Mortgages
Congratulations!
You feel that you are ready to be a home owner. You probably have
a lot of questions and you understand that buying a home is probably
the most expensive purchase you will make in your life time, so
you don’t want to make any mistake. Remember, that buying
a home is not only a purchase but an investment.
There
is a lot to learn before you actually purchase your home. There
are new terms that you need to understand and a wide range of
professional that you will meet.
You
might be asking yourself questions such as: Is homeownership right
for me?
Do I know enough about the process or buying a property? Have
I saved enough money to afford to buy now? Is my credit rating
good enough to qualify for a mortgage?
Think
positive! With the right information, your dream of being a homeowner
could be closer than you think!
How
to know if you are ready to buy
Answer
Yes or No to the following questions to help you decide if you
are ready to buy.
1.
Are you presently employed, and have been employed longer than
two years?
2. Do you have a continuous, reliable source of income?
3. Do you have a bank account and how long have you had it for?
4. Do you file your income tax return on a yearly basis?
5. Do you pay your bills on time?
6. Is your total outstanding debt - including credit cards,
lines of credit, car loans or personal loans - manageable?
7. Are all of your financial obligations accounted for in your
total debt?
8. Do you have some money saved for the down payment and closing
costs?
9. On a monthly basis, can you afford the mortgage as well as
other expenses, including all your utility bills, maintenance
services, repairs and any other financial obligations you many
have?
10. Do you have time to take care of a house – including
responsibilities like mowing the lawn and making small repairs?
11. Do you have time to devote to buying a home right now? Or,
are other commitments taking priority?
12. Do you have money to cover moving expenses and security
deposit for utility services?
If
you answered “No” to any of these questions
concentrate on strengthening those areas.
If
you answered “Yes” to most questions, you
are serious and ready to buy.
>>back
to top
To
Rent or to Buy
Deciding
whether to rent or buy is a personal decision. You will need to
decide what is best for you and your family. Following are a few
things items to consider.
BUYING
________________________ |
|
•
You will have a place for you to call your own
• You will build equity
• There are stable monthly
payments
• You will have a stronger
sense of community
|
•
There are no repair or maintenance obligations
• You can move more easily
• You are not responsible
for utilities, homeownership insurance and property taxes
|
>>back
to top
Determining
how much can you afford
Your financial institution will ask for your gross annual income
in order to decide how much to lend you. (This is just one of
the factors of the lending formula that a financial institution
takes into consideration)
Your
gross annual income is the income you earn in a year before taxes
and other deductions. It can also include other supplemental income
such as rental income, self-employment income, alimony, and child
support.
To
get a general idea of your home buying power, use this formula:
Multiply
your annual gross income by 2.5.
Example:
$45,000 x 2.5 = 112,500
You
may be able to qualify for a mortgage of $112,500. |
Although
your lender may qualify you to buy at a certain amount, it doesn’t
mean that you might be able to afford it. Remember that although
your gross income is one amount your net income (earnings after
taxes) is a lot lower and this is the amount that you need budget
with on a monthly basis.
Helpful
hint - Set a budget with your estimated mortgage payment;
include property taxes, maintenance and repairs and any other
costs associated with your housing costs.
To help you with your budgeting needs visit the budget calculator
or call 1800-267-2272 for a “Monthly Budget Tracker”
booklet.
>>back
to top
You are
ready to buy a home – now what?
It
is important to be well informed before taking the important step
of buying your home. The following steps can be taken if you are
ready for homeownership.
1.
Contact your financial institution, credit union, or
a mortgage broker. It is important for you to understand
the process of obtaining and maintaining a mortgage. Ask your
financial advisor:
•
How to qualify for a mortgage
• How the mortgage approval
process works
• Why a strong credit history
is important
• How the financing and closing
process works
• How to avoid mortgage delinquencies,
defaults and foreclosures.
2.
Get a real estate agent - If you do not know
one; start by looking for a Real Estate Professional in the
Canadian Real Estate Association website www.crea.ca.
This site will answer how a Real Estate Agent gets licensed
by the province and what their responsibility is to you as the
buyer and seller. Ask relatives, friends and co-workers for
the names and phone numbers of real estate professional with
whom they’ve worked.
3.
Go online to do research on homeownership using
www.cba.ca
or www.cmhc.gc.ca;
or, go to the library for more information.
4. Determine what type of home you want –
It is important for you to think about the features of your
dream home. Fill out this Home
Check List to make sure you don’t forget anything.
>>back
to top
What
to do if you have a bad credit rating
If
you realize that your credit rating is not as strong as you thought
it to be.
Contact a non-profit credit counselling agency for:
•
Credit education
• Confidential budget and
debt counselling
• Debt repayment programs
and
• Financial management education.
For
an agency near you visit: www.creditcounsellingcanada.ca
or www.oaccs.ca
>>back
to top
Costs
associated with a new home
Down
payment Costs - Your financial institution may inform
you that you do not need a down payment. If you do, down payments
can range from 5% to 25% of the property value. If you’re
down payment is less than 25% you will need to get mortgage insurance
which is an extra fee added to your mortgage.
Closing
Costs - Closing costs can include legal fees, property
taxes, life insurance, financing costs and items that must be
prepaid or escrowed and other settlement costs. Your lender will
inform you of these costs after you apply for a mortgage. Some
mortgage products may include closing costs, or renovation costs.
Discuss these options with your lender.
Other
Costs - There are many other costs associated with moving
and regular home maintenance, such as:
•
Moving expenses
•
Changing the locks on doors
•
Installing smoke and carbon monoxide detectors
•
Deposit and start up fee for utilities, phone, cable and other
services
•
Immediate repairs or work your home may need, such as cleaning
and painting
•
New appliances (if necessary)
•
Equipment such as lawn mower and hoses to help with maintenance
of your home
Click here to find the Glossary
of Mortgage Terms and
the Glossary
of Mortgage Product Terms.
>>back
to top
| 
