Am I Ready to Buy

What is the first step?

The first step is to see a mortgage specialist at a financial institution or a mortgage broker. Mortgage specialists work with the bank they are employed with. Mortgage brokers work with many banks attempting to get you the best interest rates. You need to find out if you qualify for a home mortgage. Banks or brokers will pre-qualify you to see if you are eligible to get financing. If you aren’t able to pre-qualify, there isn't any point in seriously looking into buying a home at this time. Lenders will guide you in the right direction to get financing down the road.

How much money do I need?

The most common down payment for a first time home purchase is 5%. There are also no down payment mortgages but you need to qualify. You basically take out a loan for the down payment and pay it back over a specified time period. This method increases your monthly expenses. There are also many other expenses involved in purchasing and maintaining a home (see below).

What are my job requirements?

Most financial institutions require that you have been with the same employer for at least a year. If you haven't been employed there for a year, they will likely ask for a letter from your employer confirming that you will have continued employment into the future. You can also qualify without being at the same employer for a year as long as you have been working in the same industry for the last 2 years.

What credit history will I need?

Financial institutions like to see a good credit history before they will lend you a large sum of money to purchase a home. Also, the better your credit rating, the lower the interest rate you will get. This could save you thousands and thousands of dollars over the term of a mortgage.

Buyer Costs for a Home Purchase

1. Down Payment - types:
   • 5% down - and borrow the other 95%
   • Borrow 5% down and pay back over a specified time period
   • Borrow from RSPs for a down payment (Home Buyers Plan)
2. CMHC Fees - Insurance you have to purchase to insure the bank if you default on the mortgage - amount depends on down payment - $0 if 25% down - you can add this cost to your mortgage loan
3. Legal Fees
4. Title Insurance or Survey-most people just get title insurance and that protects you in the future if something happens concerning your property
5. Land Titles Registration - if not already on land titles
6. Property Tax - for balance of tax year-these are paid in advance
7. Fuel Adjustments - example: they fill the oil tank and you pay them for it
8. Property Inspection - if you choose to get one done
9. Water Test Fee – if home is not on municipal services
10. Land Transfer Tax & Registration
11. Mortgage Registration Cost
12. Title Search Cost
13. Appliances - if not included in the home purchase deal
    
    Example with the above 13 points:
    
    1. 5% is the most common down payment
    2. Approx. 1-3.5% of value of the loan - your bank will explain this
    3. $500 - $800 and up
    4. $200 - approx. for title insurance
    5. $500 - $1000 and up, however, many properties are already on land titles
    6. depends on time of year
    7. depends on type of heating
    8. $200 and up
    9. $40 approx
    10. $55 + (¼ X 1% of cost of home)
    11. $55
    12. $230 approx
    13. depends if included and how much you want to spend
        
        Total: $1780 - $2580 + down payment + CMHC + Prop. Tax. Balance + Oil? Propane? + Property Inspection? + Land Transfer tax (0.25 X 1% of home cost)
        
        These are all approximate numbers for costs. Your bank and lawyer will explain any and all costs related to the purchase of your home. Banks will normally only add CMHC fees to your mortgage loan. Everything else you have to pay up front.
    
    Example of approximate costs for a $45,000 home in Sussex:
    
    1. Down Payment: $2250 ($45,000 X 5%)
    2. CMHC fees for 5% down: 1237 ($45,000 X 0.0275) 2.75 % of price
    3. Legal Fees: 750 Estimate but could vary
    4. Title Insurance: 250
    5. Land Titles Registration: 0 Assuming already on land titles
    6. Property Tax Adjustments: 250 Assuming 6 months owed @ $500/yr
    7. Fuel Adjustment: 0 Assuming not oil or propane heat
    8. Property Inspection: 300 Approximate
    9. Water Test Fee: 0 If on town water, no test is needed
    10. Land Transfer Tax & Reg.: 170
    11. Mortgage Registration: 55
    12. Title Search Cost: 230
    13. Appliances: 0 Assuming included with home
        
        Total Cost: $5492

Increase in Monthly Expenses

• Property Taxes - calculated as a rate per $1000 of assessed value of the home - example: $50,000 home is $1.25 per $1000 so $50,000 X 0.0125=$625/year - most people add this onto their mortgage payment
• Higher Heat Costs - if you are used to apartment heat costs
• House Insurance - Approx. $30/month and up
• Water & Sewer Costs - if in town - Approx. $30/month