The most important thing to remember when buying a home is that you have to pay for it. This may seem obvious, but when people are buying a home, emotion sometimes causes them to buy without doing the math first. 

A good rule of thumb is that most people will qualify for a mortgage equal to about three times their gross annual income. This will give you a very rough idea of what you will qualify for, not what you can afford. You need to look at your cash flow and determine what makes sense for you. If you like to eat out three or four times a week, you're not going to be able to afford as much as the person that bags lunch every day. 

Decide how much you can afford to pay each month for your shelter costs i.e. mortgage, property taxes, heat, hydro, water, etc. Then you can work backwards and figure out how much of a mortgage you need. Find a payment calculator and play with it until you find a mortgage amount that includes payments equal to what you can afford. 

If you are paid a salary or an hourly wage, it is a straightforward process. If you are self-employed or receive bonuses or commissions you'll have other issues to think about. Banks don't like taking risks and many perceive self-employed or commissioned people to be higher risk because of the uncertainty of their future income. The banks will typically look, not at your gross income, but at your net income after you have deducted all your expenses for tax purposes and then average your income by looking at a two- or three-year period. 

In the last few years, more lenders are acknowledging the fact that self-employed and commissioned people are not as bad at repaying their mortgages as the lenders once feared. Now there are programs geared specifically at these people to allow them to buy a home without showing any, or very little, income. 

Once you have determined what you can afford, you should get a pre-approved mortgage. This is where your mortgage specialist can help. We do a credit check and tell you the maximum mortgage amount for which you would qualify using the best discounted mortgage rates.

In about 50% of mortgage applications, people overstate their income by including overtime, commissions or bonuses that may or may not be ongoing. The financial institutions will only include this sort of income when qualifying you for a mortgage if you can demonstrate this income is ongoing and has been consistently paid over the last two to three years. If you are relying on this income to be approved for your mortgage, you need to know up front if it will work. 

In about 20% of applications, there are credit issues that people were unaware of, forgot about or failed to disclose which would impact their ability to get approved for a mortgage. If this is discovered after an Offer To Purchase is made, there is usually very little time to resolve or deal with these issues. 

The other benefit of getting a pre-approved mortgage through your mortgage specialist is that the lenders will guarantee you a mortgage rate for up to 120 days. This means that you know exactly what your rate will be if you are able to buy a home and close within the rate-guarantee period. This service is free and it gives you a little added peace of mind when shopping for a home.

The mortgage market is very competitive, and if you use your own bank they will usually not offer the best available rate at first. As your mortgage broker I negotiate on your behalf and help you explore your options. I can usually find several lenders who will want your business which means you'll save money. 

Get Started - Complete an online Mortgage Application and I will contact you to explore your mortgage options.
 

Many would-be homebuyers are now considering a new option introduced this month in Saskatchewan, that makes purchase possible and reduces monthly payments by increasing the amortization period of the mortgage . Reducing the mortgage payment by even $100 a month with a longer amortization may be enough to help first-time buyers qualify under lender rules.

Canada 's two mortgage insurers, CMHC and Genworth Financial, now offer lenders insurance for longer amortization mortgages. Genworth insures both 30 and 35 year mortgages, while CMHC offers 30 years. 

By increasing the amortization period, more first-time buyers can get into the housing market. This new product may also be helpful for those who want the flexibility of better cash flow, however, be sure to talk with your broker and think carefully about your financial goals before signing up. While it does allow people to get a foot in the door, the negative of longer amortization it that it means much more interest paid over the life of the mortgage .

Talk with your mortgage professional to help decide if this is a good choice for you. Your mortgage professional will help you with additional considerations to help reduce your costs – for example by setting up biweekly payments, the amortization period automatically drops to 25 years or less. Also, plan now to renegotiate to a shorter amortization on renewal. With consistent rising costs of Real Estate you may be happy to get into home ownership now. 

Get Started - Complete an online Mortgage Application and I'll contact you to explore your mortgage options. 

Money Saving Mortgage Strategies

There are many ways to save money when it comes to your mortgage. One way is to increase your mortgage payment frequency. Many lenders allow you to change your payment frequency at any time. 

Increase Your Payment Frequency:

Choose the payment frequency that's most convenient for you based on how often you're paid: weekly, bi-weekly (every two weeks), semi-monthly (twice a month), or monthly. Increasing your payment frequency will save you money in interest costs over the life of your mortgage. 

Example: $80,000 Mortgage @ 8% P.A. ¹
 
 

Payment Frequency	Monthly Payment	Actual Amortization (years)	Total Interest Costs 3	Interest Saved
Monthly	$610.58	25	$103,480	N/A
Semi-Monthly	$305.29	24.9	$102,410	$1,070
Bi-Weekly	$305.29	19.9	$78,114	$25,366
Weekly	$152.65	19.9	$77,821	$25,659

 You may change your payment frequency at anytime at no cost. 

1 Per annum, calculated half yearly not in advance. The rate shown is an example and is not necessarily applicable to an actual mortgage. Great care has been taken in the preparation of this table, however, there is no guarantee of complete accuracy. 
2 Assume same interest rate for entire amortization period. 
3 Over the life of the mortgage. 

If you've had your current mortgage for 2 years or longer, call me at 306-280-3240 or e-mail me at marinaf@sasktel.net for a review of your mortgage to make sure you're receiving all the benefits available today through your home's mortgage.
 

Prime rate increased three times in 2005 and is expected to continue an upward trend during 2006. A few thoughts on why rates are rising: