In the fall of 2020 I went through the process of getting approved for Down Payment Assistance through Nova Scotia Housing. The process was lengthy, and required even more steps than getting my mortgage did. But in the end it all worked out, and without it I would most certainly still be renting today. So I want to go over some changes to the program and help you prepare to get approved yourself.
Getting approved for Nova Scotia’s Down Payment Assistance Program requires you to submit a ton of information to help them understand if you are a good candidate for a loan. It is more thorough than any other loan application process I’ve ever done. But if you make sure to meet all their criteria before you submit, you are sure to be approved.
Changes to the Down Payment Assistance Program
When I began researching for this post I discovered something that got me really excited! I want to address that first, because it could make a big difference for buyers. I purchased my home prior to the massive surge in housing prices caused by the pandemic. In my area move-in ready starter homes were going for prices in the $120,000 – $180,00 range just months before. In fact an acquaintance of mine purchased a fixer upper using this program for under $90k just a few years before!
The program at that time limited the value of the home you can purchase to $150,000 outside of Halifax. And this number was realistic. It may not be enough for a dream home, but surely you could find a decent place in that range.
But that was then. Over the last year I’ve seen very few homes being listed for under $150k. And those were most commonly mobile homes on rented lots, places requiring significant repairs, or charming homes that ended up selling for 10’s of thousands over asking. This morning I did a search and found only 109 homes in that price range in the entire province, and none even remotely close to my area. And that is to say nothing of their quality or eventual selling price.
I’ve been thinking about this for a while now. What was very realistic a few years ago is now completely impractical for most Nova Scotians. I was delighted to find out that Nova Scotia has also realized that. They have now increased the maximum sale price to $200,000. This significantly increases the amount of inventory available, and allows potential home owners to bid a little higher without losing their down payment assistance. Of course this doesn’t address all of the issues facing buyers in this housing climate, but it certainly makes this program a better fit for those looking to use it.
Getting approved for Down Payment Assistance
I am a planner, and like to know how things will turn out before I move forward. When buying a home, this means getting a pre-approval (which I did not, and regret. Check out this post for more on that.) This also means a forward thinking homebuyer might seek pre-approval for the down payment assistance program. Unfortunately, that is not to be. The program requires both an accepted offer on a home and an approved mortgage, without which you will be denied.
This means you wont know if you can receive those funds until you are well into your home buying journey. But that doesn’t mean you shouldn’t prepare.
The first thing to do is check your credit score. Signing up for Transunion Credit Monitoring is a great way to see exactly what the bank will be looking at, without affecting your score. They also offer a personalized debt and credit analysis to help you continue to improve your score. And improve it you should! Even if your score is already good, the better it gets now, the better your chance of approval and the lower your interest rate will be. And now that we are seeing interest rates creeping steadily upwards, getting the best possible rate is crucial in saving you thousands over the term of your loan.
Next is to start getting your paperwork in order. Make sure your most recent tax return is done and you have your notice of assessment. Call Canada Revenue Agency and request a copy of your “Option C”. They’ll mail it to you. Contact your boss or HR rep and request an employment letter. Keep it all in a safe place, ready to go when the time comes.
There’s also some educational materials and an affidavit that needs signed, so get those out of the way too. Once you have all the supplementary work done, you can focus on your house search knowing you are prepared.
Time to get that offer in!
Search and Offer
While going through the process of finding a home and putting in an offer, you will need to employ the services of real estate professionals. I can’t emphasize enough the importance of working with people who are familiar with this program. Your realtor must respect the hard limit of $200,000, and should only show you properties with a real possibility of closing under that limit. Seeing fully renovated homes listed for $199,000 will likely just discourage you because they are sure to sell over asking.
But even more important than your realtor is your mortgage professional. When speaking with potential brokers and bankers, always ask if they are familiar with the program and if they have worked with Housing on this type of transaction before. They should be your liaison for much of the process, and deal directly with Housing in transferring documents needed for your closing. Their experience will streamline the process for you, reducing your stress at this crucial time.
When you have an accepted offer in writing, it’s time to gather up all the documents you’ve been preparing and send them over to Housing. Make sure to follow the list on their website so you don’t forget anything. Your mortgage professional can send the approval directly, and mine even aided in speeding up the process by leaning on her connections.
You should know is there is a big catch-22 in this whole situation. In order to be approved for a mortgage, you need to submit proof of a down payment. And to get the down payment assistance, you need to submit proof of an approved mortgage. You see the problem right? This is where tentative approval comes in to play.
When you put in an offer to buy a home, it’s tentative. There are a number of conditions that the buyer and seller both need to meet for the transaction to go forward. It’s the same with a mortgage. When you apply for a mortgage with the intention of using down payment assistance, you will not be approved, because you have not met all conditions. What you are looking for is actually tentative approval. This means you’ve satisfied all the other criteria, and as soon as your down payment is verified, you’re good to go.
Housing will basically do the same thing. They will verify your tentative mortgage approval with the condition of down payment approval, and they will grant you tentative approval. If your mortgage falls through for any reason, the housing funds will also fall through. So ultimately you spend a good chunk of your closing period in a tentative limbo.
All of this increases your need of a mortgage specialist who knows their way around the program. One broker I spoke to would not process my application without proof of down payment, even when I explained my desire to use this program.
When your down payment assistance is tentatively approved there is only one thing left to do. Nothing. And by that I mean nothing that could risk it being withdrawn. This would include anything that could lower your credit score including applying for new credit, missing payments or closing old credit accounts. You should not change jobs because this makes your income less stable. Switching to a different mortgage product at this time would require you to re-submit those documents. Closing on a home is a time in which you need to consider every action, and how it could effect the process. Thus taking no action until after you close is usually the best course.
Getting approved for down payment assistance will be very straight forward as long as you follow the requirements to a T. Make sure your credit rating is good. Assemble all the supporting documents in advance. Make sure the professionals you work with are knowledgeable about the program and can support you through it. Wait until your offer and mortgage are tentatively approved, and send everything in for processing. And once once your application is processed and approved, don’t change anything!
I hope this sheds some light on the process, and prevents a few unnecessary rejections.