(September 19, 2022)

From a First Time Home Buyer Perspective

The minimum income required to purchase a property in Greater Vancouver is as follows:

Single Family Detached Home: $281,000/year (individual or combined household gross income, before taxes)
Townhome: $160,000/year (individual or combined household gross income, before taxes)
Condo With 20% down payment: $115,000/year (individual or combined household gross income, before taxes)
Condo With less than 20% down payment: $170,000/year (individual or combined household gross income, before taxes)

**the scenarios above are based on benchmark price statistics for August 2022 as reported by The Real Estate Board of Greater Vancouver. Detached Home Benchmark Price = $1,954,100, Townhome Benchmark Price = $1,069,100, and Condo Benchmark Price = $740,100. Qualification rates of 7.44% as of Sept 18, 2022 were used (5.49% contract rate plus 2% stress test)

After income qualification, the next biggest challenge for first time home buyers is satisfying the minimum down payment requirement for mortgage qualification, especially in high priced markets like Vancouver. Here is a summary of down payment requirements and how they apply to the Vancouver market:

as of Aug 2022, the benchmark price for a detached home in Greater Vancouver is ~$1.8M. For homes greater than $1M, the minimum down payment for mortgage qualification in Canada is 20%. Therefore, regardless of whether you are a repeat home buyer or a first time home buyer, your minimum down payment for a benchmark detached home in Greater Vancouver will be $360,000
however, for properties less than $1M, the down payment threshold decreases significantly as follows: 5% down payment up to $500,000, then 10% on the balance thereafter
as of Aug 2022, the benchmark price for a condo in Greater Vancouver is ~$750,000. For a $750,000 condo purchase, the minimum down payment would be $50,000
the benchmark price for a townhome in Vancouver sits at ~$1.05M. Therefore, the minimum down payment requirement would be $210,000

Unlike Alberta, British Columbia has a substantially different Property Transfer Tax regime that is due at the time you purchase a resale property. If you are a first time home buyer and purchase a property under $500,000, you are exempt from paying the Property Transfer Tax. The exemption is then scaled once you surpass a $500,000 purchase price up to $525,000. The tax is calculated as follows:

1% of the fair market value up to and including $200,000, then
2% of the fair market value greater than $200,000 and up to and including $2,000,000
the property transfer tax continues to scale upward as you approach higher purchase thresholds, Click Here to read about the complete details and tiers

From a Temporary Resident Perspective (work permit holders)

All the same income and down payment thresholds apply for temporary residents just as they do for standard Canadians or Permanent Residents. The only difference is that temporary residents are able to provide alternate sources of credit verification if they haven’t yet been able to establish a standard 2 year credit history. For example, if a Temporary Resident is not able to provide a 2 year history of credit usage in Canada, they can alternatively provide a letter of good standing from their bank from where they departed. This is just one example, there are many other forms of alternative credit verification sources (call Marko right now and ask him!)
In addition to British Columbia’s Property Transfer Tax described above, the 20% Foreign Buyer Tax is also applied to the gross purchase price of a property. This is a major deterrent for temporary residents in Greater Vancouver (and throughout other popular regions in BC). Temporary resident applicants either decide to wait it out until they attain their Permanent Residence at which time they are no longer required to pay the Foreign Buyer Tax, or they relocate to other parts of the country where the Foreign Buyer Tax is not applicable (foreign buyer tax does not apply in cities such as Calgary, Edmonton, Halifax and Montreal)

From a Baby Boomer Perspective

British Columbia is increasingly becoming a primary retirement destination of Canadians. Canadians from afar continue to make their way to the Okanagan, Lower Mainland and Vancouver Island regions. Other than the price of real estate, the only other transactional item to be aware of is the Property Transfer Tax (as mentioned above
Another popular program available for BC residents aged 55 and older is the Property Tax Deferment program – this allows eligible applicants to defer on their annual property tax bill and simply let it accumulate on their land title as an outstanding charge that will become payable at the time the property is sold (click here for more details)
Applicants aged 55 and older are also eligible to purchase a property with a CHIP Reverse Mortgage (this allows the applicant to qualify for a mortgage with a minimal income and does not require any payments to service the mortgage throughout). Contact Marko right now to learn more about Reverse Mortgages, or Click Here to schedule a call with him!
Baby Boomers are often eligible for Net Worth Qualification mortgages. These mortgage qualifications are for applicants who declare a low qualifying income, but are able to boost their qualification on a dollar for dollar basis with their liquid assets. For example, if an applicant earns $20,000 per year, they would only qualify for a mortgage of ~$50,000. But if they have liquid assets of at least $250,000, their mortgage qualification would increase to $300,000! Click Here to be redirected to a past blog on High Net Worth mortgage qualification.
also worth noting is that in BC you are able to use the services of a Notary for your real estate transaction (in addition to or instead of a lawyer)

I arrived in Canada and want to buy a house!

Qualifying for a mortgage when relocating to another province

Contact Marko, he’s a Mortgage Broker!

604-800-9593 cell/text/WhatsApp | Vancouver (Click Here to schedule a call with Marko!)

403-606-3751 cell only | Calgary (Click Here to schedule a call with Marko!)

Email Me: gelo.m@mortgagecentre.com

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(August 15, 2022)

With all the talk about interest rates in the past few months there’s been less focus on the actual qualification guidelines. Here are the key qualification points to look out for if you are looking to get qualified for a mortgage in 2022:

The minimum down payment to secure is a mortgage is as follows:

5% down up to $500,000, then
10% on the balance, thereafter up to $999,999
20% down payment on purchases that are $1M or higher, up to as high as $2.25M, then
40%-50% on the balance, thereafter
Once you hit the $3M Purchase point, down payment scales differ from lender to lender…call Marko to find out more

Minimum credit score requirements are ~610 to 620 (beacon scores)

anything lower than 610 often results in sub-prime lending (rates are higher and potential for fees)

Arguably more important than your credit score is the current rating and history of your individual credit facilities. Be aware of and/or avoid the following actions:

PAY YOUR BILLS ON TIME. Lenders won’t fuss about the odd late payment, but if you are 2 payments behind, be prepared to provide a detailed explanation and support documents if possible.
avoid disputes and standoffs with creditors. If anything, pay your disputed payment then argue for the refund after. The resulting damage to your credit score could far outweigh the potential victory. Oftentimes, the outcome of a standoff with a creditor results in a downgraded credit standing, derogatory rating, and a prolonged suspension of mortgage qualification for AAA lenders (lenders with the best rates and terms)…in some cases, the damage is equivalent to that of a bankruptcy. Remember, pay the dispute – argue later.
avoid exceeding 60% of your approved credit limit on your credit cards and lines of credit. If you do, do not allow it to sit for long (more than 2 months)…if you do, your credit score will start sliding

Understand that some mortgage terms and rates will yield higher mortgage qualification amounts than others (i.e. variable rate applicants qualify for more than 5 yr fixed applicants). Currently, the spread between fixed and variable rate mortgages can be as high as 1.5% to 2%, thereby enabling variable rate applicants to qualify for larger mortgages due to the lower qualifying rate. This may seem advantageous and reasonable for some, but not for all. Be sure to discuss all possible outcomes with your mortgage broker before proceeding with your term selection.

Qualify for a mortgage BEFORE becoming self employed, because as soon as you become self employed you are no longer eligible to qualify for a mortgage for at least 2 years (the minimum established tenure for self employed applicants). However, the following circumstances may qualify as exceptions:

if you are transitioning from payroll employment to self-employment, but maintaining the same profession (i.e. transitioning from payroll engineer to independent contractor engineer)
if you are able to provide a minimum down payment of 20% and three consecutive months of business income via bank statements
both of the aforementioned circumstances may be subject to slightly higher interest rates and fees ranging from 1% to 2%

If you are planning on using borrowed money for your down payment, be sure to disclose it to your mortgage broker and ensure that they are aware of it. Otherwise, it may be discovered later on at a critical stage of your closing. Using borrowed money is allowed, but it falls under a different qualification guideline and often requires a re-do of your entire mortgage application, thereby resulting in costly delays and even outright deal collapses

Be clear on the intent of your purchase. Disclose whether you intend on living in the property regularly or if it will be used for investment purposes (rental property). If your intent is misinterpreted or falsely stated in the application, your entire application submission will likely be declined for misrepresentation and will have to be re-adjudicated with the appropriate qualification criteria as per your newly discovered intent.

Be prompt with your document and information submissions. When qualifying for a mortgage within the financing conditions time frame, time is of the essence. Lenders rarely operate in real time, so make sure you are prompt with your documentation from the onset of the submission. Prepare to gather all of your required qualification documents (recent pay stub, employment letter, down payment verification, etc) before you even submit an offer on a property. Furthermore, when your mortgage broker requests any additional documents, reply as soon as possible to ensure the documents are reviewed and approved in a timely manner

ALWAYS complete a formal mortgage preQualification. If your credit report hasn’t been pulled and verification documents haven’t been requested from you, this means you are not preQualified (or pre-approved). Call Marko for a formal mortgage preQualification (aka pre-approval).

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Contact Marko, he’s a Mortgage Broker!

604-800-9593 cell/text/WhatsApp | Vancouver (Click Here to schedule a call with Marko!)

403-606-3751 cell only | Calgary (Click Here to schedule a call with Marko!)

Email Me: gelo.m@mortgagecentre.com

Facebook

@markogelo (Twitter)

Tag: qualifying for a mortgage in vancouver

Moving to Vancouver? Here’s what you need to know when it comes to qualifying for a mortgage

From a First Time Home Buyer Perspective

From a Temporary Resident Perspective (work permit holders)

From a Baby Boomer Perspective

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Contact Marko, he’s a Mortgage Broker!