First Time Home Buyers

First Time Home Buyer

Your first home purchase will be one of the largest investments you make. We realize this process can be quite overwhelming at times, which is why our knowledgeable and experienced team is here to help you through the entire process. Let us help you understand what to expect throughout the process.

There are three stages when buying a home, planning, finding the property, and finally closing.

Planning

As a first-time home buyer, the process is exciting, but also a little scary. This is why doing your homework beforehand is critical. Here is how you can be prepared:

Find out what you can Comfortably Afford

It is easy to get emotionally invested in a purchase. However this happens, it is important to ensure you are financially ready. While we work through this process, we educate our clients on other costs associated with home ownership – insurance, taxes, utility bills etc.

Dealing with Existing Debt

The amount of existing debt that a person or persons carries will impact how much they will qualify for when applying for a mortgage. As a future homeowner, it is important to live within a budget and not take on too much additional debts. By doing so, it will also allow the client to save more money for their down payment.

Determining your Down Payment

The down payment is the amount of money that is paid upfront toward the purchase of your home. It is typically described as a percentage of the property’s purchase price.

Whenever the down payment amount is less than 20% of the cost of your home, the borrowers are required to pay for mortgage default insurance. This type of Mortgage is called an Insured Mortgage. Mortgage default insurance protects the lender if the borrower were to fail to make their mortgage payments.

Minimum Down Payment

Purchase Price	Minimum Down Payment Required
$500,000.00 or less	5% of the purchase price
$500,000.00 to $999,999.00	5% of the first $500,000.00 10% of the portion above $500,000.00
$1,000,000.00 or more	20% of the purchase price

First-Time Home Buyer Incentives

The Home Buyer’s Plan allows first-time homebuyers to withdraw funds from their Retirement Savings Plan (RSP) to use towards their first home. The Home Buyer’s Amount is a $5000.00 non-refundable income tax credit that can be applied to certain qualifying homes.

The First-Time Home Buyers Incentive enables first-time homebuyers to reduce their monthly mortgage payment without increasing their down payment. Borrowers who meet the criteria can apply for a 5% or 10% shared equity mortgage with the Government of Canada.

The HST New Housing Rebate offers qualifying home buyers an HST rebate on the purchase price of a home.

Apply for a Mortgage Pre-Approval

A mortgage pre-approval helps the clients understand how much a lender is willing to approve them for. It helps the client make a purchase decision with more confidence once they find a home they like.

Mortgage Pre-Approval rates are held for 120 days from the date that the commitment is issued. This protects the customer from being subject to rate increases during that time period. (See Mortgage Pre-Approval section for more information)

Finding the Property

This is one of the most exciting parts of the client’s home-buying journey, where you find a home that is right for you. Here are some tips that can help avoid stumbling blocks.

Getting the Right Help as you Search for a Dream Home

Retaining a realtor will help with various aspects of the buying process. While choosing a real estate agent, be sure to choose someone with excellent credentials and references.

Consider all Home Buying Costs

In addition to down payment savings, some money should be set aside for closing costs. These additional expenses can add up to as much as 4% of the purchase price. Closing costs can include home inspections fees, title insurance, land transfer tax, adjustment costs, legal fees, and more.

Find a Mortgage That Best Suits Your Needs and Goals

There are several kinds of mortgages including, Open/Closed Mortgages, Conventional/High Ratio Mortgages, and Fixed Rate/Variable Rate Mortgages. It is important to explore all the available options when financing a home.

Open/Closed: Each of these types of mortgages offer different prepayment options. An open mortgage allows the borrower the flexibility to make occasional and full prepayments without additional charges. While a closed mortgage cannot be prepaid, renegotiated, or refinanced prior to the maturity, except according to its terms.

Conventional/High Ratio: A conventional mortgage is when the buyer’s down payment is greater than 20% of the purchase price of the home. A high ratio mortgage is when the buyer’s down payment is less than 20% of the purchase price and needs a loan amount more than 80% of the home’s value.

Fixed Rate/Variable Rate: With a fixed rate mortgage, the interest rate remains the same for the duration of the mortgage term. In a variable rate mortgage the interest rate is subject to change as prime rates go up and down.

Closing

Get Coverage for your Home

All lenders require the buyer to obtain homeowners insurance before closing on the property. The insurance will need to meet the lender’s requirements and be comprehensive enough to cover repairing or rebuilding your home in the event of a significant event taking place.

The Closing

During the closing process there is a lot to deal with. Your real estate, lawyer, and mortgage broker are there to help you understand the complexity of these documents. Do not be afraid to ask questions if there is anything that is unclear to you. That is what they are there for. On the day of closing, the lawyer will proceed with the delivery of the buyer’s down payment to the seller’s lawyer. The last and most exciting step is receiving the keys to the buyer’s new home!

Looking to Purchase Your First Home?

Contact Rare Mortgage Lending Co. and get started today.

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