| Beginning
your search for a home? Now may be a good time to consider entering
the housing market. Mortgage rates are low, affordability is good
for buyers of new homes in particular, and there are good deals to
be had.
If you're uncertain about taking the plunge, you can make your house-hunting more worry-free by pre-qualifying for a mortgage before you settle on the house of your dreams. This means that you can look for a home knowing in advance how much you can expect from your bank. How much house can you afford? Most financial institutions will complete a pre-qualification certificate based on your income, the amount of your down payment, and any current liabilities. The Toronto-Dominion Bank, and many other banks, will even guarantee their terms and conditions at a specific interest rate if you purchase your home and funds advanced within 60 days of approval. If rates go up during those 60 days, you receive the approved rate and if they go down, you receive the lower rate. This means that you could realize substantial savings in interest costs. If you are buying a new home, this guarantee can be for a longer period of time. For details, contact your bank manager. To determine the maximum amount of mortgage financing for which you qualify, visit your bank where a mortgage specialist will prepare a "purchase profile" by calculating your gross debt service ratio (GDS) and total debt service ratio (TDS). In real terms, most lending institutions look for a GDS ratio in the range of 27 percent to 32 percent. This is the percentage of gross household income that lenders will allow borrowers to direct towards financing to cover mortgage principal and interest payments and property taxes. Some financial institutions also include heating costs. If your gross household income is $100,000 and the GDS ratio is 32 percent, then the amount available to you to make mortgage and tax payments should not exceed:
Most financial institutions also use the TDS ratio to determine the maximum monthly debt payment which you can comfortably support. The TDS is the ratio between gross annual income and total annual debts. These debts include mortgage payments, credit card payments, loans, car payments and so on. To meet the TDS requirements, total annual debts should not exceed 37 percent of gross annual income. In addition to the purchase price of a home, other costs such as land transfer tax, legal fees, appraisal fees, and moving expenses must be added to the total amount of money needed to complete a purchase. On the purchase of a $200,000 home, these can quickly add up to between $3,000 and $5,000. Determining Your Purchaser Profile: A mortgage specialist will take you through these steps in preparing a pre-qualification certificate. In most cases, you can pick-up a pre-qualification brochure and complete it at home or you can simply visit your branch and apply. Pre-qualifying is easy, free and convenient - you should have your pre-qualification certificate in less than 24 hours. The mortgage amount and interest rate that appears on the certificate is subject to the usual credit review and a satisfactory property appraisal at the time of purchase. Completing a pre-qualification does not obligate you to arrange your mortgage financing with that institution if you come upon more favourable terms to suit your needs elsewhere. Save Time and Energy: With your pre-qualification certificate in hand, you have a clear idea of how much you're qualified to borrow, the appropriate price range for your new home, and the size of your mortgage payment. You've saved time because much of the paper work involved in qualifying for a mortgage is done; you've saved energy because you're shopping with confidence in a price range you know you can afford. Now you can relax and concentrate on the choices that exist in today's real estate market and the other more enjoyable aspects of house hunting. Article:
It's All In The Delivery
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