First Time Home Buyers

Everything you wanted to know about buying a home.

Making the right choice when it comes to purchasing a home is a matter of good planning. There is so much to learn, especially on your first purchase, that it's essential to surround yourself with qualified professionals throughout the process. Even with the help of qualified professionals, you’ll need to understand, in a general sense, how the process works. Our hope is that this article we be a very helpful introduction to the process of buying a home and qualifying for a mortgage.

Affordability and Financing

The question of ‘How much can we afford?’ is largely answered by comparing your income to expenses in two different formulas:

• Your gross income to your future mortgage payments, heating costs, strata fees and property taxes, commonly called the Gross Debt Service Ratio (GDS Ratio)
• The three previous expenses plus all other debt servicing costs that you regularly pay on a monthly basis. This formula is commonly called the Total Debt Service Ratio (TDS). The TDS Ratio often includes the payments you make on credit card debt, automobile loans, existing lines of credit and student loans as well as other similar loans.
  

The current maximum ratios for individuals and couples with a 5% to 25% down payment are 32% for GDS and 40% for TDS. In English, this means that lenders will allow you to use a maximum of 32% of your total pre-tax or gross income to pay for your mortgage payments, property taxes and heating costs. And a maximum of 40% of your total pre-tax or gross income for these payments plus all other debt servicing cost you may have –see previous paragraph for examples.

By using these ratios I can help you select a price range for your new home that you are going to be comfortable with and let you know what the maximum mortgage that you will qualify for. This will save you time , money and disappointments you may incur by looking at homes over your price range.

Why get pre qualified?

There are 3 good reasons to get pre qualified:

• It saves you time from looking at homes outside your price range.
• We can get you an interest rate locked in for up to 120 days. This protects you from any rate increases that can happen after you have written and offer but before you close on the purchase. This could save you thousands of dollars in interest.
• It makes your offer more appealing to a seller, if they know you are a qualified buyer. This means they will look at your offer more seriously which can even result in a lower purchase price.
  

This pre-qualifying stage is also a good time to find out about the differences between conventional mortgages and high ratio insured mortgages. Ask about assistance for first time the federal government's "RSP Homebuyer's Plan" letting you use funds from your RSP to purchase a home and the option of using a gifted down payment to help you qualify.

Applying For Your Mortgage - A Checklist

A copy of the accepted Offer To Purchase, MLS print out, Strata Documents and the land survey.
A current salary letter from your employer.
Self-employed individuals need financial statements for the past three years as well as personal income tax returns.
Confirmation where your down payment came from (i.e. bank statements or a gift letter).

If you are buying a home to be constructed you will need a copy of the building plans and specifications, the land survey, plus your agreement with the builder.
With these documents in hand, I can move quickly to secure an unconditional mortgage approval once you’ve found the perfect home.

Making House Hunting Fun

By taking care of your mortgage needs first you can focus your attention on the details of the home you are buying.
Take the guesswork out of shopping for a home by taking advantage of all the professional resources available to guide you through the many choices available when purchasing your first home.

Mortgage Life Insurance

You should look at mortgage life insurance, disability and critical illness insurance, especially where two incomes are involved. Just like fire insurance, you will sleep better knowing that you are covered for those curve balls that life throws at us.

Contact us today.