It’s 5AM?! Who is this?!
It’s your debt.
My wha? Huh?
It’s your debt calling genius…when’s the last time you looked at me? I’m that bright red negative number glaring at you. You know, that number that keeps you from your dreams….HELLL-LO?
That was the sound of the 2X4 that hit me across the head yesterday afternoon after visiting a mortgage specialist to find out my options for getting out of “I’m back in high school” hell. Read: I suffer from living with my parents again.
Continuing on with my supreme mission of getting out on my own again and owning a place of my own, I thought it would be prudent to do some research and find out my current state and what my future state needs to be. I’m a research things way ahead of time type of gal.
Well, did I get the wakeup call of a lifetime!
It wasn’t all doom and gloom, but it was nonetheless a wakeup call. I found out that if I wipe out the debt I have on my line of credit, I could afford significantly more house and not have to buy a hole in the wall.
Lesson #1 Work the System
The specialist I spoke to was nice enough to give me a few ideas of how to “hack” the system per se. There are sneaky little ways to get around certain rules in regards to a mortgage, especially when it comes to extra fees, like say, the CMHC.
If someone is going to “gift” you your down payment, it is suggested that you have it in your bank account for more than 90 days before taking out your mortgage. If not, it is considered a “non-traditional” form of down payment and you are dinged an extra percentage by the CMHC. In my case 20 points extra, I would be charged 3.35% instead of 3.17% or $600 difference on a $300K home.
Another little tidbit: If you stay out of the housing market for at least five years, you can re-qualify as a new homebuyer and be able to use your RRSP’s as a down payment. For me, this is NOT an option but I thought I would throw it out there. You inevitably have to pay it back, so why bother railroading yourself.
Lesson #2 That Nasty Total Debt Service Ratio
Yea me, my TDS was below 40%, how joyous! That means I can qualify for a mortgage. Another tidbit is that if your credit history is super nice, the CMHC will let you go up to 44%, which I think is the stupidest thing anyone could do. On first glance, with my current debts I only qualify for $250K, which doesn’t buy all that much in the GTA. However, if I rid myself of my LOC, I could get $300K.
Lesson #3 Hard Work Pays Off!
Please feel free to do a happy dance with me, or sing, shout…whatever tickles your fancy…just no nakedness please.
Ready for it?
My credit score is 817! All my hard work has been paying off! So, yippy skippy, I can get lower interest rates if I keep up the hard work! WOOOT!
K, I’m done now. Carry on as you were.
The moral of the story, or rather, the advice I would like to give, would be to check in on that dream of yours occasionally for motivation. Go see whoever or whatever expert to find out where you stand in relation to getting to your dream and find out what you need to do. In addition, consider that experts’ advice. This visit for me was a huge motivator. Yes, I left slightly disappointed with myself but now I’m riding a huge wave of motivation to kill that last bit of debt and get that house!
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