• Frequently asked questions about mortgages

    What is the maximum amount that I can qualify for?

    This answer depends largely on your income, credit, debts and how much you’re putting down on the purchase [if you’re purchasing].

    If you are putting 20% down or more, then we have more flexibility to qualify you for a larger mortgage. If you’re putting less than 20% down, our hands are pretty much tied on the limitations.

    When you qualify for a mortgage or you get preapproved for the maximum amount, that does not change, unless your down payment is reaching a different threshold of 5%, 10%, 15% and the ultimate is 20%. Otherwise if you are within those ranges, then adding more of a down payment does not increase your affordability on the mortgage, it only adds to the purchase price.

    The reason why those are important thresholds is because as you reach each threshold under 20%, The insurance premium is reduced allowing you to afford more mortgage. Once you exceed 20% then insurance is no longer necessary allowing you to afford more. Not only can you afford more when you put more than 20% down due to the absence of insurance, but also because you are no longer necessarily stress tested because the government is not involved at that point.

    Can I borrow money from a friend or family member?

    If you are truly borrowing money from somebody else, then that debt needs to be disclosed to the lender and it will reduce your affordability. However you can receive a gift from an immediate family member. Since it is a gift, you can use it towards the down payment without impacting your affordability because it will not be paid back like a loan.

    What is the purpose of getting a preapproval?

    In our industry we often say that a preapproval is not worth the paper that it is printed on because it does not represent a commitment from the bank. It is just a loose estimate on how much they believe you can afford based on what you have told them. This is why it is important to speak with somebody who scrutinize your file before getting a preapproval so that you have more confidence. The advantage of a preapproval is twofold: first it hold your rate for usually 120 days so it protects you from rate increases in the meantime while you’re shopping for a home. The second reason is to have somebody look at your file closely to see what maximum purchase price you should be looking at.

    Why is my preapproval rate higher than advertised rates?

    This is because the bank is taking a risk by holding the rate for 120 days so they essentially add on a premium. Once you have placed an offer on a home and we know the closing date, then we can shop around for last minute deals and specials and lock in a current rate unless your preapproval rate is competitive.

    Should I stick to the big banks?

    It depends on your situation. Often the big banks will be more flexible than the smaller mortgage lenders but especially if you are purchasing a home with less than 20% down, because it’s insured the smaller mortgage lenders will be more competitive because there is very little risk for them.

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