Buying Your First Home in 2017? – 7 Steps to Maximize Your RRSP Down Payment

Are you thinking of buying your first home in 2017? If yes, contributing to your RRSP before the March 1st contribution deadline can help you increase your funds available for your purchase. Follow the 7 steps below so you can maximize your available funds to purchase your first home.

Step 1: Check to see if you fit all the Home Buyers' Plan (HBP) requirements at www.cra-arc.gc.ca/hbp/. If you do continue to the next step.

Step 2: Consult with Kathleen Dediluke of Dominion Lending Centres Mortgage Integrity Mortgage BC to review your credit and plan ahead so you are mortgage ready. Kathleen will help you figure out what you qualify for as well as help you navigate all the first-time home buyer programs such as the new BC Home Owners Mortgage and Equity Program.

Step 3: Contribute to your RRSP to top it up to $25,000 (check your contribution room to confirm the maximum you can contribute) for each buyer. Contribute to the highest income earners RRSP first to maximize your tax refund. If you don't have the cash to contribute, then it may be beneficial to borrow funds to contribute to your RRSP but talk to your mortgage broker first to ensure your credit is in line to do so.

Step 4: Do your taxes as soon as possible so you can get your tax refund in your bank account.

Step 5: If you didn't maximize your RRSP to $25,000 put your tax refund into your RRSP (highest income earner first) to help reduce your taxes next year.

Step 6: Now that your funds are in your accounts review your options with Kathleen and let your RRSP contributions stay in your account for 90 days for the withdrawal to qualify under the HBP.

Step 7: Begin searching for your first home. Be sure to plan the closing date to be after the minimum 90 days required for the funds to be in your RRSP and allow time for funds to transfer out of your account. 

Important 2017 Dates:

March 1 - the 2016 RRSP Contribution Deadline

February 20 - the first day you can file your 2016 income taxes

May 1 - the deadline to file your taxes if you are not self-employed

April 30 - all income taxes must be paid to CRA by all tax payers 

June 15 - the deadline to file if you are self-employed

Good to Knows about the Home Buyers' Plan:

• Funds withdrawn from your RRSP before they have been in your account for 90 days are not eligible under the HBP and income tax will be withheld from the withdrawal

• You can use your RRSP withdrawal for anything from you down payment, paying off debts, moving costs and more as long as you're in a contract to purchase your first home

• You must repay the withdrawal amount over 15 years starting the second  year following your withdrawal or pay tax on 1/15th of the amount withdrawn in tax years you do not pay it back.

Dominion Lending Centres Mortgage Professional Kathleen Dediluke will help you plan to buy your first home. It’s never too early to start your mortgage application. E-mail Kathleen  to get started today!

Inside and Outside the Box Mortgages in Today's Market

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As the first month of 2017 comes to an end Mortgage Brokers and Lenders are adjusting to the new risk based mortgage rate pricing that came into play after the Finance Minister changed Government backed mortgage default insurance regulations in late 2016.

Lenders often choose to pay for mortgage default insurance on mortgages where the borrower was not required to pay it themselves. This method protects a lenders book of business against credit loss, helps them package more secured mortgages together to sell to investors and reduces the amount of capital they are required to maintain. This method in the mortgage industry is called back-end insuring.

The changes have limited the mortgage profiles that lenders are allowed to insure using Government backed insurers. Essentially the Government is intentionally passing on the risk to Lenders by implementing stricter insurance qualifying guidelines and limiting mortgages that can be insured to what they consider lower risk "inside the box" mortgages.

The onus is now on the lender to absorb more costs if a borrower defaults. In the end costs are passed on to borrowers by lenders applying higher rates to less secured mortgages.  

If you're looking for a mortgage in today's market your circumstances may not fit "inside the Box" and be an insurable mortgage profile and your mortgage rate may be higher. The following is a short list of what insurers have limited their guidelines to:

• 25 year maximum amortizations
• Must qualify by using a rate stress test
• Maximum GDS of 39% (shelter expenses)
• Maximum TDS of 44% (all liabilities)
• No refinances
• No single unit rentals
• Purchase price must be less than $1 Million

As you can see the insurer's list is limited making Dominion Lending Centre's lender connections and mortgage solutions more important then ever! Mortgage Brokers have a vast amount of mortgage options available to cover "outside the box" uninsurable mortgage profiles. Whether your refinancing, you need an amortization over 25 years, want to buy a single-unit rental or more we have a mortgage for that!

Contact Kathleen Dediluke BC Mortgage Broker Professional to get started on your mortgage approval today! 

Why So Many Documents

Documents, documents and more documents. Yes that’s right you will need to provide your Dominion Lending Centres mortgage broker with as many documents that we request upfront as possible. Why? Because the more supporting documentation you have available will help us as brokers to find you your best mortgage options. If you don’t have everything on hand e-mail a PDF of what you have and start digging up the rest as soon as possible.

Why so many documents you ask? While the lending market isn’t what it used to be, it is now much more strict and complex then a few years ago. Lenders are asking for WAY more documentation before they will lend you money. Yes, there have been instances of mortgage fraud that likely led to more scrutinized lending and Government regulations that lenders have to abide by are always changing. Mortgage lenders need to protect their investors and help ensure our Canadian housing market remains strong.

It may seem like a pain but ask yourself this if you had a large amount of money would you lend it out to somebody without proof they have income stability and/or the means to pay it back? Pretty sure your answer is no (at least mine is).

Below is a list of typical documents lender and mortgage insurers request. If you would like a tailored list please contact DLC Mortgage Professional Kathleen Dediluke to discuss your application.

Income – lenders are looking for proof of income stability.

Self-employed Income

* 2 years of Income Tax Returns, Business Financials, CRA Notice of Assessments. Often it’s best to have your accountant e-mail them to us so no pages are missing.

Rental income

* Lease agreements

* T1-General tax returns with the Statement of Real Estate Activities. If you don’t claim your rental income let us know as this may affect how your mortgage is approved.

* Proof of the rental income being deposit on a regular basis into your bank account.

Guaranteed Employment Income

* A couple of recent pay stubs

* A job letter confirming your position, guaranteed pay and hours, if you are seasonal, contract or any specific information that relates to your income stability. Lenders will call your employer to verify the letter and ask for more information as possible. (Sample Job Letter)

* 2 Years of CRA Notice of Assessments

* 2 Years T1-Generals

Commission, Overtime, Seasonal, Contact or Bonus Income.

* A couple of recent pay stubs

* Job letter

* 2 years of T1-General Income tax returns

* 2 years of CRA Notice of Assessments

Liabilities – We will see most of your consumer credit accounts on your credit report however we may require some additional paperwork

* Current mortgage statements

* Property tax statements and proof of payment

* Child Support Payments proof via court orders and bank statements

* Alimony via Separation Agreements

* Proof your income tax has been paid. This is the most important item to pay because the Government has more power than the lenders. If you are wanting to refinance your mortgage to pay CRA contact us to discuss your options.

* Proof debts have been paid. If a zero balance is require you must show the account at a zero balance or the current balance and the proof of payment

Down Payment & Closing Costs

* The last 90 days of savings history. Any larger deposits have to be sourced.

* Gift Letter (some lenders have prescribed forms)

* Statement showing gift deposited into your account

* Property sale contracts and mortgage statements

About Documentation from Financial Institute

* Must have account ownership proof. For example e-statements are the best as they typically have your name, account number and the providers details already on the statement

* Screenshots work if the providers logo/name are clearly shown on them as well as the account holders name. If the account number only shows then you will have to provide an additional document from the provider with both your account number and name.

* If you are having your account history printed at a Teller please have the Teller stamp the paperwork

Documentation varies by applicant and lender. Be prepared by contacting your mortgage professional today for your tailored documents list.