Mortgage experts...would I get approved?

[Canucks3322]

Ok, my lease is up at the end of the year and I want to purchase an older, small, condo close to downtown...about $150,000 to $175,000. I see the great investment potential as those are the units that will skyrocket the next time there's a boom in Calgary and I personally don't mind living in a crappy, small place because all my friends live near downtown and I can walk to work and I just generally like the area.

Here will be my financial situation come December 31, 2009, don't judge, I'm 28, and I've been at my job with the Federal Government (seen as the most stable employer) for 4 years come February, 2010...BUT I HAVE A LOT OF DEBT from being stupid when I was younger....

-$62,000 gross income (new contract will be signed in the new year, then I will go up to $65,000)
-$13,000 CASH in the bank
-$15,000 owing on credit card (yea yea I know, stupid but that's why I been putting away $1000 bucks a month and renting a basement room for 450 a month since April)
-$8,000-ish owing on student loan, $155 a month payments
-$16,500 owing on car loan, $370 a month payments, $180 a month insurance
-I spend about $240 a month on food, $75 for gym membership, $83 for a bus pass (which I won't need if I live close to downtown)

Should I pay down the credit card with the cash before I apply for a mortgage or could I get approved without? Or should I do a combination, pay down some debt, while keeping enough for a 5% downpayment??? How much could I even get approved for??

My credit payment history is near perfect, I've missed payments maybe twice by accident and I've had credit cards and bills since I was 18...my credit card interest rate is 9-11% over 3 different cards that have a limit of $50,000, and I have a best buy card with $5000 (?) limit, and a Bay card and Futureshop card which I haven't touched in years, I used them for maybe 5 years and paid off both of them and never missed a payment...

[SteveMo600]

K dude, you're gonna have to go to a mortgage broker to see if you are approved. Don't take the advice from the board, there are very few qualified people that can steer you in the right direction.

If you decide to use your excess cash as a down payment then as a STARTER, go to the bank and try to get approved for a line of credit/loan so that you can payoff your credit cards. You should be able to lock in a cheaper interest rate with the bank, than you're paying on your CC. You're getting rolled on your CC, especially with where prime is right now. Paying off credit cards is a guaranteed return.

Cut up the Futureshop and Bay cards.

[Canucks3322]

Here's the thing I don't get with the Credit Cards though...from the mortgage calculator that I used, it looked at how much your minimum monthly payment would be, so they only look at your ability to service the debt and not the TOTAL amount of the debt??

I haven't used or seen my department store credit cards in 5+ years and I'm pretty sure the accounts are closed, I don't know for sure, I haven't checked my credit file yet. Would it be beneficial to close 2 of my 3 credit card accounts? Because each of them has at least a $15,000 limit....but only one is near maxed, the other 2 have zero balance.

[Meback]

Man, wtf are u doing with that 13,000 in the bank, pay off that credit card, ur getting boned up in the ass with the interest rate! Debt first, morgage later. Some may disagree, since its a pretty good time too buy.

[Canucks3322]

^ Lol, I know...that's why I want to consider this...but yes, you make a good point, but at 10% annually, thats 1400 a year. :dunno: If I pay it all off now, I'm gonna go back to paying $1000 bucks a month in RENT for ANOTHER YEAR because I don't have a downpayment. I know it's better to start building equity first, I just wanna know if I'll get approved...

[blueripper6]

put 10GS on your credit card tmr...

im not an expert or anything but why would you have a huge debt on a credit card when you are really only like 1 or 2 paychecks away from having that shit locked down.

And why do you use a bus if you have a car and pay insurance?

[Isaiah]

Originally posted by blueripper6

And why do you use a bus if you have a car and pay insurance?

Because if he works downtown, $83 buspass>$1,000 downtown parking

[barmanjay]

Rent:
1000/mo x 12 mo = $12000 in the landlords bank
you still own nothing, no pride of ownership, no chance for future inflation equity gain.

own:
1000/mo x 12 mo = $11000 to the bank in interest payments and $1000 into your equity - the landlord can kiss your ass.
good chance to inflationary equity gain if another hiccup in real estate trends happen.


Ratio isn't good now, but the ratio changes in your favour over the years

Your Debt ratio might be good,.. but how is your beacon score?


If you want to buy a place,.. use that 13g's as a downpayment and closing costs.

Paying down your debt is the smart thing to do to save on interest charges with those credit card companies,.. but you need a minimum of 5% down to purchase a home.

[SteveMo600]

Find out what's going on with those department credit cards and close the accounts, cut up the cards. They're tempting to use and usually have the WORST interest rates.

They probably will approve you somehow. Seriously man, book an appointment with somebody at the bank you use and go from there. They'll let you know what you're pre-approved for and a minimum downpayment amount.

My suggestion, if you're set on buying a place use between 7-10k for a downpayment (or less if you can) and then use the balance to pay off your highest credit card. Then, go get a line of credit through your bank and then pay off ALL your credit cards. Start making monthly payments on your consolidated line of credit at a lower rate.

[barmanjay]

Originally posted by SteveMo600
...
My suggestion, if you're set on buying a place use between 7-10k for a downpayment (or less if you can) and then use the balance to pay off your highest credit card. Then, go get a line of credit through your bank and then pay off ALL your credit cards. Start making monthly payments on your consolidated line of credit at a lower rate.


^^^ Smart man

[badatusrnames]

Originally posted by Isaiah

$83 buspass < $1,000 downtown parking

[Canucks3322]

Okay, that's what I thought....use some of it to pay off credit card but leave enough for a downpayment right? :thumbsup:

Yea there's no temptation whatsoever to use the department cards and I guess I'll get my free credit report first...I learned about 5 + years ago to NEVER use those department cards unless I can pay it off on time, and I worked hard over the past 10 years to get my Visa and Mastercard rates down to 9%....

[barmanjay]

Originally posted by Canucks3322
Okay, that's what I thought....use some of it to pay off credit card but leave enough for a downpayment right? :thumbsup:

Talk to a mortgage specialist first before you go paying stuff off,.. don't leave yourself short

take all your closing costs into account aswell

[Canucks3322]

^ lol, of course, I'm not going solely off advice from Beyond haha

And yes, I work downtown, so driving to work was never an option, these places I want to buy are within walking distance to the free downtrain train line.

[kaput]

.

[Canucks3322]

Yea, I used the TD Bank one and it asked for my credit limits, it takes 3% of your total credit limits into consideration and tells me to fuck off too...wtf? I will most likely have to see a mortgage broker.

[kaput]

.

[Canucks3322]

^ Yea that's why I was asking if I should close some accounts...I guess the mortgage broker would be able to tell me all this stuff before handing my appliciation...

[kaput]

.

[el-nino]

You can prolly afford a mortgage of around 280,000. This is a rough estimate based on your inofrmation given.
PM and I can tell you how much you can actually afford.

[prae]

Originally posted by el-nino
You can prolly QUALIFY FOR a mortgage of around 280,000. This is a rough estimate based on your inofrmation given.
PM and I can tell you how much you can actually afford.
fixed, emphasis added.

Honestly, I would concentrate on eliminating your debts and rent for a few more years. You are already 28, and you never know how fast your living situation could change.

What if you meet the right woman and decide to have kids by the time you're 30? You will NOT still want to be in that condo.

A condo is not a sound short-term investment given today's outlook. It might take you 5 years to see any upside on the thing. By then you'll be 33, potentially with a wife and a kid on the way.

I'm not presuming to understand or be able to predict your personal situation. Speak with a qualified financial planner, not just a mortgage "expert" with a vested interest in providing you with a sizeable loan. Nothing against el-nino.

[Canucks3322]

Yea I laughed when I saw that, no offence to him personally either. You make some good points to consider for sure....

[el-nino]

Originally posted by prae

fixed, emphasis added.

Honestly, I would concentrate on eliminating your debts and rent for a few more years. You are already 28, and you never know how fast your living situation could change.

What if you meet the right woman and decide to have kids by the time you're 30? You will NOT still want to be in that condo.

A condo is not a sound short-term investment given today's outlook. It might take you 5 years to see any upside on the thing. By then you'll be 33, potentially with a wife and a kid on the way.

I'm not presuming to understand or be able to predict your personal situation. Speak with a qualified financial planner, not just a mortgage &quot;expert&quot; with a vested interest in providing you with a sizeable loan. Nothing against el-nino.

Non taken! Thanks for the fix!

[D. Dub]

Originally posted by el-nino
You can prolly afford a mortgage of around 280,000. This is a rough estimate based on your inofrmation given.
PM and I can tell you how much you can actually afford.

Hey man, with all the advertising you do here -- perhaps you should become a sponsor and throw some of that money back to the site? :dunno:

[B4tMan]

pay the CC bill. 19.75% versus 4.4 on the mortgage 4 year fixed

[sputnik]

With the amount of debt you have it would be best for you to forget about buying something at the moment and focus on paying down your debts.

The first thing I would do is use the $13,000 cash to pay off the credit card bill. The interest rate will KILL you if you try to pay it off slowly.

Then I would start saving the money that would normally be used to slowly pay down the credit card bill and put it into an RRSP. Use the higher tax return and pay down your other debts in the process while still building up your RRSP.

When the majority of your debt is paid off use the RRSPs and the First Time Home Buyers Plan to borrow against your RRSP for your downpayment.

[el-nino]

Originally posted by D. Dub


Hey man, with all the advertising you do here -- perhaps you should become a sponsor and throw some of that money back to the site? :dunno:
I think your right. I planned to sponsor beyond after my wedding as I could use every cent right now.
I will sponsor the sight on my next pay day.

[Canucks3322]

el-nino...nothing personal against you but how old are you? Just going from your posts I would not choose to do business with you because you type like you never graduated high school. I mean, you could just be a really bad speller, but it reflects on your image as a professional and someone I would trust in dealing with this much money. Also, the fact that you want to get me approved for $280,000 shows you really aren't that interested in my financial wellbeing. That is ludicrous that I would and could overstretch myself that much. My entire paycheque would go to the mortgage with a bit left over for bread and water.

sputnik and B4tman...my normal credit card rate is 9-10%, I have been kiting the balance between cards the past 1-2 years at anywhere from 4-6% as balance transfers, so interest isn't that much of an issue (the interest on the cards I will pay in the following year will therefore be nothing compared to the money I will dump down the tube in rent)...the main issue I think is therefore, should I pay off the credit card AND wait ANOTHER YEAR to save up for the downpayment all the while paying 1000 bucks a month to a landlord or should I try and see what can I get approved for right now (December) and take advantage of low interest rates, low prices, a good investment (condos near downtown are the ones that will skyrocket the most the next time the boom comes)....I think the answer is the latter, honestly, and I really just made this thread to see if I could even get approved at this point with the credit card debt, I know the answer though, it's gonna be a combination, pay down some of it but have enough for a downpayment and closing costs, it's always better to buy a home as early as possible unless the prices are overinflated right?? And like I said, I'm not paying the 20% interest rate on the cards...

[sputnik]

Originally posted by Canucks3322
the main issue I think is therefore, should I pay off the credit card AND wait ANOTHER YEAR to save up for the downpayment all the while paying 1000 bucks a month to a landlord or should I try and see what can I get approved for right now (December) and take advantage of low interest rates, low prices, a good investment (condos near downtown are the ones that will skyrocket the most the next time the boom comes)

How do you expect to make $1000/month payments on your credit card while you have a mortgage? Or are you going to make minimum payments and pay it off in 10 years?

[Canucks3322]

^ I won't be making $1000/month payments with a mortgage, you're right about that, but with my raise, I could make ballpark $500 a month....?:dunno: I would be taking a while longer to pay it off but at least I'd be building equity and having a place to call my own right? And also the rise in value the next time there is a boom in Calgary would more than make it worth it...

[sputnik]

I guess only you will know for sure. I suggest you make a list of ALL of your expenses and compare that to your take home income. If you have less than 10% left at the end of the month, you may want to reconsider if you can afford the mortgage (and other costs associated with ownership).

Consider the following costs.

- Mortgage
- Condo Fees
- Property Tax
- Bills (Power, Phone, Cell Phone, Internet, TV)
- Insurance (Condo, Car)
- Car Costs (Maintenance, Gas, Payments)
- Food (Groceries and Restaurants)
- Entertainment (Movies, Drinks, Travel)
- Household Costs (Furniture, Clothes or other stuff around the house)
- Savings (still gotta save for a rainy day)
- Monthly debt repatments

[simke]

just wanna throw my 2 cents out there since I was in a similar situation like you.

So my salary is about the same, debts about the same (more student loan, less cc), and I bought a condo for 240k last feb. Now, it did not help that my condo is only worth 200-210k by now, but that does not matter right now.

Before buying I was sharing a 2 bed in downtown with a buddy for $1200 + 200 utilities = $700 each. Now, costs of my condo are approx. $1800 a month - and my debts still there, and way harder to pay off now. If I was you I would pay of my debts first and then save for downpayment.

You also mentioned that you have $50k limit on your cc. They will automatically assume you owe max on that when they look at your numbers for approval - so probably cut down that limit to like $5k once you pay off those cards. Also, this next boom your are reffering to, will not happen in a long time, so I think time is on your side.

So to sum up - I would, pay off debt, save for down payment and buy in 2-3 yrs. Much better than being in a lot of debt, mortgage and consumer, and not knowing how will things work out if you lost your job.

just a side note - there is plenty of $800-900 one bedrooms around 15th ave

[el-nino]

Originally posted by Canucks3322
el-nino...nothing personal against you but how old are you? Just going from your posts I would not choose to do business with you because you type like you never graduated high school. I mean, you could just be a really bad speller, but it reflects on your image as a professional and someone I would trust in dealing with this much money. Also, the fact that you want to get me approved for $280,000 shows you really aren't that interested in my financial wellbeing. That is ludicrous that I would and could overstretch myself that much. My entire paycheque would go to the mortgage with a bit left over for bread and water.


Ha-ha. Honestly you are not the first person to complain about my typing skills. I am not a bad speller but just quick at typing. I never really check over what I write.
As far as quoting you with the 280k I just figured that qualifying for more allows you to have more options then just the 150-175k. I never said go for it. What if you found a property that you absolutely loved and was priced at 200k? At lease you know now that it is obtainable.
My job as a broker is to make sure you are put in a situation that is manageable. It's definitely not to put you in a direction where you are heading straight for Bankruptcy. You don’t have to trust me and you don’t have to use me as a broker. I know that there is always going to be someone better then me at this job. I am 27 years old and I am extremely good at what I do and I pride myself in the work I have done.
Now to answer your original question if you will get approved the answer is most likely. Even with all your debts.
When Qualifying for a mortgage, Lenders do not take into consideration groceries, gym membership and car insurance. But for this purpose I included it.
With the information given in your original post your GDS sits at 19.03%and TDS sits at 43.303% This is using todays rates.
Lenders like to see 32/40. Your GDS is your principle and interest payment of the mortgage amount and your TDS is the total debt servicing which includes your principle and interest payments as well as your monthly liabilities such as your car payment and credit card debt. Again, this TDS calculation includes your gym membership and groceries, which is not usually used for qualification purposes.
I guarantee if you were to use Andrew Chan these percentage numbers will drop significantly due to his lower interest rate.
I hope this helps and trust me I know I must work on my typing skills.

[dezmarez]

dude....
cash back mortgage!!

sure its going to be a little higher rate....

but you have your 15k for down payment...

then receive 5% of your purchase price back to pay off your credit cards and what not...

you do a $250k condo....thats $12,500 back cash...
turn around pay off your high interest cards....

done!!

[Canucks3322]

el nino....okay, fair enough. Thanks for the explanation, I appreciate it.

dezmarez....tell me more, what is the catch besides the higher interest rates??

simke...I am honestly only looking for a condo that's well below 200,000 so that my mortgage payments are around what I'd pay for a one bedroom in rent, I am really paranoid when it comes to overstretching myself because of the debt I've built up...I want to still have money leftover every month to pay for entertainment and clothes or a newer car and what not, where I live is definitely not a priority to me, as long as I own it....

I should probably explain also where this huge ass credit card debt is from....I sold my '07 Mazda 3 in December and I owed about 9500 left on the loan, I put it on the card knowing I could kite it around on balance transfers for around 5% interest (but STUPID ME I didn't realize how much it would affect me when I apply for a mortgage), the rest is from stupid crap when I was younger, clothes, things I wanted, some of it is from school...

[dezmarez]

there really isn't a catch...
basically you would have to do a 5, 6, 7 or 10 year amortization...
you get 5% of your mtg amount...
so you said you want to do below $200k....
$200k mortgage....you get $10,000 cash back...

say the 5 year posted is 5.85%, that's what you take, rather then taking the special 5 [email protected]%.

Now this would have to be a fixed rate mortgage, and you be subject to IRD penalties if you were to break the term before the 5 years is up....you would also be required to pay back a pro-rated portion of the original cash back, so the cash-back would only be a good idea if you were planning to stay in for the 5 years.

the good thing is, you could consistently renew into cash back mortgages, ever 5 years, or opt not to after your first term has ended....

the cash back is a perfect solution for people in your situation...or for people who rent out multiple properties...they do cash back mortgages and receive lump sum payments which they can then turn around and put back into the property to improve it, or purchase another property.

[extm88]

Just going to throw my 2 cents in...
I would love to tell you to purchase a place and to use me and blah blah
But in all honesty, do you really feel like adding a mortgage to your list of debt right now? Sure its a good time to buy however if I was in your shoes I would rather pay more for a house in a year and be debt free with a clear mind than to hop in right now and have a mortgage, bills + your current active debt.
Jay, i respect your oppinion with alot of things however using the
12x1000 renting= landlords money
12x1000 owning= ownership
example is not very accurate. He is currently renting at $450?? meaning he can continue to chip away at debt. If he was paying $1000 for rent then I could agree with you example.

[quazimoto]

His current rent is less than the interest he'd pay on the mortgage. Ownership is not always money in the bank. The last year or so it's been more true than ever. I'd personally say keep saving.

The other option out there and I don't know why anybody didn't say this because it will seriously help your situation. Decide which bank you want to do your mortgage through. Go in first and apply for a line of credit. Just a basic line of credit normally the interest on these will be roughly half of even less than half of what your credit card company is looking for which makes the payments more manageable not to mention being paid off faster.

I would personally say to stay away from cash back mortgages since the interest you'll pay on that money is just not worth it. Paying 19% interest on a CC is one thing but then paying 5-6% interest on $250,000+ is something you need to consider as it will be there for a few years with that increased rate.

[assram]

Here are some tips..

put your CC debt into a 0% balance transfer.
There are cards out there that consolidate your debt at 0% for 15 months (at least last time i checked). Go here to find out the latest promo's.

http://www.redflagdeals.com/forums/showthread.php?t=352003

That'll save huge on interest.
EDIT: Just checked. They have 1.99% for life, and it's luck of the draw for 0% for 15 months. END EDIT

Next I'd probably put that CASH into RRSP.
Save money on your tax income, get a bigger tax return.

Now when you buy your first house, you are allowed to pull out all of your RRSPs at no penalty.

Add that with your tax return, and you should have a pretty good downpayment.

I'm not sure about your credit score, and your approval or what not, but this is what i would do given your situation.
Also CANCEL any cards you aren't using. They hurt your score.

Oh, and with your rrsp, put it into something completely safe, and able to pull out at any time w/o penalty.

EDIT: I just read that you are only paying 450 for rent.. Dude, that's awesome. Seriously, if you can continue to stay there, I would. Still do the 0% or 1.99% balance transfer in the above link though. and put that cash into rrsp's.

Put your numbers into free online quicktax to see how much refund you can expect in 2010 depending on how much of your cash you put in. Then it's a little balance of how much to contribute to your rrsp to get back a return to pay off balance transfer. Or putting cash directly into balance transfer.

Getting a 0% balance transfer isn't that hard though, I've had a few in my lifetime. I've never had CC debt though. I simply used the cash for investments.
END EDIT

[sml]

Originally posted by sputnik
With the amount of debt you have it would be best for you to forget about buying something at the moment and focus on paying down your debts.

The first thing I would do is use the $13,000 cash to pay off the credit card bill. The interest rate will KILL you if you try to pay it off slowly.

Then I would start saving the money that would normally be used to slowly pay down the credit card bill and put it into an RRSP. Use the higher tax return and pay down your other debts in the process while still building up your RRSP.

When the majority of your debt is paid off use the RRSPs and the First Time Home Buyers Plan to borrow against your RRSP for your downpayment.

Listen to this man, he has given you the best advice out of all the responses that I've read here. I understand that you want to use the cash in the bank as a downpayment but once the mortgage company finds out that you have a credit card debt, it all nets out to the same thing. ie) If you have $10 cash, but you owe someone $10, your net worth is $0. That $10 that you owe the cc company will NOT go unnoticed.