Mortgage Blog

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So, you want to buy a house?

July 23, 2021 | Posted by: Charles Edwards

So you’ve decided it’s time to buy a house.  Now what? 

While this should not be considered an exhaustive list, it gives you a good idea of what to expect. 

Financial sanity check and pre-approval

All too often people put the cart before the horse and, once they make up their mind it’s time to buy, they start shopping.  That’s not good! 

The first thing you need to know is what do you qualify for?  Especially in today’s environment with the mortgage stress test. 

The very first thing you should do is speak with your mortgage agent.  They are going to help you understand in depth where you currently are from a financial point of view and where you need to be to buy that house of your dreams.  Maybe you’re ready now.  Maybe you need to do some financial house cleaning before you go any further. 

You will need to make sure you have the down payment and closing costs required.  Down payment can be as little as 5% for insured purchases and 20%+ for insurable/uninsurable purchases.  Plan for 1.5% of the purchase price for closing costs.  It is possible to purchase with no money down, essentially borrowing the down payment but you will need to be a very strong candidate for this to work. 

They are going to look at things like your credit score (so important in order to get the best products), income, assets, liabilities, debt ratios, etc. 

It is possible to get a pre-approval with many lenders.  This can be helpful in an environment where interest rates are rising.  This will give you a rate guarantee up to 120 days although you are not bound to this specific lender.  However, it’s important to realize that a pre-approval is not necessarily a guarantee you will be approved for a mortgage.  At the time of the actual purchase, everything will be reviewed by the lender and if anything has changed since the initial submission, problems could arise.  For insured purchases, the pre-approval isn’t even reviewed by the insurer.  This is why it is so important to work with a good mortgage agent who will give you invaluable advice along the way.

Once you have actually submitted an offer to purchase, your mortgage agent will then review the myriad of lenders and programs at their disposal to find just the right product for you.  Like anything else in life, no two situations are the same and not all lenders are the best fit for all borrowers.  There are considerations that may make some lenders more attractive than others.

Choose a Realtor

Once you have figured out your budget, then it’s time to work with a good real estate agent and start house hunting.  While your real estate agent is the best one to speak with reading the actual purchase process, at a high level it will consist of you shopping based on your budget, your must have’s, your nice to have’s and the neighbourhood(s) you wish to be in. 

When you find that perfect place, then it’s time to submit an offer to purchase.  When you submit an offer to purchase, there are often conditions that go along with your offer.  The most important one from our point of view is the condition of finance.  We always recommend a minimum of 5 business days.  This allows you 5 business days to work with your mortgage agent to ensure the lender will agree to the purchase.  If there are any problems, you can simply walk away with no repercussions. 

This is such an important point that it’s worth repeating.  You never want to go ‘firm’ on an offer to purchase without a condition of finance.  Ok, I know, never say never.  In rare circumstances, it may make sense to go firm but never, ever do this without input from your mortgage agent.  There are a number of things that can affect a lender’s willingness to grant you a mortgage and if things go south, you do not want to be on the hook.  An offer to purchase is a contract between you and the seller and you need to be sure you are protected.

Typically, you will want at least 1 month before the closing date to finalize the mortgage.  While it is possible things can happen a little quicker, it’s not wise to chance this.  Always speak to your mortgage agent first before committing to anything less. 

The second most common condition on an offer to purchase is a home inspection.  This is a very good idea and will help give you peace of mind that the property you wish to purchase will be a solid investment.  You want to know early in the process if there are any serious problems with the property and a good home inspector will be able to detect any serious issues.  Make sure your mortgage agent gets a copy of the inspection report to ensure they are aware of any areas of concern.  It is possible that items brought up in the report may affect the lenders willingness to grant you a mortgage. 

Choose a lawyer

This is something you should really be thinking about in the early stages of the process.  You will need a lawyer to represent you and to ensure your interests are protected.  Once the deal is finalized, your lawyer will work with the seller’s lawyer and with your lender to ensure things are done as required. 

Closing the purchase

By this time, you have been approved by the lender, the home inspection looks great and it’s time to dot the i’s and cross the t’s. 

I mentioned previously to plan for approx. 1.5% of the purchase price for closing costs.  While it often is not quite that much, most lenders will want to see that you have that available just to be sure.  This includes but is not necessarily limited to the following:

  • Legal fees
  • Land Transfer tax
  • PST on CMHC insurance if applicable
  • Title insurance

We will work together collecting whatever information the lender requires from you and satisfying their conditions.  Ideally, we want this all completed a minimum of 2 weeks prior to the actual closing date. 

Once this is all complete, the lender issues instructions to your lawyer and your lawyer will do their thing to finalize the deal.  You will meet with your lawyer one final time to sign the last of the paperwork and to pick up the keys! 

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