Purchase Mortgage Financing – First Mortgage

When purchasing a home, your first mortgage will be important. It is important to secure a first mortgage that you can afford to pay so that you don’t end up “house poor” so to speak. It is also important to think about how much of a first mortgage rate you are willing to pay and then to look around. When looking around it is okay to inquire with a company about their rate but be sure not to make an application as too many inquiries to your credit report can damage your credit score.

Most first mortgages involve less than a 25% down payment and so they have to be insured by CMHC. If your first mortgage needs to be insured by CMHC this means that both the lender and CMHC have to approve you. It happens from time to time that a lender approves a mortgage and CMHC declines it. CMHC has its own lending guidelines and one is that your housing payment cannot exceed 32% of your gross income and your housing payment, plus payment of other debt like loans and credit cards, cannot exceed 42%.

To figure out how much of a mortgage payment you can afford simply take your gross annual income, multiply by 32% and then divide the sum by 12 (E.G. Y x 32% / 12 = maximum monthly mortgage payment including taxes).

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A mortgage broker is usually your best choice for mortgage financing. They have access to all of the banks’ best deals and can usually secure the lowest rate. The bank will also pay their fee in most cases.

While you can go to a mortgage broker and be pre-approved by both the broker and the bank, you won’t be able to obtain official CMHC approval until you have made an offer on a home.