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Canadian Home Buyer’s Journey from Mortgage till Closing…

Posted by admin on November 6, 2015
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It provides examples that will guide you through the entire home buying process, from the moment you make the decision to buy your dream home to the moment the movers carry the first box through the front door. It couldn’t be easier!

The first question you should ask yourself is:

Are you Financially ready?

Two type of calculation play major role in determining your mortgage amount and interest; Gross Debt Service ratio (GDS) and your Total Debt Service Ratio (TDS).

GDS is the % of your gross monthly income used for mortgage payments, taxes and heating cost and half of monthly maintenance cost in case of leasehold property. Ratio should not be more than 32% of your gross monthly income.

TDS ratio is the % of gross monthly income required to cover monthly housing costs, plus other debt payments such as car loans, line of credit payments, loans leases etc. Ratio should not be more than 40% of your gross monthly income.

Do you have your credit report?

Before looking for a mortgage lender, get a copy of your own credit history. There are two main credit-reporting agencies: Equifax Canada Inc. and TransUnion of Canada. You can contact either one of them to get a copy of your credit report. It contain summary of your financial history and shows whether or not you have had any problems in the past paying off debts.

Have you been pre approved on mortgage?

Even if you haven’t found the home you want to buy, having a pre-approved mortgage amount will help keep a good price range in mind. Before you start search it’s always advisable to contact your mortgage source to pre approve, but keep in mind it’s not a guarantee.

Ask following from your mortgage specialist before saying “YES”

  1. Type of mortgage options available; for example, Fixed, variable, Conventional, closed or open mortgage.
  2. What mortgage features are best for you? Can you transfer your existing mortgage to new home (is it portable), are there any pre payment privilages? what are the charges in case you prepay mortgage?
  3. How often can you make your payments? Weekly, biweekly or monthly? And it’s effect on interest rate?
  4. How much do you need for down payment? and it’s impact on interest payment?
  5. Are you planning to purchase a property with less than 20% down payment? If yes, then it trigger additional cost in form of Mortgage default insurance which range from 0.6% to 3.85% and get added to your mortgage.

 

Are you eligible for Government assisted programs?

  •    As a first time home buyer you are eligible for following:
  1. A one time withdrawal upto $25,000 from RRSP per spouse, to help put as down payment which is repayable in 15 years.
  2. A tax relief credit of upto $750 to assist in closing cost.
  3. Provincial land transfer credit upto $2,000.
  4. HST rebate on new housing.
  5. 5% down payment option.

 

Home Search

  1. Underlining where you want to live? (Which City, Near Work or School etc).
  2. What features you want in your home? (How many B/R’s, W/S, Kitchen, Finished Basement, Backyard, near Park, School, Bus Station, GO Train, Community Centre etc).
  3. What type of home do you prefer? (Condo Apartment / Town House / Semi Detach or Detach).
  4. What are the type of ownership? (Freehold / Leasehold / Condominium).

 

Things I wish I knew before buying a home

  1. The advice your uncle gave you is not a law to abide by

As soon as you announce that you’re looking to buy property, you can expect friends and family to come out of the woodwork with all their advice. Remember that principles that may have been true in the past don’t necessarily continue to be so in the changeable property market.

  1. Take the time to sniff out any issues with the property

Smell for mould, and animal-related odours. Knock on walls to see if they sound hollow. Open the dryer and the dishwasher – you never know if pests are living in there. Does the toilet flush properly? Does the heating/air-conditioning work? Is the flue functioning above the fireplace? Is the water pressure okay?

  1. Work with experienced professionals

Hire the most thorough, licensed home inspector you can find to pinpoint any issues that could potentially end up becoming costly repairs. To avoid conflict, make sure your lawyer is not also representing the seller.

  1. Use your head, not your heart

Don’t be afraid to walk away from a bad deal. There will be other properties, maybe even better ones. Remember that this is a financial transaction and that your terms must be met.

  1. Negotiate as much as you can

You can use an agent to do the negotiating for you, but you can’t be sure how hard they will push for you. As a buyer, you should feel in control and as though you have nothing to lose through robust negotiation.

  1. Don’t let yourself feel pressured

If you feel rushed at all, then back away.

  1. Carefully consider what you can really afford

Determine your budget based on what you can afford to repay now, not the maximum you’re allowed to borrow.

  1. Gardens and yards are work

Almost everyone likes the idea of having a garden, but if you’re not used to maintaining one, you might want to think twice about whether you want to spend your weekends weeding and mowing the lawn.

  1. Buy a property you can afford now, not later

Even if you’re pretty certain that you’ll be earning more in a year or two, you might also find that circumstances increase the other expenses in your life. Children, schools, new cars and travel plans are substantial costs. Make sure there will be room in your budget for you to live the life you want.

  1. Select an agent carefully

Prepare questions in advance of a meeting. Find out what kind of experience they have, how many buyers they are representing and if they can share any references. Speak to a few different agents before deciding on one.

Closing Cost

Home Inspection Fee

CMHC recommends that you make a home inspection a condition of your Offer to Purchase. A home inspection is done by a qualified home inspector to provide you with information on the condition of the home. Costs range depending on the age, size and complexity of the house and the condition that it is in. For example, it may be more costly to inspect a large, older, home, or one in relatively poor condition or that has many pre-existing problems or concerns.

Survey or Certificate of Location Cost

The mortgage lender may ask for an up-to-date survey or certificate of location. If the seller has a survey, but it is more than five years old, it will probably need to be updated. You should ask the seller to provide an updated survey, especially if there has been a new addition, deck or fence built close to the property line. If the seller does not have one, or does not agree to get one, you may have to pay for it yourself.

Remember, you must have permission from the property owner before hiring a surveyor to go onto the property. Ask your realtor to help co-ordinate this with the owner. A survey or certificate of location can cost $1,000 to $2,000.

Title Insurance

Your lender, lawyer, or notary may suggest that you get title insurance. This will cover loss caused by defects of title to the property.

Land Transfer Fees

Land Transfer Tax, Deed Registration Fee, Tariff or Property Purchases Tax. In some provinces and territories, you may have to pay this provincial or municipal charge when you close the sale. The cost is a percentage of the property’s purchase price. Check on the internet or with your lawyer (or notary) or other team member to find out about the current rates. These fees can cost a few thousand dollars.

Water Tests

If the home has a well, you will want to have the quality of the water tested to ensure that the water supply is adequate and the water is drinkable. You can negotiate these costs with the vendor and list them in your Offer to Purchase.

Septic Tank

If the house has a septic tank, it should be professionally checked to make sure it is in good working order. You can negotiate the cost with the vendor and list it in your offer of purchase.

Estoppel Certificate Fee (does not apply in Quebec)

This applies if you are buying a condominium and could cost up to $100. Also called a Status Certificate it outlines a condominium corporation’s financial and legal state.

Prepaid Property Taxes and/or Utility Bills

Property taxes are charged by the municipality where the home is located. They are based on the value of the home. The seller may have already paid property tax or other expenses that apply to the time after the house passes into your hands. You need to pay back the seller for taxes and other costs (including items like filling the oil tank).

Property Insurance

The mortgage lender requires you to have property insurance because your home is security for the mortgage. Property insurance covers the cost of replacing your home and its contents in case of loss. Property insurance must be in place on closing day.

Legal Fees

Legal fees and related costs must be paid on closing day. The minimum cost is $500 (plus GST/HST). In addition, your lawyer or notary will charge you direct costs to check on the legal status of the property.

Other Costs

Depending on your situation, you may have some other initial expenses to consider:

  • Moving expenses
    Whether you’ll be hiring a moving company or renting a truck and asking friends for help, there are likely to be moving expenses.
  • Renovations or repairs
    Can renovations or repairs be delayed, or are some necessary to do immediately?
  • Condominium Fees
    Do you have to make the initial payment for these monthly fees?
  • Service connection fees
    Telephone, gas, electricity, cable TV, satellite TV, Internet, and so on, may charge service connection fees. Some utilities may ask you to pay a deposit.
  • Appliances
    Does your new home come with appliances? Do you already have your own?
  • Gardening equipment
    Will you need to buy gardening equipment the first summer in your new home?
  • Snow-clearing equipment
    Will you need to buy snow-clearing equipment the first winter in your new home?
  • Window treatments
    Do blinds or curtains come with the house?
  • Decorating materials
    Do you want to re-paint or apply wallpaper? Do the floors need to be refinished or re-carpeted? Do you have all the tools you need for decorating?
  • Hand tools
    Do you have the basic hand tools you’ll need for your new home?
  • Dehumidifier
    Will you need a dehumidifier to control moisture levels?

Making an Offer

Agreement of Purchase and sale

An offer is a legal agreement and is binding with buyer and seller if signed by both the parties. Offer could be conditional against Home inspection, Financing etc, if any of the conditions are not met you can walk out of agreement.

Certified Deposit

Within 24hrs of offer acceptance, certified deposit to be submitted by buyer as per terms of the offer. Further as per FINTRAC regulation  agents need to see valid government issued ID and are required to keep record of name, address, date of birth and occupation detail for the files which are kept for atleast five years.

Now that you have arrived at the destination, it’s time to enjoy your new home!

For more info visit sarnail.com

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