Purchasing a Home
For many first-time buyers, the process of finding a home can be confusing. Here, we’ll demonstrate how to purchase a home – and how we can help along the way.
When shopping for a home, the first step is to figure out how much you can afford. A pre-approval will give you the confidence of knowing that financing is available, and it can put you in a very positive negotiation position against other home buyers who aren’t pre-approved.
In order to get pre-approved for a first-time mortgage, we require information that will determine your buying power. Affordability is based on the household income of the applicants, the monthly expenses (car loans, etc.) and the expenses associated with owning a home (property taxes, condo fees, and heating costs). You also need to determine if you have enough cash resources to secure a mortgage to buy a house. The cash required is for the down payment. In Canada, 5% of the purchase price is usually required* to put down, and in addition there are closing costs which equals 1.5% of the purchase price. Closing costs will cover expenses including legal fees, land transfer tax, etc. that must be incurred to complete the purchase.
Any mortgage with less than a 20% down payment is known as a high-ratio mortgage and requires you to purchase mortgage default insurance, commonly referred to as CMHC or Genworth insurance.
Along with an application and a signed consent to pull your credit report (credit determines what kind of borrower you are and have been in the past), we will request several income documents from you based on your type of income earned. As well, there are many other questions we will need to ask you and the end result will be options that we provide based on your situation.
There are several ways you can submit an application to us. You may apply on-line here, by phone or in house, our office or your location. We can also fax you an application form if you wish.
*We do have some institutions that can still offer the 5% down payment as cash back – NOTE: this is a higher interest rate product.
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Finding your perfect home can be a long process. A realtor will help identify the right type of home for you and continually research new listings in neighbourhoods that meet your needs. After seeing many different homes, you have finally found one worthy of an offer! What are the next steps? Your realtor will create an Agreement of Purchase and Sale to the vendor (the owner of the home). This is known as the offer. An offer is a legal agreement to purchase a home and can be made conditional on factors such as financing or a home inspection, etc.. If any of the conditions are not met, you can change or cancel the offer. Once all of the conditions are met, it is a legally binding agreement between you, the buyer and the seller. We strongly recommend that you have a financing condition included in your offer even if you have a qualified preapproval with us. There are many different factors that the lender will take into consideration on a particular property, including square footage minimums, zoning requirements, etc.
Once your offer is accepted, you usually have 7 – 10 business days to meet your conditions set forth in the offer. At this time your realtor will send us a copy of your offer and we will then submit your application along with the offer and MLS listing to the lender. If it is a private sale, a Purchase and Sale Agreement can be done up by your solicitor. We will set out to have a commitment from the lender for you to sign within this time frame so that you may waive your financing condition by the time allotted on the agreement. Which brings us to the next step.
Philip Trilsbeck, Sales Representative
Century 21 Don Campbell
Real Estate Limited, Brokerage
36 Andrew Street South, Orillia, ON L3V 5J1
It is our job to sell your application to the home mortgage lenders and make sure you get the best possible rate and terms for your situation. At this time, the lender has reviewed the application we have submitted, along with the P & S (Purchase & Sale) agreement and MLS listing. All of those details have been met by the lender and they now will issue a commitment of approval for your new home loan.
This approval will be subject to meeting certain conditions. It will state which documents the lender requires such as NOA’s, T1 Generals, paystubs, employment letters, etc. and a bank statement to prove you have enough savings for your down-payment. We usually request these documents from you upfront and already have them on file.
If it’s a private sale or a conventional mortgage (conventional mortgages usually refer to 80% and under LTV loan to value and also usually not insured by a mortgage insurer) there might be a condition to have an appraisal to confirm value of the property.
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Each commitment is different and targets specific criteria. The commitment comes to us directly. We write up the “signing package” and have you come in and sign. At this point, we still have the ability to change the rate and term, payment amount or frequency, etc. (as long as your ratios are still in line with what is acceptable to the lender). We can also send the signing package by email. At this time we also like to set up a time to review this with you over the phone. There are other documents included in our signing package. We are mandated as mortgage agents and brokers to provide certain information; discussing fees, closing costs, mortgage insurance, etc. We review all of this with you and provide a copy of this package to you. It’s quite painless… really!
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Once you have chosen a real estate lawyer to work with, we provide their contact information to the lender. As part of our service to you, we then forward all of the documentation your solicitor requires to their office. In time, the lender sends “Instructions” to your lawyer’s office. These Instructions are similar to the Commitment that we receive only this time now with a list of conditions that your solicitor is mandated to meet on your behalf. These conditions could consist of providing house insurance verification, obtaining the bank draft or certified cheque for the closing funds, etc. You will have a meeting with your lawyer prior to closing to confirm all of the details and provide legal signatures. The lawyer receives the funds from your lender and disburses to the seller or builder of your new home.
If you don’t have or know of a lawyer, we will be glad to refer you to one.
Fay A. McFarlane & Associate
Barristers, Solicitors, Notaries
P. O. Box 861, 12 West Street North, Orillia, ON L3V 6K8
William G. McLean, B.A., J.D.
Crawford McLean Anderson LLP
40 Coldwater Street East
Orillia, ON L3V 6K4
MARTIN J. PROST, B.A., LL.B.
Barrister, Solicitor, Notary Public
Box 96, 323 Midland Avenue, Midland, ON, L4R 4K6
Pick up keys at your lawyer’s office on the day of closing. It is crucial that you visit your newly purchased home/condo the very same day to make sure everything is to your satisfaction and in line with your home buying contract.