No Down Payment? Mortgage Program

VIDEO: How to Create a Zero Down Mortgage

To put this program together successfully, you have to put 3 things in place

1. get a personal loan or personal line of credit from your bank for your down payment funds,
2. have us locate a lender for you that will give you a mortgage using borrowed down payment, and
3. the lender has to be set up to work with Sagen Canada (similar to CMHC), who will provide mortgage insurance that the lender requires to give you a low down payment mortgage. Sagen provides the Borrowed Down Payment Insurance Program to the mortgage lender, and it is their criteria that we have to meet to make this work for you.

Here are the requirements to be approved for the program:

1. You should have very good credit, which generally means a score of 750.
2. You must have stable income, with at least 2 years with your current employer(s) if your base hours or incomes are not guaranteed.
3. Your income must be sufficient to pay the new house mortgage, and the new down payment loan per industry standard debt-to-income ratios, which generally means low or no consumer debts. 
4. You must qualify for and get a line of credit or loan first for the down payment (this is the first step, talk to your bank .. but only after you talk to us so that you frame the request correctly)
5. Generally, your target house price should not exceed ~4 times your household taxable income (T4s) assuming your consumer debts are low to moderate. I can be more precise when we talk.  Canada Child Benefit can count to household income too.
6. Generally, purchasing a house under $500K works best, which I can explain the reasons if need be, but there is some wiggle room here.
7. Please note, this program is simply not available for people with any credit issues, high consumer debt loads, or unstable/new income.

No Down Payment Mortgage Example 

Here is an example for what it would take to purchase a home priced at $600,000.

Per standard mortgage qualifying rules, for a $500K purchase you would require 5% down payment ($25,000) plus an additional ~1% ($5,000) or more for the closing costs you will have (lawyer, property inspection, applicable taxes, utility connections, etc.). So you need a mortgage for $475,000 and a down payment loan for $25,000.  Generally, you must have at least the closing costs in savings.

Here are what the approximate numbers might look like:

$2885/mo - your monthly mortgage payment (~a third of this is mortgage balance reduction) (ex 4.99% interest, 25 year amortization)
$ 500/mo - the borrowed down payment loan repayment (ex. 7.5% Interest, 5yr term)
$ 300/mo - property taxes to the town or city 
$ 200/mo - fire/property insurance
---------
$3885/mo - TOTAL COST OF OWNING YOUR OWN HOME - COMPARE THAT TO PAYING RENT

Guideline Income: to qualify for this mortgage, your household taxable income should be about 1/4th the house price or more. $500K/4 = $125K/yr as a guideline income. In addition your jobs have to be stable and very good credit.

Putting it all Together - Whether Borrowed Down or Otherwise

Setting a goal to get your own home is a big deal and an exciting journey. It starts with a dream, followed by taking some initial "discovery" and "exploration" steps. At some point you get the first sense that "hey, this may be possible!" Before you know it you are looking at homes, then one day ... it's moving day and a place to call your own. I'm happy to be part of your journey....

Understanding mortgage finance is a key part in your plan and journey. To get a home, you need to be able to qualify for a mortgage. Your income needs to be stable and sufficient to pay your existing debts and the new mortgage, your credit profile has to show that when someone extends you credit that you pay them back on time and as agreed, and you have to have the required minimum down-payment, and - understandably - that can be hard to save in today's environment. For those with strong employment and strong credit, there may be a short cut for down payment, which we discussed above, called the Borrowed Down Payment Program, and there are other ways too.

VIDEO: How to Create a No Down Payment Mortgage

Warning - all of the criteria above are requirements for the program, so please double check. If you can meet all 6, please complete a profile and we'd be happy to provide an assessment upon receiving it.