New BC HOME Down Payment Program Help For First Time Buyers

2017-01-13 | 14:15:45

REVIEW OF CMHC PURCHASE

Minimum Equity Requirements:
• 5% down payment for the purchase price (or lending value) portion ≤ $500,000; and
• 10% down payment for the purchase price (or lending value) portion > $500,00

 

REVIEW OF CMHC PURCHASE


Minimum Equity Requirements Example
For a home with a purchase price (or lending value)
of $600,000, the minimum down payment
required is:
= 5% of $500,000 + 10% of $100,000
= $25,000 + $10,000
= $35,000

CMHC TRADITION SOURCE OF DOWN PAYMENT


•Applicant savings
•Proceeds from sale of another property
•RRSP withdrawal
•Non-repayable gift from immediate relative
•Funds borrowed against proven assets
•Equity grant (non-repayable from federal, provincial or municipal agency)
•Sweat equity (<50% of minimum required equity)
•Rent-to-own payments in excess of market rents
•Land unencumbered


REVIEW OF CMHC DEBT SERVICE

Debt Service Guidelines (Credit Score: GDS/TDS)
• < 680 : 35% / 42%
• 680 + : 39% / 44%
•Debt service flexibilities are based on an assessment of the strength of the overall application, and not minimum credit score alone


CMHC REVIEW

Non-Traditional Sources of Down Payment Any source that is arm’s length to and not tied to the purchase or sale of the property such as:
• Borrowed funds (BC Home Plan)
• Gifts
• 100% sweat equity
• Non-traditional sources of equity are only available to borrowers who have good credit history and sufficient income to support their obligations under the mortgage.


Non-Traditional Sources of Down Payment
•LTV 90.01% to 95%
•1 – 2 units
• Permanent residents, including newcomers to Canada
• First mortgages only
• Recommended minimum credit score: 650

ABOUT THE PROGRAM

BC Home Owner Mortgage and Equity Partnership (BC HOME Partnership)
•Assists British Columbia residents who are eligible first-time homebuyers by providing repayable down payment assistance loans.
•The loan is for a 25-year term, interest and payment free for the first five years.
•Program starts January 16, 2017, for purchases of homes that close on or after February 15,2017
•Three-year program with loans advanced between January 16, 2017 and March 31, 2020

WHO CAN QUALIFY FOR A BC HOME PARTNERSHIP PROGRAM

Individuals must meet ALL of the following requirements:
•Be a Canadian citizen or permanent resident that has resided in Canada for at least five years
•Have lived in BC for at least 12 months preceding the application
•Be a first-time homebuyer
•Purchase a home that is $750,000 or less
•Be eligible for a high-ratio insured first mortgage for the home

Other eligibility requirements are:
•The combined, gross household income must not exceed $150,000.
•The home must be used as the principal residence of all individuals on title for the first five years after purchasing.

WHAT TYPE OF PROPERTIES ARE ELIGIBLE

Examples of eligible properties include, but are not limited to:
•Detached/semi-detached homes
•Row homes
•Town homes
•Condominium homes
•Rental and seasonal/recreation properties are NOT eligible

HOW DOES THE REPAYMENT WORK?

•Terms of the second mortgage will be 25 years.
•No principal or interest payments required for first 5 years.
•Home buyer may repay the loan in full or in part at any given time without penalty.
•Interest will start accruing in 6th year, and home buyer will start making principal and interest payments amortized over 20 years.
•Interest rate will be reset at the Royal Bank of Canada Prime Rate plus 0.5% at each of the 10th, 15th, and 20th anniversary dates.

The BC Home Partnership loan is due and payable in full if any of the following occur:
•Default under the first mortgage or the BC HOME Partnership loan
•Change of ownership (including addition of a person to title
•The home is no longer the homebuyer's principal residence
•BC Housing determines the homebuyer misrepresented or made a false statement in connection with the application for the loan

EXAMPLE #1 – 95% LTV
Premium Calculation should be applied as follows:
•Purchase Price: $475,000
• Minimum Equity Required: $23,750 (i.e. 5% of $475,000)
• Down Payment Sources: $11,875(2.5%)Traditional & $11,875(2.5%) Non-traditional
•Total Loan: $451,250
•To process (Non-traditional down payment source) indicator to be selected by Lender Premium Rate Due: 3.85% (non-traditional sources)

EXAMPLE #2 – NON-TRADITIONAL DOWN PAYMENT LIMIT
Premium Calculation should be applied as follows:
•Purchase Price: $600,000
•Minimum Equity Required: $35,000 (5% of $500,000 and 10% of $100,000) Down Payment: $30,000(5% Traditional) & $30,000(5%Non-traditional)
•Total Loan: $540,000
•LTV: 90.0%* LTV for Non-traditional sources of equity is limited to 90.01% to 95% Client must:
•Increase down payment to $35,000 : min equity met: 3.6%
• Decrease down payment to $29,400 (LTV 90.01%): 3.85% (non-traditional sources)

EXAMPLE #3 – 10% OF DOWN PAYMENT FROM TRADITIONAL SOURCE
Premium Calculation should be applied as follows:
•Purchase Price: $500,000
•Minimum Equity Required: $25,000 ( 5% of $500,000)
•Down Payment Sources: $50,000 Traditional & $25,000 Non-Traditional
•Total Loan Amount: $425,000 LTV: 85%
•In this case the down payment from traditional sources is 10% of the lending value therefore the premium is calculated based on the actual LTV of 85% : 1.8%

Call us for your inquiries at 778-999-6145

 

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