I’m sure you’ve heard it before, but buying a home is one of the biggest financial and lifestyle decisions you will ever make. As your Mortgage Broker, we’re with you right from the moment you decide to buy your first home, through the movers carrying the boxes through the front door, to being mortgage free!
Buying your first home can be both exciting and stressful. Let’s walk through process and what to consider along the way. Knowledge of the process and costs involved in buying your first home will lessen any unexpected pressure.
What does the process look like?
Knowing what to expect is the first step to relieving the stress of buying a home. Here’s a quick look at the steps involved:
How much can you afford versus what will the bank approve you for?
I like to start with what can you realistically afford versus what will the lender approve you for. Often the lender will say you qualify for much more than you’ll realistically pay each month.
What can you comfortably afford? We look at your existing financial and family obligations as well as lifestyle to ensure the new payments fit with your other priorities.
Don’t get caught in the excitement! Prepare a budget and know your numbers.
Once you have a firm budget in place, the next step is getting you pre-approved. A “pre-approval” is not what you might think. The bank doesn’t review documents, they simply take your word for it. To the lender, a pre-approval means securing a maximum rate that you will pay if you buy a home in the next 120 days. This can mean disappointment when you finally have an accepted offer on a property if the lender isn’t reviewing documents until this point.
Mortgage Brokers take pre-approvals a step further than the bank. We’ll gather all the documents that we would for a full approval so that not only can we secure a rate hold, but when we tell you that you qualify for a $350,000 purchase with 5% down, we are 100% sure that’s what you qualify for.
Remember, there is no cost and no risk or obligation to you. If you don’t buy a home, or you choose another lender, that’s completely your call. Securing a pre-approval just gives you that extra piece of mind.
Get to know the lingo
Open versus closed? Fixed rates versus variable rate mortgages? Amortization versus term? Conventional versus high-ratio? Insured, insurable, uninsured? Payment frequency? Mortgage default Insurance? Assumable and/or portable?
Is your head spinning yet? Our job is to educate you, not to overwhelm you. We also don’t want you signing documents you don’t fully understand. We take the time to review the terms and conditions of your mortgage so that you feel comfortable signing on the dotted line.
Be prepared for the paperwork required
When you apply for a mortgage, you are required to submit paperwork that supports your income, down payment, any existing properties, assets, debts and, of course, credit.
Lenders want to see current information, so documents need to be dated within the last 30 days. When it comes to down payment, they are going to want to see 90 days of history on the account. They want to be sure you are not borrowing funds and not disclosing them as borrowed, for example. Any large, unidentified deposits need to be explained and documents provided to support the explanation.
Credit issues, other properties, divorced or separate, new to Canada? These come with their own document requirements. Be prepared for the paperwork and accept it. The lender is doing their due diligence and at the end of the day, the risk is theirs, not yours.
What are the must haves in your first home?
You need to consider what are the must haves and those that are nice-to-haves in your first home. Three bedrooms or four? One bathroom or two? Basement developed or not? New build or mature community?
One bathroom is fine when there are only two of you but what are you going to do with guests and kids? What’s your maximum commute time to and from work? Is public transit close by?
Do a little work beforehand. Walk the neighbourhood in the daytime and again in the evening. What do you see and hear and talk to people on the street. Work with your realtor to help you narrow this list because these are all things you need to know before making the offer.
I can make an offer without a Home Inspection, Right?
Here’s where we sometimes miss a step and it can cost you. Always, always, ALWAYS have a professional Home Inspector complete a detailed home inspection of your prospective new purchase. And always write it as a condition of the offer. This it too large an investment for you not to have completed all your due diligence.
Your Realtor should be able to guide you through this step, but don’t forget to ask the seller questions you need to know the answers to. Has the basement flooded or had water problems? What about roof leaks? Have the Sellers ever had to file insurance claims? What for? You need to know the answers to these questions so you can make an informed decision. Don’t let someone else’ money pit become yours.
What about the First-Time Home Buyer Programs I’ve Heard About?
As a first-time home buyer, you may also qualify for federal and provincial First Time Home Buyer Programs. These include the:
Choosing the product that is right for you
We have been conditioned to think the best mortgage is the one that comes with the lowest interest rate. However, this is not always the case. We’ve all heard stories about someone who got a rock bottom interest rate but when they went to move before the end of the term they were charged a horrendous mortgage payout penalty. You will need to have an in-depth conversation with your Mortgage Broker about to avoid this pitfall. Things to think about are:
Knowing the above will allow your Mortgage Broker to provide you with the best mortgage options for you and your family.