Guelph
Ontario Canada home mortgage loans from banks and mortgage
brokers
If
you live in Ontario or any other part of Canada, and
you're considering a home mortgage refinancing loan,
or you're applying for your first home mortgage loan,
or a second mortgage, or a home equity loan, take some
time to get the facts first.
You
may be considering the purchase of Southwestern Ontario
farm land, vacant property, or commercial real estate
in London, Sarnia, Chatham, Leamington, Tecumseh, Windsor
or any other Ontario community. If so, the first step
in the process of buying that house, condominium or
piece of property is to obtain a mortgage, which has
four requirements:
Enough stable income to qualify for the mortgage payments
Good credit to show your potential of paying that mortgage
payment
Enough money for closing costs and down payment
Buying a home or property that is acceptable to a bank,
credit union or other lender
The
general requirements are explained in more detail below.
In Ontario, even if you don't fit the mold exactly,
there may still be ways for you to buy a home, farm
land or any real estate property. Our guidelines are
fairly general, and there really is a loan program for
everyone. Visit our mortgage
information section for some options.
In
Southern Ontario, home mortgage loans require adequate
income
Adequate
income means that you can prove you make enough money
to qualify for the mortgage or home loan. If you are
salaried, a bank or other home mortgage loan lender
will use your gross monthly salary so you qualify for
a mortgage loan. If you are self-employed, commissioned,
using bonuses or part-time income for mortgage qualification,
the mortgage loan lender may average two years income
to arrive at a stable number. Alimony and child support
can be used for mortgage loan qualifying, but you will
probably have to prove that you actually receive the
money regularly, not merely that you are entitled to
it.
Ontario
banks and other mortgage lenders use debt-to-income
ratios to determine mortgage qualification. Acceptable
debt-to-income ratios change with the type of mortgage
loan program used. There are usually two mortgage qualification
ratios used:
The "front" ratio: the total amount of the
new principal, interest, taxes, insurance (PITI) should
not exceed 25-35% of your gross monthly income, depending
on the mortgage or loan program. If you are buying a
condo or co-operative housing in London, Sarnia, Chatham,
Leamington, Tecumseh, Windsor or any other Southern
Ontario community, where there is a homeowner's fee,
you will have to add the monthly fee to your PITI to
calculate this mortgage loan ratio.
The "back" ratio: the total PITI plus all
your monthly debts (including car loans, student loans,
credit cards, alimony, child support, and other recurring
monthly debts) should not exceed 33-41% of your gross
monthly income, depending on the mortgage loan program.
Qualifying
for a home mortgage in Ontario is easier with a good
credit rating
Good
credit means you have met all your financial obligations
in a responsible manner. Credit reporting agencies report
any payments you have made over 30 days late, any outstanding
balances that you owe, and any judgments, liens,
or bankruptcies that have been filed against
you. If you have a few payments that are more than 30
days late on credit cards or student loans, the Ontario
bank or mortgage lender will require an explanation
letter and will probably make the mortgage loan anyway;
however, if you have more than a few late payments,
or they were more than 30 days late, you will have to
provide specific information about the circumstances
surrounding the late payments.
Ontario
banks, mortgage companies and other home loan lenders
will consider an explanation for a spell of bad credit.
They want to see that the difficulties happened during
a specific timeframe, that the borrower has a reason
(divorce, loss of job, illness or other life change)
and that good credit has been re-established.
Previous
late mortgage payments and bankruptcies have specific
rules about acceptability. So check with a bank, credit
union, mortgage company or home loan lender who specializes
in "less than perfect credit" loans, often
called B and C mortgages. For more information
on shopping for home loans, bank mortgages or going
through a mortgage broker, see our our mortgage
information section.
In
Southern Ontario, it's more than just lowest mortgage
rates
Affording
the monthly mortgage payments on the Southern Ontario
home you buy
The
monthly mortgage loan payment includes principal and
interest on a mortgage, property taxes, homeowner's
insurance and any condominium, co-op or homeowner's
fees. Go to our Mortgages
calculators section to find mortgage loan calculators
to easily figure out what monthly payments will be at
today's interest rates.
Finding
the mortgage down payment for the purchase of a home
or property
You
will need cash for a down payment, for closing
costs, for prepaid expenses, and for reserves.
The home down payment money has to be derived from a
source acceptable to the bank, credit union, mortgage
company or private lender you want to use. Generally,
you are not allowed to borrow your down payment or closing
costs, except when the mortgae or home loan is secured.
The
Southern Ontario home you mortgage must be an acceptable
purchase property
Banks, credit unions, mortgage companies and most other
home loan enders are looking at the property as security
for your loan. They expect you to repay the mortgage
or home loan as agreed, but if you default, they will
foreclose on the property and sell the house to make
back their loss. For this reason, they appraise the
property to determine what it is worth and to establish
its condition. Most standard mortgage and home loan
financing requires the property to be in "average"
condition, as determined by the home appraiser. That
means some deferred maintenance is acceptable, but if
the house is in poor enough condition to warrant a "below
average" rating, a special home financing program
would probably be necessary.
Some indications of potential problems include holes
in the floors, walls, roofs, or ceilings, missing appliances,
non-functioning bathrooms and obvious safety hazards.
Other types of property that may fall outside standard
guidelines are mobile homes, vacant land, and properties
with acreage. Rules vary among different mnicipalities
across Ontario, but in Southern Ontario communities
such as London, Sarnia and Lambton County, Chatham and
Kent County, Leamington, Amherstburg, Lakeshore, Tecumseh,
Windsor, Belle River, Wheatley and most others, the
regulations are fairly consistent. Check our communities
page for specific municipalities. |
