Did you know, that there are mortgages that are tailored for buying “fixer-uppers”? Do you have your eye on a home that has great bones, but just needs a bit of TLC here and there? Well, I bet you didn’t know that you can put as little as a 5% down payment and still qualify for a mortgage that turns that “fixer-upper” into your dream home. Here’s a few guidelines and rules to qualify:

  • Loan-to-Value Limits
    1. After the initial purchase advance, you can make 4 other advances.
    2. Lending value is based on either the improved property value or the sum of the purchase price and the costs of improvements, whichever is less.
  • Property
    1. It can have a maximum of 4 units
    2. 1 unit must be owner occupied
    3. New constructions or existing properties
    4. Estimated remaining economic life of the property should be a minimum of 25 years
    5. Must be readily marketable as a residential home.
  • Terms & Rate
    1. Your rate can be fixed or variable.
    2. For fixed rates where the term is 5 years or more, the contract rate is applied
    3. For fixed or variable rates where the term is less than 5 years, the qualifying interest rate is either the contract rate or the 5 year benchmark rate, depending on which is greater
  • Insurance Premium
    1. Due to the nature of this loan, and depending on the Loan-to-Value, you may be charged an insurance premium. Don’t worry, this is not additional fee you have to pay, it will be included in your mortgage.
      • Up to 65% LTV : 0.60% premium
      • 65.01% to 75% : 0.75% premium
      • 75.01% to 80%: 1.25% premium
      • 80.01% to 85%: 1.80% premium
      • 85.01% to 90%: 2.40% premium
      • 90.01% to 95%: 3.15% premium
  • Borrower
    1. We will need information about your income, down payment and credit.
    2. Gifted down payments from family members are allowed, but they have to be verified and non-repayable
  • Debt Ratios
    1. For an LTV that is greater than 80% and a credit score of less than 680, GDS ratios should be less than 35% and TDS should less than 42%
    2. For an LTV that is greater than 80% and a credit score over 680, GDS ratios should be less than 39% and TDS should be less than 44%.
  • Documents
    1. If your improvements are more than 20% of the property’s purchase price or more than $40,000, you will need to supply additional documents such as cost estimates and contracts.