So Many Questions

So Many Questions By Theresa Grant Real Estate columnist A while back I was having dinner with a friend when her son came home with his girlfriend. They are in their twenties and recent graduates of university. With their careers on track, their next step according to them is to plan for buying a house and planning their future together. As many people do, they have amassed a lot of information, but it was apparent after just a few minutes of conversation that much of the information they were equipped with was flat out wrong. So began an evening of answering many questions and dispelling many myths regarding purchasing a home. It was very impromptu but welcome at the same time as I hate to see people wondering around ill-informed when it comes to buying a home. Misinformation in this area can literally alter the trajectory of someone’s life. If a person is not aware of their options, they often make decisions that they would not have otherwise made, but they weren’t aware of what was available to them. One of the first questions they had was regarding income. In an effort to bump up their income, they were not only working but they had put together a little side business. Their business was viable and generated income. The problem was that they were just taking the income as it came in and putting it in the bank. They thought that if they just put the money in the bank and told the bank officer where it had come from that all would be well, and it could be considered part of their overall income. I told them that if they wanted it to count as income that would be recognized by the bank when it came time to get a mortgage that they would have to structure that income as being received through their small business and that they would have to open a business account and show that to the bank officer. One thing about income that hasn’t changed too much over the years is that banks want to see stable sources of income, and they want to see proper documentation. A good rule of thumb is that to have part-time income included you should have that part-time job for 2 years. That is the same for self-employed people. Another question they had pertained to downpayment. All of the examples they had seen referred to a 20% downpayment. So, naturally they thought that they needed to come up with 20% down as a minimum. That is not accurate. 5% is the requirement. The reason 20% is always thrown out there is because when you put 20% down you do not have to obtain mortgage insurance through CMHC. There is a minimal cost for the insurance and that is factored into your payments. While the more you can put down, the better it is for you, you can get into the market at 5% down. Never hesitate to ask questions.