Many renters have wondered if buying a home is truly within their reach. It often seems like quite a daunting task for the first time buyer. The good news is that with the vast variety of options available today, it has never been easier to secure a mortgage.

The first prerequisite is having a minimum down payment of 5%. This can come by way of accrued savings or a gift from an immediate family member. Today, home buyers can make tax free withdrawals from their RRSPs and use these proceeds towards their home purchase. This method has allowed thousands of buyers to obtain the necessary down payment. The maximum RRSP withdrawal amount is $40,000 per couple or $20,000 for an individual. The RRSP withdrawal must be returned back into the plan over a 15 year period.

When the down payment is less than 25%, it will result in a so called "high ratio" mortgage which requires both the lender's approval and Canadian Mortgage Housing Corporation or GE approval. These two bodies act as insurers for the financial institution. The purchaser pays a one time insurance fee which then is built into the total mortgage. A down payment equal or greater than 25% results in a so called "conventional" mortgage.

The second prerequisite is having sufficient income to qualify for the home purchase. Financial institutions set standard guidelines for which will determine how large a mortgage a borrower can qualify. Interest rates play a major role in establishing the amount of mortgage one can obtain. It is essential to determine how much financing you can secure before you start house hunting. You do not want to fall in love with your dream home only to find out that the banks will not advance the total amount required. A realtor can help you quickly establish these parameters.

Should your income fall short of these requirements, you can still be creative and see what other alternatives are available to you. For example, you can use part-time income to qualify for your home purchase.

The final stage in obtaining mortgage approval is a satisfactory review of a prospective buyer's credit rating. Every financial institution is linked to a credit bureau (usually Equifax) where data is collected on a monthly basis reporting the pattern of repayment for such items as credit cards and personal loans. If a consumer has an unblemished credit record, then providing the above mentioned criteria were met, securing a mortgage is a virtual certainty. On the other hand, should there be any questionable credit transactions, such obstacles can usually be overcome. If an individual has very poor credit, this may require significantly more work. If there are good reasons for the sub standard credit it will help in building a case for the derogatory credit. Often times in such cases, CMHC or GE capital (the insurers) will ask the borrower to increase their down payment to 10% to 15% due to the poor credit history. If this option isn't viable for the Purchaser then another alternative would be to get a co-signer or guarantor.

Another consideration would be to obtain a second mortgage. Lenders will often giver a 75% loan without asking too many questions about credit, income, etc. Basically their position is that even if the loan does go into default, there is sufficient equity to protect the lender. The shortfall between the first mortgage and the down payment can made up with a second mortgage. Traditionally, second mortgages will command a higher interest rate but because the amount of the second mortgage is relatively small, it should not significantly increase your monthly cash outlay. The advantage of a second mortgage to a borrower is that any insurance fees associated with a high ratio mortgage are eliminated.

If an individual has declared personal bankruptcy, in order to qualify for a mortgage, they must have been discharged for at least two years and must also have established one year of exemplary credit. However, If the down payment is greater than 25% the two year period can be reduced.

Today, with all the incentives available to Purchasers such as cash backs, and deferral of closing costs (land transfer tax and legal fees), coupled with the historically low interest rates, there has never been a better time to explore the home ownership alternative.

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