Niagara Real Estate Blog

The mortgage application process: Conventional or high-ratio?

Posted by Terence Davids on Feb 15, 2017 3:00:26 PM
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mortgages and buying your first home

The real estate market definitely has a learning curve if you’re new to it. If you’re buying your first home, there’s plenty of jargon that will be new to you and may take some time getting used to. The concept of mortgages and the language that comes with them shouldn’t slow down the process. With a concrete home buyers plan you’ll be able to understand terms like conventional and high-ratio mortgage in no time.


Buying your first home and getting the mortgage

The first step in this process is getting your Offer of Acceptance approved. Once this has been done, you can see your lender, who will ensure everything is in place to complete the mortgage application and be on your way to buying a home. A property appraisal, land survey, and title insurance are all things your lender may ask you to get. Once this is all done you'll either get a conventional or a high-ratio mortgage, depending on your down payment.


So, what’s a conventional mortgage?

If the mortgage loan is equal to or less than 80% of the lending value of the property it’ll be a conventional mortgage, meaning that your down payment is at least 20% of the purchase price or market value. If you’re buying your first home, a side note: The lending value is the property’s purchase price or market value (whichever is less).

Example: For a $300,000 purchase price you will have to make a $60,000 down payment or higher for a conventional mortgage.


And a high-ratio mortgage?

As a first time home buyer and the market being as hot as it is, finances may be a little complicated to come up with. A down payment less than 20% of the home price will require you to get a high-ratio mortgage. The maximum property value for high-ratio insurance must be less than $1,000,000 and can be insured by the CMHC, Genworth Financial Canada or Canada Guarantee.

Example: A $300,000 purchase price with a minimum down payment of $15,000 would result in you looking at a high-ratio mortgage.

Buying your first home is never an easy process. Get a better handle on the market with the help of some of the best Niagara realtors. Team Davids has the experience and knowledge you need to find the house you’re looking for in the best time possible. Connect with us today!

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Topics: Buying A Home

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