Mortgage financing rules have changed on both a federal and provincial level. However, these rules are not the only things that determine your eligibility for a mortgage. Here are a few other factors that affect your ability to get a mortgage and ways you can improve your odds of securing one.
The Type of Property
Lenders will look at the marketability of the property in Grande Prairie or elsewhere before determining if they’ll offer a loan for it. Properties that are in bad shape, far from the beaten path (without nearby amenities) and not generally attractive to the average home buyer are the least likely to qualify for a mortgage. For example, few people want to buy a cabin without a full kitchen and bathroom, whether they want to live there seasonally or year-round. A house with an unusual layout will have fewer takers than a conventional suburban single family home. If the property is considered somewhat marketable, you’ll need a larger down payment than more desirable properties or have the property insured through CMHC regardless of the down payment amount.
Another issue is the risk associated with the home. If you’re buying a property with more than four units, they’ll classify that as a commercial real estate loan. If you’re buying a condo, the lenders may want to limit their exposure to the overall exposure they may specifically have in that building so we need to use a different lender. Even if the property itself is great, if the lender already has mortgages on half the units, they may decline your mortgage application for that condo but would approve it if you bid on a home elsewhere. If you’re buying an older home or condo building, the risk is considered greater depending on if the home is viewed as close to expiration of the its life expectancy. In these cases, a comprehensive review is necessary, and reserve fund study for a condo may be required.
The Location of the Property
The location of the property affects its eligibility for a loan. We already mentioned that property far from amenities is generally less marketable, so you need a larger down payment or have to pay cash for it. If the home is in a remote location the less lenders will be willing to lend to you unless there is another source of demand. For example, a home far from the city but close to a ski resort has more value than one equally far from the city but nowhere near recreational opportunities.
Properties located out of key market areas may require a larger down payment and/or higher interest rate. Rural properties, for example, may require mortgage default insurance though you’ve put 20% down. Every lender has different policies and my job as your Grande Prairie mortgage broker is to make sure we place you with the right lender to get your deal approved.
Properties with limited or lacking municipal utilities are considered higher risk. You’ll need to pay more to assess the risk such as paying for water testing, demonstrating seasonal access or proving the condition of the property. If the property needs significant renovations, they may not extend a loan. In these cases, you may be able to buy the property with a high interest loan and fix it up, then refinance the entire outstanding balance into a conventional loan.
The Use of the Property
Owner-occupied housing is considered ideal for lenders. You can have a portion of the property that will be a rental and still secure an insured mortgage with less than 20% down payment, such as when there is a legal rental suite connected to the home. If your condo or home has an attached office or commercial space, some lenders will refuse to deal with it while others may allow it if their insurer does. Second homes require a review to determine if it can be occupied seasonally or year round this would determine if it is a vacation property or second home. Investment properties to be rented out for income fall into a rental property category.
Always consult with a mortgage professional before you start shopping for a new home so that you understand all of your options. Call us at Whalen Mortgages your Trusted Grande Prairie Mortgage Brokers to discuss your next purchase or transfer. 780-357-3993