Your Pay Went Up, But you Don’t Qualify for a Mortgage?!
I want to share with you a story. Below is the story of John, and if you ever want to own a home, you need to read his story.
John was a 25 years old. He was good with money. He went to school and he worked his butt off to support himself. John had been saving $250 every pay cheque for the past 2 years allowing him to accumulate $12,500. This was hard for John as he was barely making $15 an hour and was not left with much spending money after each payday. Six months ago, John started a new job working full time getting paid more than $25 an hour. With the increase in income, he bought a new car with monthly payments he could easily make. Financially, John was feeling confident.
John called his mortgage broker to tell him the good news. He had his 5% down payment, had his new full time job getting more than $25 an hour and was ready to put in an offer on a $250,000 condo. John was excited- he’d been saving for 2 years, he could finally move out and have his own home. Unfortunately, John’s mortgage broker informed him that even though he had the 5% down payment and full time job, he wouldn’t be able to buy a home for at least another two years!
What the heck happened?
Well, a couple things.
First, John’s credit report wasn’t strong enough and his score was too low because of unpaid parking tickets and short credit history. Second, John didn’t know about closing costs so his savings were short thousands of dollars. Third, John didn’t know about the ratios lenders look at when qualifying a potential borrower. His $450 a month car payment took away his ability to qualify for an additional $100,000. To top it all off, John wasn’t even guaranteed 40 hours a week at this new job. Due to this, John’s broker informed him that a lender will require a 2-year average income. Of course, 6 months ago John was only earning $15 an hour, giving him a 2-year average income significantly lower than what he had now.
How to avoid being like John:
Do an application with a Dominion Lending Centres mortgage broker, these are FREE. They’ll be able to tell you exactly what you can afford, exactly how much you need to have saved, and where your credit score needs to be and how to get it there. Many of you reading this are a year or two away from wanting to purchase your own home but even if you are 5 years away: call a mortgage broker, take 20 minutes, do an application, and get qualified!
Purchasing a home is one of life’s biggest and most stressful moments and you need to be prepared for it so you don’t waste time and money like John. This is my entire reason for being a mortgage broker; someone who can be an expert for others to rely on for help. Use a Dominion Lending Centres broker, find an expert, get qualified.