Steps to Your Financial Solution
Mortgage pre-qualification saves a great deal
of time and effort for potential purchasers.
By taking the guess work out of what you can afford,
you can spend more time looking at properties that suit your lifestyle
as well as your budget.
- Complete Mortgage Application Form
- Mortgage Pre-Approval
- What should I budget for a home purchase?
- I Found My Dream Home, Now What?
- Completing my home purchase.
The financing process differs depending on your financial situation and the property you are buying.
For mortgage pre-approval you actually apply for the mortgage even
if you don't know which home you will purchase. After checking your
credit, and perhaps verifying your income, the lender commits in writing,
to funding your mortgage, pending a successful appraisal of the home
and a few other conditions. You are issued a Commitment Letter by the lender.
A pre-approved mortgage places you
in the driver's seat when it comes time
to make an offer.
Being pre-approved shows the seller
you're a serious buyer, who's ready
and able to make a deal.
A mortgage pre-approval booked through a lender guarantees an interest rate for a period of time, typically 60 to 120 days. If interest rates increase the rate is protected and if interest rates come down most lenders will give the benefit of the reduction to the client.
To submit your application for pre-approval you will be asked to supply:
• Income verification (employment letter, last T4, pay stub)
• Self employed individuals require 3 years financial statements and personal tax returns
• Confirmation of down payment
• Authorization for a credit report
• Full application including a personal net worth statement
Before making a home-buying decision, you should calculate both the one-time and ongoing costs associated with buying and operating the home.
Your monthly mortgage payments, taxes, heating costs, and 50% of condominium fees should not exceed 32% of your gross annual income. This is called your Gross Debt Service Ratio.
Your Gross Debt Service Ratio plus monthly payments on any other outstanding debts (including loan payments, car payments, credit card payments, and department store accounts, etc.) should not exceed 40% of your gross annual income. This is called your Total Debt Service Ratio.
Under normal circumstances, you should budget about 2% of the value of your home to cover annual operating and maintenance costs which are not included in your Gross or Total Debt Service Ratios.
consider the following costs associated with purchase of a home:
- Legal Fees
- Home inspection Costs
- Moving expenses
- Appraisal Fees
- Home Insurance
Costs that may apply:
- Property Taxes
- Land Survey Costs
- Strata Costs
- CMHC / Genworth mortgage insurance
- Property Transfer Tax; based on purchase price, 1% of first $200,000 + 2% of balance. Possible property purchase tax exemption for first time buyer with purchase under $425,000.
- Adjustment Costs (any other costs that have to be worked out between a seller and buyer, i.e.: tenants deposits, rents)
As a guide for preparing a budget, consider the following costs associated with ongoing ownership of a home:
- Monthly mortgage payments
- Property taxes
- Mortgage life insurance
- Heating costs
- Costs of secondary financing, such as a second mortgage (if applicable)
- Condominium fees (if applicable)
- Operating and maintenance costs
When you make an offer to purchase a property a clause in the contract will allow you the time needed to fulfill any of the lenders conditions that are outstanding. When you are pre-approved you know that the lender likes you, but they have no details on the property you want to buy. In most situations an appraisal will be ordered to determine market value or CMHC / Genworth will have to approve your purchase. Once all the conditions to your pre-approval have been met you are ready to remove your "subject to financing clause."
Gloria will send you the 'Commitment' Form for you to complete and return, as well as the 'Conflict of Interest' form.