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A First-Time Homebuyers Guide to Squamish: Part 2 Financing

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To buy your first home, you likely will need a mortgage. Before you even consider looking at houses, you should research mortgage prospects. To secure mortgage approval quickly, potential home buyers should have good credit, a healthy income, and savings in the bank.

Unfortunately if you have less-than-stellar credit, are self-employed, or are lacking cash, you’ll want to start this process much sooner. This will give you more time to get your finances in order and will ensure you will be in the right state to buy a home.

Getting a mortgage

Before getting a mortgage, meet with a mortgage officer. Mortgage officers are professionals who will help you determine whether or not you have credit issues that need to be resolved before looking at property. They will also let you know what you can afford before you begin your hunt for the perfect home.

Be prepared to bring documents showcasing your financial standing. Most lenders will require several years of tax returns and many months of bank statements. They will need proof of your income, and will want to know about all your debts. In addition, you will also have to disclose the source of any big deposits. This means that if family members give you money for a down payment, lenders will need a letter documenting the exchange.

Improving your chances of financing

It is advantageous to pay off as much debt as you can before dipping your toes in the real estate market. Paying off your debts will help lower what’s known as your debt-to-income ratio. Lenders look at your income and compare it to all of your debts – student loans, car payments, credit card debt – as a means of determining how much you can afford to borrow. If your total debt, including the new house payment, would be more than 43 percent of your income, it’s unlikely that you would be approved for a loan.

Lenders will also be interested in your work history and your prospective job opportunities. For example, if you’ve just landed an engineering job, a lender may not be worried that you don’t have years of work history. That being said, if you’re working part-time in an entry level position, you’re less likely to be approved for a loan until you’ve had the job for at least two years.

If you’re self-employed, the road to securing a mortgage may be a bit rockier. Small business owners often don’t qualify for a mortgage until they’ve been in business two years. This is partly because most self-employed professionals write off many expenses on their taxes, making their adjusted gross income much lower than their actual income. The lender will consider that lower number your income.

 

Find out more about buying a property in Squamish in Part 1 of our series, or get in touch with one of our agents.