By: Alexa Grant
Buying Your First Home
Tags: first time buyer, buying a home,
Buying Your First Home- What You Need to Know
1. Save a Down Payment Before Getting a First Home Mortgage
While Home Mortgage Ontario can offer a first home mortgage with a cash-back mortgage product for up to 5% of the value of the home, the best practice would be to save up a minimum of 5% for your first home mortgage downpayment. Cash back mortgages require high credit scores, clean credit reports, and a willingness to pay a premium in interest to get into a home without a down payment. The larger your down payment, the more likely a lender will be to finance your purchase.
Remember, saving a downpayment of 20% or more will avoid mandatory Canada Mortgage and Housing Corporation (CMHC)mortgage insurance saving you thousands in fees and interest in the long-run.
2. Create a Budget
One of the most important steps to buying a house is understanding how much mortgage you can afford. Creating a budget which outlines how much you spend on a monthly basis is a good first step in determining how much money you currently have left over at the end of each month.
3. Calculate your Maximum Mortgage Amount
Use our Mortgage Centre Calculators to determine how much you can afford for your first home mortgage financing.
4. Get Preapproved Before House Hunting
Contacting Home Mortgage Ontario to be pre-approved for a home mortgage will provide you with a low interest rate hold for 90 to 120 days (3 to 4 months) with a lender according to your financial situation.
A preapproval is a written commitment from the lender stating the maximum mortgage amount they are willing to lend you at a particular interest rate. There are no obligations to follow through with a pre approval, but gives comfort to the buyer before making an offer on their first home. Also, the rate hold simply represents the highest rate they will offer. If interest rates are lower within 30 days of your purchased home closing date, you will receive the lower rate. Learn the difference between being pre-qualified, pre-approved, and approved by reading one of my recent blog posts here.
5. Find Your Dream Home & Make an Offer Conditional on Financing
Once a preapproval is in place, shop for that beautiful home you have been looking for. You’ll have comfort understanding how much you can afford and feel confident that you have taken appropriate action in preparing for this life changing event.
Although you have been preapproved for a mortgage, it is always important to make your offer conditional on financing. Since you have no obligation to follow through on the pre approval, the lender also has no obligation. Also, if your situation changes such as a change in income, hours worked per week, increase in debt on your credit cards or line of credit, the pre-approval would be no longer valid.
6. Get Approved for a Mortgage Commitment Letter
Once your offer is accepted, contact your Mortgage Specialist to get you officially approved by a lender. This step will get you a written commitment which guarantees the lender will finance your purchase, assuming all of the information you provided is true.
What Happens Once You have put an offer in?
1). You will need to provide a deposit cheque to your real estate agent. This deposit cheque will be made out the brokerage that has the property listed. You will need to provide this within 24 hours of acceptance of your conditional offer.
2.) Choose a lawyer to represent you. Ask you real estate agent for a list of recommended local lawyers.
3.) Pick a date and time to do the inspections. If you are buying in the country you will want to do a well, septic and home inspection.
Approximate Costs: Home inspection $400-550. Well Inspection & Septic $300-350. These costs will be on you are investigating this home to see if it worth purchasing.
4.) You will want to review any documents the real estate agent can provide you on the home ie, operating expenses, well documents, septic documents, home improvement permits etc.
5.) If you are looking to add an addition or a garage to the property you will need to speak with the building department at the township or city you are buying in and see if it is at all possible. When buying waterfront you will also potentially need to speak with the local conservation authority.
6.) You will need to speak with your insurance provider to make sure that the property is able to be insured as this is required for a mortgage.
7.) If buying in the country you will want a potable water test as this is also required for most mortgages.
8.) After you have reviewed all reports and well researched the property you will need to fill out a form to purchase the home and make it a firm deal.
9.) Talk with you lawyer as soon as the deal is firm to get a cost of adjustments. If you are buying a home with an oil tank or propane you will need to pay for the oil or propane in the tanks. If the taxes have been paid in full you will need to pay the taxes based on a pro-rated amount etc.
10.) Before closing you will want to do a couple final walk throughs to make sure the property and the chattels included are all in the condition you purchased them in. If they are not alert your lawyer immediately before closing.
If you have any other additional quetions about buying a home please don't hesitate to contact me today!