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Rule of Thumb

The most typical question a mortgage broker is asked is “How much am I qualified for?”. This question is becoming increasingly difficult to answer without an in depth look at your financial picture.
The government stress test and increasing interest rates often means your limits today are different tomorrow.

Since this question is asked so often, I have decided to give a very general rule of thumb… It should be taken as a generalization and not a hardfast rule.

If you are debt free and have a well established credit history, for every $25,000.00 in family income we can qualify you for $100,000.00 mortgage. As an example, if you want to buy a house for $300,000.00 then you will need $75,000.00.

Some factors that can affect this generalization:

• Debts: If you have lots of car loans, high line of credit/credit card utilization
• High Property Taxes
• Weak/Poor Credit: If your beacon score is less than 680, you will qualify for reduced lending ratios

Keep in mind that we are different then chartered banks. As a mortgage broker we have access to various banks, credit unions, virtual lenders, and alternative options. Each lender has different rules for qualification. Some lenders accept child tax as a portion of the income. 20% down payment or more helps too because certain banks offer extended amortizations (30 Years). In addition, because we don’t require high ratio default insurance with 20%, the banks can make their own decisions regarding affordability ratios.

Self employed clients, keep in mind we are talking about NET income after all deductions. If your gross income is $200,000.00 per year but you write off lots of expenses and end up with an income of $20,000.00, this income (20K) is the number that we are using to qualify. Fear not, we have programs and options for you too.

The most general rule of thumb that I can offer… Don’t guess. Give us a call because it’s free. With all the rules, policies, and programs that exist today let our team of professionals guide you through the process.

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Why do I need a mortgage broker?

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For something as seemingly straightforward as buying a home, the mortgage process can feel overwhelmingly complex. One element of the purchasing process that causes confusion among home buyers is whether or not to use a mortgage broker. A mortgage broker is an intermediary between borrowers and lenders. Their job is to find the right loan and lender for borrowers, ensuring a smooth mortgage process for all parties involved.

According to the Canada Mortgage Housing Corporation’s 2015 Mortgage Consumer Survey, mortgage broker market share is trending upwards for most market segments. This is particularly evident among repeat buyers where market share has increased from 32% in 2012 to 42% in 2015. Over this time period broker share has also increased among first-time buyers (48% to 55%) and refinancers (27% to 33%). Among renewers, broker share has remained stable at around 21%.

So should you be one of the growing individuals who turn to a mortgage broker when purchasing a home? The following are some of the benefits brokers can offer:

Rates
If you want to make sure you’re getting the best rate possible, working with a mortgage broker can take a lot of the guesswork out of the equation. Brokers have access to a large network of different lenders, helping them to find the best interest rates for your type of loan.

Payment
You can work with a mortgage broker without having to worry about hidden fees. Mortgage brokers’ livelihoods depend on the quality of their services, not on charging borrowers. They get paid a commission from lenders. Brokers also have more incentive to find the best mortgages for borrowers, since they don’t get paid until your mortgage funds.

Options
Your first instinct might be to approach your current financial institution when the time comes to take out a home loan. However, being a customer doesn’t always guarantee approval, or lowest interest rates. Mortgage brokers deal with multiple lenders, allowing them to canvass a much larger area when searching for your loan. While your bank may deny you a loan or charge higher interest rates, brokers have the capability to find a lender that won’t.

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