So you are thinking about buying a home this year? Here are a few tips to help you as a future Home Buyer win in this crazy hot real estate market where multiple offers are the norm.
First, you want to create yourself a budget or cash flow plan and stick to it, so you can keep your finances on track. Understanding where you are spending your hard earned money will help you identify and deal with normal and unexpected expenses whenever they come up. Having a budget or cash flow plan will decrease your stress levels, prepare you for unexpected costs and help you plan for your future of home ownership. If you need help with budgeting, please call or email me, I will send you a budgeting form and make other recommendations which I have personally tested.
Before you start looking at homes, meet with a Mortgage Agent, like myself, who can assist with mortgage pre-planning, so you will feel confident when you go house hunting with your realtor. There is a misconception out there that once you have been “pre-approved”, that a lender has approved you and you have a mortgage. This is not the case. Most lenders and mortgage default insurers, such as CMHC, Genworth or Canada Guaranty do not provide mortgage pre-approvals.
To obtain a mortgage pre-approval, you and your realtor will feel confident with, it is important to understand what is needed to obtain a good mortgage pre-approval.
- Your mortgage pre-approval should be properly income qualified. As a licensed Mortgage Agent, I start by completing a mortgage application and getting your income confirmation. The documents needed for income confirmation vary depending on your employment situation. For example, if you are salaried employee or an employee with guaranteed hours, a recent pay stub and employment letter from your employer will be enough. If you are hourly employee, receive commission income, regular bonuses/overtime, or you are self-employed, you will need to provide additional documents. Lenders want to see the two most recent notice of assessments (NOA’s) from Canada Revenue Agency (CRA). For self-employed clients, additional documents will be required depending on how much income is shown on the notice of assessment but generally, lenders want at least the two most recent T1 generals which will include statement of business activity. If you are receiving child or spousal support or paying alimony, a copy of your separation agreement will also be required.
- The down payment you have available will be confirmed from 3 month bank/investment statements. If part of the down payment is coming from a gift of a family member, a gift letter will be prepared to be signed by the gift donor and kept with your mortgage application. There needs to be discussions on closing costs involved in purchasing a property, such as legal costs, land transfer, title insurance, property taxes transfer costs (if applicable), appraisal costs (if applicable), home inspection. The lenders want to see from your bank/investment statements, you have at least 1.5% of the purchase price of the home set aside for the closing costs, even if you are a first time home buyer and may be eligible for certain tax benefits.
- After confirming income and down payment, the Mortgage professional will be able to tell you how much your mortgage payment will be and have a good idea of property taxes and condo fees (if applicable). When you know how much mortgage you can afford and how much down payment you have available, you can confidently know what purchase price of properties you are able to put an offer to purchase, without going over your monthly budget.
- A mortgage pre-approval can secure you a guaranteed mortgage rate for 90 to 120 days. This is important if rates go up during your house hunting period.
- Your realtor will help guide you to find a suitable property that will meet lender and mortgage default insurer guidelines. When you find a property that you are really interested in placing an offer to purchase, it is advisable to pay for a home inspection ahead of time, so you are more confident about the property you want to purchase. This will not guarantee that your offer is accepted but it will tell the seller that you are serious about buying their property and may help you win the multiple bidding situation, when they are reviewing all the offers.
I understand in this crazy hot real estate market with multiple offers, it is important to go in with a “clean offer” where there are no conditions of financing or home inspection. This is why it is important to speak to a mortgage professional before you start the house hunting process, who will take the extra time to look at your financial situation. It is important for you to be honest with them, so there are no surprises when the lender reviews your application and credit bureau.
Better yet, contact me, Deborah da Silva, your local Dominion Lending Centres Mortgage Professional and have a proper mortgage pre-approval done, so you are fully prepared for what will most likely be the largest purchase in your life! I can be reached by completing the contact form on my website or by phone 416-839-0654.
Happy House Hunting!