Buying your first home? Here’s what you need to know.
Buying your first home is one of the most exciting and rewarding moments in your life! People dream of the perfect home but not the perfect mortgage however Mortgage Tailors does.
Our first-time homebuyer section guide’s you through the steps to get you to the finish line. We will help determine what the real costs of homeownership look like, and the actual step by step process to buying your first home. We will make sure everything is in order for a pre-approval.
Before charging in, you need to be in a financially stable position to handle the large purchase of a home. You must understand all the costs associated with owning a home including devoting regular time to maintenance.
Do You Know the Costs?
There are two major costs associated with purchasing a home, the upfront costs and ongoing costs.
Upfront costs: The upfront cost is the initial amount of money you require to buy a home. It includes your down payment and closing costs.
Ongoing costs: The ongoing costs include mortgage payments, property taxes, house insurance, utility bills and condo fees; if applicable. You must always keep in mind future repair costs such as replacement of shingles, hot water heater and furnace.
Buying Your First Home
Once you decide you are in the right space to move forward with buying a home, we will figure out exactly what you can qualify for and more importantly, what you are comfortable paying as they are to different things.
The Down Payment
The minimum down payment on any mortgage in Canada is 5% if it is owner occupied, if you are buying for investment purposes, then you are required to put 20% as the down payment.
Buying with less than 20% down payment does require default insurance which is mandatory to protect the lender or bank.
Down payment can come from savings or RRSP’s. You can pull up to $35,000 individually towards the down payment and you have 15 years to pay it back. You can also get a gift from an immediate family member. This can be a parent and all you require is a gift letter stating the money does not have to be paid back.
The mortgage pre-qualification is the process to provide you with an estimate for a realistic price range to start looking for the perfect home, it is not a pre-approval.
Pre-approval requires submission and verification of your income and down payment documents. It gives you the parameters of what you can afford. You will know what the monthly payment would be associated with that purchase price.
Protecting your Pre-approval
Once you have been pre-approved, refrain from the following:
• Refrain from having additional credit report pulls
• Refrain from applying for new credit, closing off existing credit cards or making large purchases until after the transaction is completed.
Financial approval is the last step to sealing the deal on your home purchase. Keep in mind that just because you are pre-approved, it doesn’t guarantee the final approval. If buying a home with less than 20% down payment, you still need a mortgage default insurers approval. Keep in mind you should not change jobs, nor purchase a new vehicle. Do not increase your debt load at all.
Phew, your almost there. All your hard work house hunting is complete, your mortgage is approved and now it’s just the final paperwork. The bank will instruct the lawyer to complete the legal paperwork for the purchase. The bank sends the mortgage money to the lawyer to handle and register the home in your name.
Congratulations, you are now a homeowner!