So you’ve decided to buy your first home in Edmonton: you’re doing reasonably well in your job and maybe want to move into a bigger place to start a family. Being a first-time homeowner can be challenging, especially in the current economic climate.
You may need to set realistic expectations regarding your first-time buyer mortgage rates. Before you can look around for securing a mortgage from the best mortgage brokers in Edmonton, there’s a checklist of items you need to conduct to ensure that you are financially ready to buy a new home.
Credit Report Check
Even before looking for a mortgage lender, order a copy of your credit report. Check to make sure you have a good credit score. Based on your credit score, a potential mortgage lender may
- Refuse your application
- Approve you for a lower mortgage amount or at a higher interest
- Consider your application with a larger down payment
- Have somebody to co-sign with you on the mortgage
- Get mortgage loan insurance, even with a 20% down payment
You need to do a bit of homework on your current and expected future financial situation before seeking a mortgage for your new house. As you know, mortgage lenders will look at your financial records to determine if you can afford to pay your monthly mortgage rates in Edmonton.
Specifically, you need to have a closer look at your income before taxes, your expenses, loan amount requested, existing debts, credit score and amortization period.
Be aware that your monthly housing expenses should not exceed 35% of your gross household income. You may qualify for a mortgage even if your monthly housing expenses are slightly higher but you will be exposed to the risk of taking on more debt than you can comfortably pay back.
Moreover, you will need to make sure that your total debt load, including monthly housing costs plus other debts, does not go over 42% of your gross income. While you may still qualify for a mortgage with higher debt load, you leave yourself exposed to more risk of paying back the debt.
Before lending institutions such as banks and brokers can arrange for a mortgage for you, you will need to pass a stress test. This stress test will require you to prove that you can afford payments at qualifying interest rates in Edmonton. Generally, this rate is higher than the mortgage rate in your contract.
First-time Homebuyer Incentive Program
This program is intended to help qualified first-time homebuyers reduce their monthly mortgage costs without adding to their financial stress. This allows qualified homebuyers to finance a portion of their home purchase through a form of shared equity mortgage with the Canadian Government.
An incentive amount of 5% is available for the purchase of existing homes. On the other hand, an incentive amount of 10% is available for the purchase of newly constructed homes.