Before house hunting you should know in which price range you are looking. Getting preapproved allows you to see what range you are comfortable in.
Your preapproval rate depends on many factors including:
1.Your GDS Ratio (Gross Debt Service Ratio)
This is your monthly housing expenses (ie: mortgage payments, taxes and condominium fees etc).
Typically your GDS should be no higher than 32%.
To see what your approximate amount available for mortgage and property taxes are multiply your total monthly gross income by 32%.
2.TDS Ratio (Total Debt Service Ratio)
This includes your monthly housing expenses but also includes other fixed monthly expenses (include same items as GDS but add loans, credit cards, insurance, etc).
To see what your approximate amount available for mortgage, property taxes and fixed monthly payments are, multiply your total monthly gross income by 40%.
Mortgage Options:
1. Conventional Mortgage:
A loan for up to 80% of the purchase price of a property.
2. High Ratio Mortgage:
A Loan for up to 100% of the purchase price of a property.
Mortgage Types:
Open Mortgage:
Allows you to pay any or all of the sum owing at any time without penalty.
Fixed Rate Mortgage:
The payments are preset and prepayment privileges vary with product.
Adjustable Rate Mortgage:
Payment floats with prime rate.
Additional Information:
Downpayments: A down payment is the amount you put down in cash on closing. Companies will generally mortgage a property with as little as 0% down payment. This is considered a high ratio mortgage. To qualify for a conventional mortgage you need 20% down payment.
CMHC Insurance: Any mortgage with only 0% to 19% down payment is considered high ratio and requires CMHC insurance. It guarantees the risk of lending to the home buyer.
Term Of Mortgage:
The length of time the money is loaned to you at a set or variable interest rate.
Amortization:
The number of years your mortgage payment is based on. (Up to 40 years on insured mortgages)
To get the preapproval process started please feel free to contact me today to help you get in contact with a knowledgeable mortgage professional.
This report courtesy of
Matt Pfeifer at Royal LePage Triland Realty
519-672-9891 X 451
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