No down payment mortgage program covers you up to 95% financing, with 5% of your mortgage amount applied as your down payment. It is basically like buying your home with NO money down.
No Money Down Mortgage is Available to:
- Still available and supported by CMHC.
- Must have an excellent credit history and credit score.
- First time home buyers just starting out with no down payment saved.
- Students buying a home with a strong co-signer.
- Home buyers with cash assets tied up and therefore has no down payment.
- The Lender will give you the 5% downpayment at closing.
- Expect to pay a higher rate of interest so the lender gets their money back.
Zero down payment mortgage rates can be slightly higher at times. So for some people this loan type is not always the best option. However, most first time home buyers find the slight increase very manageable as it is worked into the monthly cost of their mortgage payments. Even with slightly higher rates, most clients find monthly payments to be less than the cost of renting.
No Money Down Mortgage – Only offered for the province of Ontario
Recently CMHC has changed their rules to allow 100% financing! There are two ways that you can receive 100% financing for your home. You can borrow the 5% required down payment from a line of credit or loan, or you can borrow the down payment from the mortgage lender who will incorporate the down payment amount into your interest rate. Incorporating the down payment into your interest rate means that your rate will be slightly higher, and the extra interest that the lender earns will compensate for the 5% down payment over the course of the mortgage term.
There are two main components to qualifying under these guidelines. The first is your credit score. You must have a minimum beacon score of 680 to be considered for this product. A beacon score is a credit score that reflects your credit history. There are many factors that determine your beacon score. The scoring system takes into account how many inquiries have been made on your credit bureau, your repayment history with loans, lines of credit or credit cards, and how close your outstanding balance is to your credit limit on those accounts (these are not all they things taken into consideration but some of them). To find out your beacon score and see if you have the magic score of 680 or above, give us a call and we can check for you.
The other component is your income versus your monthly payments. CMHC determines whether or you qualify based on two ratios: Total Debt Services Ratio (TDS) and Gross Debt Service Ratio (GDS). These ratios reflect how much debt you have in comparison to your income, and your ability to support the debts. TDS cannot exceed 40% and GDS cannot exceed 32%. To find out if you fall within the required ratios, call a Discount Mortgage Canada Inc mortgage specialist.
There are other alternative lending programs out there that do not lend using CMHC criteria. These programs cater to people who have slower credit history or do not have enough income to support the require CMHC ratios. There is also 100% financing available by going this avenue, but the interest rate is slightly higher. It may not be as attractive as the products offered under CHMC’s guidelines, but it may be a better option than continuing to rent. In fact, many people go this route, selecting a smaller term, and using that time to re-establish their credit so that they can qualify for a CMHC product with their mortgage is up from renewal.
To find out more, and start paying your own mortgage rather than your landlord’s mortgage, Contact me today or call at 416-402-7264 for a free consultation!