The discussion is going on that someone bought a house in Canada.
The following are the conditions to buy a house in North America & Canada.
Qualifying for a Mortgage Loan:
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Banks don't loan money to just anybody. [/SIZE]They want to feel secure that you're able and responsible enough to pay them back. So you'll usually need these things in order for the bank to give you a loan:
- Enough money for the Down Payment (3 to 20% of the purchase price)
- Two years of steady employment (same job or field)
- Good (not perfect) credit score (~660+, as of 6/09)
- Monthly income that's 2 to 3 times higher than your expected monthly mortgage payment
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If you don't have all four items above right now don't fret. [/SIZE]You still have some options.
- Meet with a lender anyway. Don't just assume you can't get a mortgage. It can't hurt to go talk to a bank and see whether they're willing to give you a loan. Even if they won't give you a loan they can probably help you by letting you know where the deficiencies are, so you can work towards qualifying in the future.
- Try for a Low-Doc or No-Doc Loan. As I write this in 2009 these are fairly rare now because banks lost a lot of money by giving these out like candy, but as time goes by I think banks will offer more of these again. Not as many as they used to, but it will still be an option for some people, so I'll continue to keep this section here.
Anyway, these loans are for people who can't (or don't want to) provide details about their income or their employment. The most popular is called a Stated Income loan because you just "state" how much income you have without offering any proof. It's also called NIV for "No Income Verification" because your income isn't verified. Weth No Ratio and No Doc loans, you don't even say how much you make. You can think of these as "Don't Ask, Don't Tell" loans. The No Doc is also called NINA, for "No Income & No Asset verification". Because income is never proven with any of these loans I joking call them the "Drug Dealer Loans", though of course there are many legitimate reasons for wanting a loan of this type.
Since the bank is taking a bigger risk on you with a No-Doc or Low-Doc loan, the interest rate is higher than on a traditional loan, and the exact amount depends on your credit score, your lender's preference, and which flavor of low-doc/no-doc loan you get. The premium you'll pay will range 0.125 to 3.0 percentage points over a traditional loan.
I got one of these loans myself once. I had started a new business a year earlier and was easily making enough money to make the mortgage payments on the house I wanted, but because the business was brand-new I didn't have income history and there was no way a bank would give me a traditional loan. My good credit, and my willingness to pay a tiny amount of extra interest, was enough to get me the loan without having to supply any paperwork.
Here's how the different loans stack up.
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What you need for each kind of loan[/SIZE]
Regular Loan Stated Income
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("NIV")[/SIZE]
No Ratio No-Doc
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("NINA")[/SIZE]
Income
You provide proof (e.g., paycheck stubs, W2's)
You just tell the banker how much you make and they take your word for it
You don't even say how much you make. (Don't ask, don't tell.)
Down Payment Needed
✔
Small ✔
Small to Bigger ✔✔
Bigger ✔✔✔
Biggest
Credit Required
✔
Fair ✔✔
Good ✔✔
Excellent ✔✔✔
Near-Perfect
Employment History
✔ ✔
Proof of Assets
✔ ✔ Possible
Proof of Income
✔
Interest Rate
✔
Lowest ✔✔
Higher
[SIZE=-2](+0.125% to 1% higher)[/SIZE] ✔✔✔
Highest ✔✔✔
Highest
[SIZE=-2](up to 3% higher)[/SIZE]
[SIZE=-1]More on Low- and No-Doc Loans from MSN.[/SIZE]
- Use a Mortgage Broker. A mortgage broker represents lots of different lenders so they can shop around to try to find one who will make you a loan. They charge a fee for this service but if you can't get a mortgage otherwise then it could be worth it. You can find mortgage brokers in the homes section of the newspaper classifieds and in the yellow pages. A good online broker is E-Loan.
- Try to get the owner to finance all or part of the cost of the home. Getting an owner to finance a home is difficult, but if you have no other options then it's worth a try. You can increase your chances of success by offering a higher interest rate and/or asking the owner to finance only part of the cost of the home. See our page on owner financing.
- Get a co-signor. See if a family member or very close friend with a higher income and better credit than yours will cosign a loan for you. That means that the loan will be yours and you'll be responsible for paying it, but if you don't, the cosignor will have to pay it. Obviously the cosignor will have to have agreat deal of trust in you for this option to work.
- Have a friend or family member buy the house, and rent-to-own it from them. Friends and family might be wary of co-signing a loan for you because their credit gets ruined if you don't make the house payments, and they have little recourse against you. A more attractive alternative is to have your friend or family member buy the house in their name, and then rent it to you with an option to buy. Here's how it works: You'll make the mortgage payments and pay for taxes, insurance, and maintenance, as your "rent". You can get the house in your name by either making all the payments after 30 years, or by buying the house for the amount of the remaining mortgage once your credit improves enough for you to get your own loan. If you fail to make your payments, you forfeit your right to buy the house, and your friend/family member can either pick up the payments or sell the house. Either way, they're not out because they already own the house. They don't have to foreclose if you don't pay, because the house was already in their name. For that reason this arrangement can be more attractive to them than the idea of their being a cosignor.
In fact, if you don't have the money for a down payment, your friend/family member might loan you the money for the down payment as well -- usually for a slightly higher interest rate than the mortgage.
A downside of having someone buy the house for you is that the interest rate will be about 1% higher because the house will be considered investment property for the buyer and not a residence, since they're not going to live in it. Still, if the only way you can get yourself into your own home is to pay a little more interest, it might be worth it.
http://michaelbluejay.com/house/qualifying.html
