forward Four Years LATER. Once again my wife and I had the money we had the experience we even had the credit. What could go wrong! A week after our application... "Denied" We were devastated to say the least. This time we had been denied because I had changed professions from operating to power engineering! Same company different work. Need another 3 years! (Which turns out it was good thing. As we were about to find out that northern Alberta was no longer going to be our home).
Now we had some more fun up north before we left. I started a construction company called Dax Contracting. I had fourteen employees, three crews, built residential homes, commercial spaces, and did renovations. WENT BANKRUPT. Yup bankrupt. But, don’t feel bad for me just yet. In the end It taught me invaluable lessons, and ultimately lead me back home to the Shuswap. Which I was able to find my true calling in Real-Estate!
Now, my wife and I and our adorable ray of sunshine Daxton were finally were successful. Yes we are home owners at the ripe old age of 27! How did we do it? Well check out the three simple steps to help you get qualified to buy!
- Look at your income and job history. How long have you been in the career ( one year for employees min and 3 years for self-employed min) If you can check those off, then see what your income will buy you in today’s market. The math is fairly easy, and you will need a mortgage calculator. (I have one on my web page just high light buyer's) First off take your total income, which can be more than one if there is more than one buyer. Now remove 60% of it. For ease, I’m going to give you an example. Combined income = 100k - 60% = 40k. Your remaining 40k is living cost, so if you have payments of any kind they go against this! Such as car payments credit card payments, and or any other loans you may have. Let’s say you have a monthly car payment of 500 month, = 6k a year. Your remaining balance is 36k. This is the maximum allowance you will have for a mortgage payment. So now this is where a mortgage calculator comes in. You need to enter in a realistic goal such as 400k purchase price, and stress test yourself. This means prime plus 2% which currently April 20 2018. Is 5.19%. This gives you a monthly payment of $2400.00 a month or 28k a year. Now add on utilities, property tax, and insurance. Your pretty much max out your 36k bench mark. This means your maximum allowed mortgage with a 5% down payment will be 400k.
- Make sure your credit is good. 650 or higher is pretty much a minimum. Also make sure you have proven you can pay off more than just a credit card. Banks like to see you can handle debt. At the same time you don’t want to have a ton of debt prior to purchasing your home. Your potentially about to gain a 400k debt!
- LAST BUT NOT LEAST USE A MORTGAGE BROKER!! I can’t stress this enough. Don’t go to a bank. If you work with a broker they can send your application to 30 lenders who all review and bid for your business. Giving you the best chance to not only get approved but at the best rate.
If you found this helpful or would like any more in depth advice. Leave a comment, send me an email, or sign up to my webpage. Baskillrealty.ca