.jpg)
First Time Buyers
Relax, we'll make buying your first home easy.
Doing anything for the first time can be scary—especially when it's something as big as buying a house! But don't worry. We will provide you with all the information, advice, assistance and reassurance you need, every step of the way.
To help you feel prepared and informed, here are some of the steps involved in buying a house. If there's anything you're unsure about, please don't hesitate to ask us. We're prepared to do everything we can to make things proceed smoothly, quickly and effortlessly.
• First Time Homebuyer Grants / Programs
• Choosing a Realtor
• Finding and Purchasing the Right Home
• Making House Hunting Fun
• Affordability and Financing
• Selecting the Right Mortgage
• Applying For Your Mortgage - A Checklist
• Before You Sign the Offer
• On Closing Day
• Mortgage Life Insurance
• Prepayment Privileges
First Time Buyer Programs
The Government of Canada has two home purchase programs that help a first time buyer purchasing a home. You should find out if you are eligible to take advantage of these 2 programs, namely:
Property Transfer Tax Exemption
Home Buyer's Plan - using your RRSP for down payment
Choosing a Realtor
Choosing the right realtor can help ensure you get the right house at the right price. Here's a checklist of questions to ask potential realtors before deciding to work with one. One of the best methods to find a good Realtor is to ask around in your network of friends and service providers. We work with Realtors everyday and would be happy to steer you in the direction of someone great. Work with someone you relate to, with whom you have some chemistry, and who offers excellent service and value. Be sure to ask if the realtor is acting for a vendor or for you.
Qualifications
Look for experience in your area, in your price range, and perhaps letters of reference.
Full-time realtor
Ask if this is their full-time career and whether they're committed to it in the long term.
Track record
How many properties have they sold in the last 3 months? How do they rank among peers? How many current listings do they have? What has their ranking been over the last 5 years? Where does their company rank in sales and market share?
Strategy
Ask how they'll approach your home search. Simply rely on MLS listings? Or do they have other sources of homes to show you? Are they willing to change their strategy to adapt to market conditions, or are they inflexible?
Length of time for search
How long do they think it'll take? What's the average length of time in your area and in the current market?
Price negotiation
What's the current selling price versus asking price in your area and in the current market? Is their personal sell vs. ask price better or worse than average?
Support staff
Ask whether they have support people to assist in the process. This also gives you an additional contact when you need it.
Viewing appointments
Do they prefer to pre-book viewing excursions or are they flexible enough to show you listings as they become available?
Finding and Purchasing the Right Home
When you're about to make one of the largest purchases of your life, be sure to shop around.
Consider such things as transportation, distance to work, and proximity to schools, daycare, recreational facilities, shopping, healthcare, and so on. If the listing realtor claims "10 minutes to downtown," find out if that's during rush-hour in a minivan or at 3:00 a.m. in a Porsche Boxster!
Making House Hunting Fun
There's no shortage of information available to help you make an informed purchase decision. Lenders, as well as CMHC, the Canadian Bankers' Association, the Ontario Real Estate Association and the Home Builders' Association all have brochures (even videos) to make house-hunting stress-free and fun.
To take the guesswork out of shopping for a home, take advantage of all the professional resources available to guide you through the many choices available when purchasing your first home.
Affordability and Financing
Thoroughly review your current income and expenses. How much will your new mortgage add to your monthly expenses? Before you embark on your housing search, get a pre-approved mortgage, especially if you're a first time buyer. A pre-approved mortgage lets you know how much money you qualify for, so you can shop in comfort.
Lenders determine affordability by looking at your Gross Debt Service ratio (GDS) and your Total Debt Service ratio (TDS). The GDS ratio is based on what you can afford to pay each month; it includes mortgage payments, taxes and heating. Generally, maximum GDS ratio is 35%. The TDS ratio includes everything covered under GDS plus all your other financing obligations. Maximum TDS ratio is 40-42% with some lenders but for clients with the best credit rating we can go to 44% or higher with specific lenders.
Banks and lenders have different guidelines for GDS and TDS ratios. That's why it helps to work with a mortgage consultant, we'll find the best lender for your needs!
We can help you do a complete analysis based on net income and projected budgets to determine what you can afford.
This pre-qualifying stage is also the time to find out about the differences between conventional mortgages and high-ratio insured mortgages. Ask about assistance for first-time homebuyers such as gifted down payments which are permitted under the 5% ‘Flex down’ program through CMHC and the federal government's "RRSP Homebuyer's Plan", which lets you use funds from your RRSP to purchase a home.
We will also go over closing costs with you, like land transfer taxes, legal fees and other disbursements. A good rule of thumb is to budget about 3% of the purchase price for closing costs. And don't forget: if you buy a new home from a builder, you'll pay 7% GST on the total purchase price.
Before you're pre-qualified, your Mortgage Specialist will pull a credit bureau report and ask for written confirmation of income and how much you plan to use for a down payment on your purchase.
Once you're pre-qualified, the interest rate can be held for 90 to 120 days from the time of your application. If rates drop, you'll get the lower rate; if they rise, you're covered. And just because you pre-qualified by a certain financial institution, you're by no means committed to that lender. We'll shop the market to get you the best possible deal!
Selecting the Right Mortgage
Your basic choices in selecting a mortgage include:
Conventional vs. high-ratio mortgages
A conventional mortgage equals no more than 80% of the appraised value or purchase price of the property, whichever is less. A high-ratio mortgage is usually for more than 80% of the appraised value or purchase price. High ratio mortgages are granted under the provisions of the National Housing Act and must, by law, have mortgage default insurance (CMHC, Genworth or AIG). The borrower is required to pay the insurance premium which is usually added to the mortgage.
Closed vs. open mortgages
Closed mortgages usually offer lower interest rates than open mortgages of the same term, but open mortgages let you pay off as much as you want, any time, without penalty.
Short term vs. long term
The term you select is important, too. Short term mortgages are appropriate if you believe interest rates will be lower at renewal time. Long term mortgages are suitable if you feel current rates are reasonable and you want the security of budgeting for the future. This is especially important for first time homebuyers.
Fixed rate vs. variable rate
You can choose a fixed or variable interest rate. A fixed rate mortgage allows you to budget precisely for whatever term you select—from one to as many as 35 years. A variable rate mortgage fluctuates with the market.
Ask us about specialty mortgages that creatively combine the best of all worlds.
Applying For Your Mortgage - A Checklist
When you apply for a mortgage, you will need:
Your Mortgage Specialist can help you determine how much you can afford, obtain a pre-qualified approval, and help you choose the mortgage that's right for you. This allows you to act quickly when you find the home you want.
Keep in touch with your mortgage consultant while you are looking for a home so that we can work with you and your Realtor to ensure the very best mortgage is available when you find the right home. When you find a home you like, please feel free to give us a call - we can calculate your mortgage options relative to a specific property so that you know the maximum price you can offer.
Before You Sign the Offer
Select a lawyer as you'd select a real estate agent: seek competitive fees, excellent service, knowledge, approachability—in other words, value.
Involve your lawyer before you sign the Offer, which becomes a legal Agreement of Purchase and Sale once you and the seller sign it. Have your lawyer read the document carefully and review it with you. Once it's signed and accepted, your lawyer will order a series of searches from various municipal offices to ensure that the vendors haven't been sued, that they've paid all of their property taxes and water, electric and gas bills, and that there'll be no outstanding mortgages or liens on the property once you become the owner.
Your lawyer will also draft a series of closing documents and review the closing documents drafted by the vendor's lawyer.
Your lender and lawyer will co-ordinate and draft the appropriate documents. Your lawyer will notify the property tax offices as well as the utility offices that you will be the new owner as of the closing day.
A few days before closing, you'll visit your lawyer's office to sign the closing documents. Bring a certified cheque for the balance of the closing funds, because the lawyer pays the relevant parties on your behalf (land transfer to the government, balance owing to the vendor, etc.). Part of that amount covers the lawyer's fee and disbursement costs. The lawyer obtains the mortgage funds directly from the institution that's funding your mortgage.
On Closing Day
On closing day, your legal representative will register the new deed and mortgage, proceeds of the sale will be transferred to the sellers lawyer. Finally, you pick up the keys and YOU'RE IN!
After closing, your lawyer will send you a reporting letter and copies of all the documents you signed including the deed, the mortgage and the survey, and a summary of the flow of funds.
Mortgage Life Insurance
In the mortgage process you will be offered Mortgage Life Insurance. It is important to seriously consider having some life insurance. Mortgage Life Insurance can be inexpensive and can be incorporated into your mortgage payments. In the event of death, terminal illness, or permanent disability, insurance can help lighten the burden on you and your loved ones. Quotes are available with each approved mortgage.
Prepayment Privileges
Financial institutions vary in their prepayment privileges, which let you pay down your mortgage faster. Our best advice: research your options! Also be aware that the longer the amortization period (the time it takes to pay off a mortgage), the more interest you'll end up paying. Amortization periods range from five to 35 years.
Another option to consider is portability. If you decide to sell your home and buy another, you should be able to take your mortgage with you or transfer it to the buyer of your home without penalty. This can be a major advantage if your mortgage rate is below current market rates.
