95% FINANCING (5% DOWN)
Eligibility Criteria	Must be purchasing a principal residence. 95% financing is now available for any purchase price.
Down Payment	5% of purchase price (or 7.5% for owner occupied duplexes), from the borrowers' own resources. The down payment CANNOT be borrowed. Proof that funds have been on deposit for at least 90 days is generally required, unless the funds are a gift from family. Where funds are a gift from family they must usually be in the borrowers' account two weeks prior to the completion date. As well, proof of availability of funds must be provided along with a gift letter signed by the Giver confirming that the money is a true gift and not a loan.
Closing Costs	Borrower must demonstrate the ability to cover closing costs of at least 1.5% of the purchase price.
Debt Servicing	The ability to debt service is calculated by adding together the mortgage payment, property taxes, heating costs and one-half of the condominium fees. Together these costs must not exceed 32% of household income. This is called the Gross Debt Service Ratio. For qualifying purposes only, the mortgage payment used is the greater of the contract rate or the Approved Lender's 3 year posted rate. While the actual mortgage rate could be lower, the borrower must qualify based on the higher rate. The next ratio calculated is called the Total Debt Service Ratio. It is calculated by adding the property related expenses plus the payments on all other debts. This ratio must not exceed 40% of household income. Household income is usually taxable income. Employment Insurance cannot be used.
Insurance Premium	Where the down payment is less than 10% of the purchase price, a Mortgage Insurance Premium of 2.75% of the amount to be financed will be added onto the net mortgage amount.
Underwriting	The length of time on the job, or employment stability, along with good credit history, are major factors in the approval of applications with less than 10% down. A guarantor's income may be used to qualify an application as long as the guarantor will also live in the property (i.e. husband and wife). Applications can sometimes be strengthened in the following manner: Where the borrower(s) do not meet the debt servicing guidelines or job stability requirements, parents may sometimes be used to strengthen a mortgage application. The parents must have sufficient income to qualify and good credit history to make the risk acceptable to the Lender. In these instances, the parents must go on title. Where the borrower(s) meet the debt servicing requirements but the application needs strengthening for some other reason, the guarantees of parents with strong income and credit history may provide sufficient strength to make the risk acceptable to the Lender.
Go directly to the next article: 2006 Home Buyers' Plan or the Full Article Listing. Information subject to change without notice.