Buying With 5% Down Payment

March 2, 2008

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Buying a home with 5% down payment. This is the minimum requirement for a home buyer to qualify for a high ratio mortgage. A home buyer is also required to show he or she has her own savings to cover closing costs of at least 1.5% of the purchase price.

Using 5% cash back incentive from mortgage lender

There are some rules governing how a home buyer can buy with 5% down payment:

1. Home buyer is qualified based on 3-year fixed discount mortgage rate.
2. The home is your principal residence.
3. You must provide 1.5% from own resources for closing costs.
4. You meet lender’s income and credit requirements.
5. CMHC, Genworth or AIG approve your mortgage insurance.

Debt Service Ratios

Gross Debt Service Ratio – Your payment must not exceed 32% of your gross household income. This includes payment of principal + interest + property taxes + heat + condo fees.

Total Debt Service Ratio – In addition to the above ‘shelter costs’, your total other debts including credit cards, car loans and personal loans must not exceed 40% of your gross annual income.

For information on CMHC’s mortgage loan insurance products, you can click on this CMHC’s website.

Kindly contact me (Elsie Tse) at 604-716-3369 or Email Me 

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