Ten Steps To Home Buying

Financing Your Property

There are many common methods of financing the purchase of a property, including:
• Cash
• Cash to existing mortgage.
• Cash to a new conventional mortgage.
• Cash to a vendor take back (VTB) mortgage.
• Cash to combination of a conventional mortgage and VTB mortgage.
• Cash to a Hi-Ratio mortgage. (to learn about High Ratio mortgages click here)

Whenever a mortgage is involved in the Financing Process, several steps are required:

• Completion of the loan application by the lender

• The lender processes and reviews the application on information provided by the borrower
• The lending institution requires:

1. An appraisal of the home
2. A Credit Report on the borrower
3. Verification of net worth (assets & liabilities) of the borrower.
4. Verification of down payment
5. Verification of Income of the borrower
Once the loan is approved, a Mortgage Commitment is issued for the borrowers Signature.

First Time Buyers 5% Down Payment 95% financing is available to first time buyers subject to the following criteria: In Fact today You can Purchase A Home with Zero Down if you have great Credit.
• Principle Residence for Canadian Resident
• Maximum 32% of gross family income to carry mortgage, taxes and heating.
• Maximum debt load to 4O% • $250,000 ceiling in the Toronto Area

Special Note: When Buying a condominium the finance company will use anywhere from 50% to all of the monthly maintenance fees to help determine your financial ability to pay a mortgage. In other words the maintenance fees will be part of the qualification process.

This plan has been made into a permanent program. This plan helps those who can afford the monthly cost of home ownership but have difficulty accumulating the down payment to purchase a home.

BUDGETING A KEY FACTOR IN PURCHASING A HOME

THINGS TO CONSIDER:

• Ongoing housing costs, including monthly mortgage payments, taxes, heating, secondary financing and 50% of condominium fees (if applicable). These costs should not exceed 32% of gross annual income.
• Loan payments, car payments, credit car payments. These costs should not exceed 40% of gross annual income.
• Two to three percent of the value of the home to cover annual operating and maintenance costs.
• One-time costs, which include appraisal, survey, land transfer taxes, insurance, moving and legal fees. Consult with a lawyer to determine an accurate estimate of these costs (usually 2% of the value of the home).

EXPENSES TO CONSIDER
• Appraisal
• Home Insurance
• Lawyer’s Fee
• Property Tax Adjustment
• Survey costs
• Fuel Adjustment
• Land Transfer Tax
• Interest Adjustment
• Mortgage Insurance Fee (CMHC)
• Mortgage Insurance Application Fee
• Other

PREPARING YOUR MONTHLY BUDGET:

INCOME = Monthly income (after taxes) + other income

Expenses: Monthly mortgage payment, property taxes, heating costs, home insurance, electricity, water, cable, telephone

Other: Car payment, auto insurance and repairs, gas, credit cards, other loans, groceries, life insurance, entertainment, vacation, clothing, other.