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My Mortgage Blog

I’m sure you’ve heard it before, but buying a home is one of the biggest financial and lifestyle decisions you will ever make. As your Mortgage Broker, we’re with you right from the moment you decide to buy your first home, through the movers carrying the boxes through the front door, to being mortgage free!

 Buying your first home can be both exciting and stressful. Let’s walk through the process and what to consider along the way. Knowledge of the process and costs involved in buying your first home will lessen any unexpected pressure.

 

What does the process look like?

Knowing what to expect is the first step to relieving the stress of buying a home. Here’s a quick look at the steps involved:

1.     Know your budget and stick within it – the first step is to determine what you qualify for and what you can realistically handle for payments. Staying within your budget is key to ensuring you don’t get in over your head.

2.     Pre-approval – once you know what you can afford, the next step is getting the OK from the lender and securing a rate.

3.     Creating a professional home buying team to assist you with the process. Your home buying team should include your Mortgage Broker, Realtor, Home Inspector, Lawyer and Insurance Agent.

4.     House shopping! Once you know what type of property you want, where you want to live and what you can afford, it’s time to go shopping.

5.     Making an offer and acceptance by the seller - when you find the ideal property, you, with the assistance of your Realtor, will make an offer and negotiate the various terms with the seller. When you have settled on price and terms, this is where we, as your Mortgage Broker, come back into the picture.

6.     Financing approval – like a pre-approval, we’ll gather all the documents/updated documents required and discuss the various options available to you. We then submit the file along with the supporting documents for review and acceptance by the lender.

7.     Firm sale – once you’re approved by the lender, you will remove the financing condition. There may be other conditions, like a home inspection, that will need to be completed and removed as well. Now you’ve officially bought a house!

8.     Meeting with the Lawyer – you meet with your lawyer anywhere from three days to two weeks prior to taking possession.

9.     Mortgage payments are made in arrears, not advance like rent. If you decide to pay monthly, for example, and you take possession September 1, your first payment will be on October 1.

 

How much can you afford versus what will the bank approve you for?

I like to start with what can you realistically afford versus what will the lender approve you for. Often the lender will say you qualify for much more than you’ll realistically pay each month.

 What can you comfortably afford? We look at your existing financial and family obligations as well as lifestyle to ensure the new payments fit with your other priorities.

 Don’t get caught in the excitement! Prepare a budget and know your numbers.

 Once you have a firm budget in place, the next step is getting you pre-approved. A “pre-approval” is not what you might think. The bank doesn’t review documents, they simply take your word for it. To the lender, a pre-approval means securing a maximum rate that you will pay if you buy a home in the next 120 days. This can mean disappointment when you finally have an accepted offer on a property if the lender isn’t reviewing documents until this point.

 Mortgage Brokers take pre-approvals a step further than the bank. We’ll gather all the documents that we would for a full approval so that not only can we secure a rate hold, but when we tell you that you qualify for a $350,000 purchase with 5% down, we are 100% sure that’s what you qualify for.

Remember, there is no cost and no risk or obligation to you. If you don’t buy a home, or you choose another lender, that’s completely your call. Securing a pre-approval just gives you that extra piece of mind.


Get to know the lingo

Open versus closed? Fixed rates versus variable rate mortgages? Amortization versus term? Conventional versus high-ratio? Insured, insurable, uninsured? Payment frequency? Mortgage default Insurance? Assumable and/or portable?

 Is your head spinning yet? Our job is to educate you, not to overwhelm you. We also don’t want you signing documents you don’t fully understand. We take the time to review the terms and conditions of your mortgage so that you feel comfortable signing on the dotted line.

 

Be prepared for the paperwork required

When you apply for a mortgage, you are required to submit paperwork that supports your income, down payment, any existing properties, assets, debts and, of course, credit.

 Lenders want to see current information, so documents need to be dated within the last 30 days. When it comes to down payment, they are going to want to see 90 days of history on the account. They want to be sure you are not borrowing funds and not disclosing them as borrowed, for example. Any large, unidentified deposits need to be explained and documents provided to support the explanation.

 Credit issues, other properties, divorced or separated, new to Canada? These come with their own document requirements. Be prepared for the paperwork and accept it. The lender is doing their due diligence and at the end of the day, the risk is theirs, not yours.

 

What are the must haves in your first home?

You need to consider what are the must haves and those that are nice-to-haves in your first home. Three bedrooms or four? One bathroom or two? Basement developed or not? New build or mature community?

 One bathroom is fine when there are only two of you but what are you going to do with guests and kids? What’s your maximum commute time to and from work? Is public transit close by?

 Do a little work beforehand. Walk the neighbourhood in the daytime and again in the evening. What do you see and hear and talk to people on the street. Work with your realtor to help you narrow this list because these are all things you need to know before making the offer.


I can make an offer without a Home Inspection, Right?

Here’s where we sometimes miss a step and it can cost you. ALWAYS, ALWAYS, ALWAYS have a professional Home Inspector complete a detailed home inspection of your prospective new purchase. And always write it as a condition of the offer. This it too large an investment for you not to have completed all your due diligence.

 Your Realtor should be able to guide you through this step, but don’t forget to ask the seller questions you need to know the answers to. Has the basement flooded or had water problems? What about roof leaks? Have the Sellers ever had to file insurance claims?  What for? You need to know the answers to these questions so you can make an informed decision. Don’t let someone else’ money pit become yours.


What about the First-Time Home Buyer Programs I’ve Heard About?

As a first-time home buyer, you may also qualify for federal and provincial First Time Home Buyer Programs. These include the:

 1.     First-Time Home Buyers Tax Credit You could receive a non-refundable tax credit for the purchase of a qualifying home so long as you meet the criteria. To be considered as a first-time home buyer, neither you nor your spouse or common-law partner should have owned and lived in your own home within the last four years. Talk to your accountant for more details.

 2.     RRSP Home Buyers Plan (HBP) Through the Home Buyer’s Plan, first-time home buyers can borrow funds from their Registered Retirement Savings Plans to help pay for a new home. You may withdraw up to $25,000 from your RRSP without declaring the withdrawal as income on your tax return. You must pay the funds back to your RRSP within 15 years to avoid being penalized.

 3.     GST/HST new housing rebate If you purchased a newly built home to use as your primary residence, you can claim a rebate for GST/HST paid on the purchase. When you buy the home, the builder may pass this rebate to you directly by lowering the price of the home to reflect the rebate. If the builder does not offer the rebate, you have two years from the date you purchased the home to apply for the rebate from the CRA.

 4.     Land Transfer Tax Rebate In some provinces and cities, there is a rebate available to help the first-time home buyer offset the cost of the land transfer tax. If you qualify, land transfer tax rebates are available to first-time home buyers in Ontario, BC and Prince Edward Island. There is no land transfer tax in Alberta.

 

Choosing the product that is right for you

We have been conditioned to think the best mortgage is the one that comes with the lowest interest rate. However, this is not always the case. We’ve all heard stories about someone who got a rock bottom interest rate but when they went to move before the end of the term they were charged a horrendous mortgage payout penalty. You will need to have an in-depth conversation with your Mortgage Broker about to avoid this pitfall. Things to think about are:

·      Is this a starter home or move up home?

·      Will you be having kids?

·      Will you be able to make extra monthly or periodic lump sum payment?

·      Is this a rental property/second home?

·      Are you self-employed or will you become self-employed?

·      How much of a down payment do you have?

 Knowing the above will allow your Mortgage Broker to provide you with the best mortgage options for you and your family.