4 Creative Ways to Still Qualify for a Mortgage

#1 Gift down payment

The first way is by making a larger down payment. The easiest way to do this is by receiving a gift from family.

A gift from a family can be quite helpful. It can help you achieve the minimum required down payment or it can top up your down payment so that you don’t have to pay mortgage default insurance.

When receiving gifted down payment money, there are a couple of things to know. Firstly, the gifted down payment money has to be deposited into your bank account first before you use it. The family member isn’t supposed to pay the amounts directly for the deposit or down payment (unless they are also co-signer).

Secondly, the gifted down payment money almost always has to be from a direct family member. Parents, siblings, and sometimes grandparents are okay. Aunts and uncles are usually not.

#2 Co-signer

The second way to qualify for a mortgage is by getting a co-signer. If your parents aren’t in the financial position to gift you down payment money, another way that they can help you is by co-signing on your mortgage.

When your parents co-sign, the lender uses their income to help you qualify. This can be very helpful in expensive markets like Toronto and Vancouver, where buying a home on your own can be challenging.

The ideal candidate for a co-signer is someone that earns a decent income with minimal debt. If your parents are still working and only have a modest mortgage on their primary residence, they can be great co-signer. However, if your parents are on a fixed income with a sizable mortgage, they might not be the best fit.

#3 Credit unions

If you’re buying with at least 20 percent down, credit unions can be a great option. With a credit union, you may be able to qualify at the actual mortgage rate instead of the higher mortgage stress test. This can mean qualifying to spend 20 percent or more on a property.

Not all credit unions qualify you based on your mortgage rate. You want to work with a provincially regulated credit union, not a federally regulated one. Provincially regulated ones don’t need to use the mortgage stress test, while federally regulated ones do.

You also want to make sure the credit union qualifies you based on the mortgage rate. Even if it’s a provincially regulated one, it may not.

#4 A longer amortization

The fourth way is by extending your mortgage amortization. This is the length of time it takes to pay off your mortgage in full.

Again, if you are putting at least 20 percent down, you have the option of extending your amortization to 35 years. The mortgage rate will most likely be higher, but you can most likely afford to spend more on a home, so it may be worth it.