How to get approved for a mortgage with student loans
Welcome to Homebuyer’s School, brought to you by Brookfield Residential. Hi everyone and welcome to another edition of Homebuyer’s School. Today I’m joined by Mujtaba Syed, a mobile mortgage specialist with TD Canada Trust and today the question we’re gonna answer is: How to get pre-approved for a mortgage with a student loan or any other financial debt. Yeah absolutely, so your current financial obligations definitely plays a
role in your pre-approval. Any debts outstanding, it could be a student loan,
it could be a car loan, it could be many other things.
So our pre-approval will actually help you kind of get an idea. We’ll break down
what your payments are and we’ll actually help you decide what’s the
perfect home for you, if you’re comfortable with all your payments and
the mortgage payment, that’s the best place to be. You should be able to kind
of cover your current financial obligations and also the mortgage. It
also might even help you to kind of decide, “should I pay off those loans
first, should I pay off my student loans or my car loan so I can get approved for
a for, a larger mortgage to get you into the perfect dream home.” Once again,
these are just great question to have with your specialist. It’s all about having
that discussion and it should be open-ended to kind of have that
discussion and see exactly where you see yourself to be. It should be a long-term
goal, it should be a long-term plan and really have that discussion with your
specialist and lender. How much do financial debts really impact the ability to get pre-approved for a mortgage? Yeah absolutely, that’s, like I said, it’s it’s a very, very important part. It could have a major impact on your pre-approval depending on the debts that you currently have, your repayment history with that debt and many other things. So it’s, it’s a very important step to kind of get an idea of your financial
obligations and should also factor into your own monthly budget that you’ve kind
of worked out for yourself after or before you’ve seen that specialist, just
find out exactly how much you want to spend on your mortgage or on your home
so you can actually stay on top of your financial obligations.
So I’ve heard a lot about this, an insured mortgage. Is it a different
process – first of all, what is it right? What is an insured mortgage and is it a different process in terms of getting a pre-approval for it and why would I want to get pre-approved for that? Absolutely, so the process should still
be the same. Insured mortgage is technically just what we call default
insurance on a mortgage. So in Canada it’s actually – it’s a legal obligation if
you’re putting less than 20 percent down to have default insurance, which is
just – it just makes the bank’s more comfortable in lending to you.
So without the default insurance you need to come up with 20 percent down to
buy a house which sometimes could be a large amount. It could – it could actually
take you a very long time to save up that, but with default insurance it’s a
benefit to some clients and to buyers. It gets you into market
sooner with the minimum of 5% down and get you out owning a home sooner.
Does that, does that default insurance or insured mortgage – does that, is a part
of your monthly payment plan or do you have to put it up front?
Yeah absolutely, it could be done either way. We could definitely build it right into
your mortgage so it’s not you part of your payments or you could pay it up front. A
lender will definitely ask you those questions and say what meets your needs
the best. If it’s – if you feel like you rather just pay for all at once and through
your mortgage payment, they can definitely add it or if you feel like
you rather just pay it upfront, you can definitely do it that as well.
Do you have a choice? So let’s say I want to get pre-approved and I don’t have my
20% right and I’ll have you know generally good credit score and you know, I
meet all the criteria for the – let’s say; the bank or mortgage specialist. Can I say, “Hey, I want to choose a insured mortgage versus – or it’s only for special cases? Yeah so technically if you have less than 20% down, it’s the only way to
technically purchase a house is get that insured mortgage. Once again, it
is a benefit. Look at it as a benefit so default insurance and it gets you into a
home sooner and with that 5%. sometimes you need to sit down and talk
and say, “I could, I could save that 20%” but saving that 20% keeps you up from
getting into the market sooner where you’ve technically missed out. You might
have missed out any appreciation in the market. How many more years of rent you
might have had to pay to save up that. Sometimes, it doesn’t make sense to save
that 20% and get in sooner. Once again, it’s a conversation to have with your specialist and your lender to see what
best fits your needs. If you want to get in sooner or you can rather wait and get
in later. It just depends on your financial situation.
Do you have anything else to add in terms of insured mortgage or mortgages with
financial debts? Yeah absolutely, so there’s a lot of
benefits in getting an insured mortgage and you can actually go on their websites. One of the insurance providers in Canada is called CMHC which is called the Canadian Mortgage Housing Corporation. They’re very, have a very detailed benefit on their website. It also gives you a lot of
helpful tips on their website about getting a home and buying a home. The other one’s called Genworth Insurance and the other one is called Canada Guaranty and they all provide very similar things, they might have little different things
here and there but it’s also a benefit because there are certain
guidelines that they can help you with. If you’re going through a hardship, most
insurance companies have things built into their insured mortgages where they
can actually help you. They can help you with your financial obligation, they can
work with you, they can do other things, so they can actually be very helpful to have. Perfect, well thank you very much Mo. Thank you very much everyone for joining
us and we’ll catch you next time. That’s another edition of Homebuyer’s School. Tune in next time for more expert tips and tricks and visit www.homebuyersschool.ca to bring you one step closer to finding your dream home. As with everything, it would be great if you like and share our videos. Also, please let us know if you have any home buying questions you want us to answer.