First Time Home Buyer
Why go through a Mortgage Broker?
We specialize in mortgages and we have access to more than one lender. We can find the best mortgage product to suit your financial needs. We provide knowledge of the mortgage product that you are interested in with a faster turnaround time than most banks get within their own company. We can provide you with broker rates which are lower than the bank rates. We provide a rate guarantee from the lender that approved you and then watch to make sure your rate does not expire or if it is lower request for the lower rate. We can also spend more time with you and make sure you understand the mortgage product and the pre payment privileges that the product has to offer you. We build relationships that we want to keep no matter what your credit is like.
This is a very exciting time purchasing your first home. Canquest will help you with every step of the way with common sense advice and information. There is no fee to assist you in qualifying for your new mortgage and also providing the best mortgage approval that will suits you and your family.
There are common questions that are asked by first time homebuyers and I would like to assist you with eliminating the stress that comes with obtaining your first mortgage. I have also attached some links that you may want to check out with the different mortgage insurers.
What do I do first to qualify for a mortgage?
You need to provide your broker with an application form with 3 year history of your residence and your employment history. You will need to verify income which will require a letter from your employer, a current pay stub and your current Notice of Assessment to prove your taxes have been paid. You will have to also provide proof of your down payment. There are various products for mortgages through various lenders and Canquest can assist in finding you the right product and the right lender.
What is the minimum down payment?
- 5% down on purchases under $500,000
- The government has change the minumum down payment to 10% (instead of 5%) for homes valued between $500,000 to $999,999. (5% for the first $500,000 and 10% for the remainder up to $999,999.00).
- $1,000,000 value home is 20%
Effective: February 15, 2016
What can I use for a down payment?
- Home Buyer Plan increased to $25,000 from $20,000 for withdrawals made after January 27,2009 . You would have to payback the amount taken out the following year over a 15 year amortization. Under the existing requirements, neither you nor your spouse or common-law partner can own the qualifying home for more than 30 days before making the final withdrawal. You will need a copy of the Home buyer plan signed and when the funds are deposited to the account a copy of the statement showing the money going into the account.
- Gift Letter from your immediate family member - deposited to your bank account and a 3 month bank statement for the proof
- Your Savings account - 3 month bank statements
- Sale of Existing Home - Proof of equity would require Current Mortgage Statement with a Firm binding sale of existing home.
What other cost do I have to save money for before buying a home?
You must save 1.5% of purchase price for closing costs as per the insurers requirements. This does not mean that your legal costs are going to be this high it is a guideline the insurers use to make sure you have enough money to close the deal. Some of the lenders will allow a lawyer quote and the amount of the quote to be in your bank account vs the 1.5%.
Can I get a pre approval now and then go look for a home?
Yes! You should get a pre approval so you know how much you can afford to purchase. The lenders provide a 120 day rate guarantee. This provides you with comfort while making the right offer on a house with your realtor. When interest rates are moving up and down you get the best of both. You are protected from the higher rate and if the rates fall you can get the lower rate.
What is A High Ratio Mortgage and the Insurance Premium?
When a client has less than 20% down is considered a high ratio mortgage. The mortgage insurers are one of three: CMHC, GENWORTH AND AIG INSURANCE. Canada Mortgage and Housing Corporation is a federally owned and operated institution that evaluates the client and property to allow the borrower to purchase a home with a lower down payment requirement. The other two; Genworth and AIG are not federally owned. They each provide insurance to the lenders in case of default. There is an insurance premium which is added to your mortgage to cover the mortgage amount. The amount of the premium charge is determined by the percentage advanced ie 95%, 82% etc. This premium is added to your mortgage as a one time fee for the duration of your mortgage. It is not refundable if you put money down after the mortgage as been advanced.
What costs are involved in obtaining a mortgage?
The cost that you will incur are Legal costs- including title insurance, property taxes paid current, Property Insurance - Insuring the house and your dwelling, appraisal if it is not insured with CMHC, GENWORTH OR AIG., inspection cost - if you are having the new house inspected. Once you have the approval and the financing you will have hook up cost on all the utilities.
How long will this process take to complete the mortgage from start to finish?
Your mortgage pre approval will depend on you and how fast you can provide the necessary documentation for a pre approval including the income confirmation. Once that is all obtain it should take 24 - 48 hours for an approval. Once you have made an offer on the house that you are purchasing you should give 10 business days for the financing to be all approved by the lender. The lender will go and get the insurers approval and they have to determine the value of the house. When you are putting down 20% or more down then an appraisal will have to be ordered through an independent approved appraiser who has to be on the lenders approved list. The appraisal company can take 5 - 7 business days to complete the appraisal and get the report back to the broker. Then it has to get reviewed by the lender. All the conditions have to be met before the financing condition can be removed off the Offer to purchase. After all that is completed the documentation is triggered to the lawyer that you provided to act on your behalf. The lawyer has to prepare all his documentation and registration documentation for you to sign. Depending on how busy the lawyer's office is and land titles you will have to ask them at that time if the funding will be on time. I recommend that all clients take out title insurance to protect them from fraud and it replaces a Real Property report which can be costly.
What if I have damaged credit or have been discharged from bankruptcy? Would I be able to qualify for a mortgage?
Yes, you can. Please check out the Alternative Lending Section of my website.
What is a term of a mortgage mean? When I take a 5 year term?
Mortgages have a 25 year amortization which means that is how long you have to payoff the mortgage. The longer the amortization the smaller the payment and the smaller amount goes off the principal amount of your mortgage. The term of the mortgage is when you want a 5 year term you are locked in at that rate for 5 years. The lender calculates the mortgage on a semi annual rate.. If you decide to break that 5 year commitment you would have a penalty which we explain further down.
What if I do not want a 25 year amortization?
The 25 year amortization is to assist clients to qualify for a mortgage because of the house prices have increased over the years and a lot of people do not qualify for less than 25 year amortization. If you are a first time home buyer this is a very attractive feature because it helps you qualify for the mortgage at a lower payment amount. You can shorten your amortization later on into your mortgage. Each lender has a pre payment privilege which allows you to pay down on your mortgage either with a lump sum payment or a increase in your mortgage payment. The percentage is between 15-20% of the original amount your borrowed. So, at the end of the term you can decrease your amortization and during the locked in time you can do a pre payment if you want to pay down on your mortgage.
Do I have to pay the property taxes to the lender?
The property taxes are going to be taken from your account on the frequency you set up with the lender to go into a special account for your taxes. When you are a high ratio mortgage some of the lenders collect your taxes for you an put them into the account. On June 30 of each year they are do and payable so the lender will pay your taxes for you. There are still some lenders who will request that you be on the TIPPS program with the city or municipality where your home is located.
When you have an 80% loan to value ratio the lender lets you pay your taxes on your own.
If you want to go on a TIPPS program for a monthly installment you would contact the city. Email: property. tax @calgary.ca, Fax # 403.268.3550, Phone # 403.234.7480. Canquest has a form.
What if I have no down payment but my credit is good and I have a good job, can you help me?
There are a couple of options available for borrowers without a downpayment. The following are some examples of the current 100% financing options available:
- down payment is borrowed ( ie credit cards, line of credit and personal loan)
- credit score must be high
- insurance premium of 2.9% added to your mortgage
- client can qualify for "best" discounted interest rates
- All types of properties on owned land ( not rented pad ) are eligible.
5% Cash Back Downpayment
- down payment is provided from lender by way of 5% cash back (provided at the time of closing from the lawyer)
- credit score must be high
- insurance premium is 2.9% added to your mortgage
- interest rates are lenders posted rates ( call for rates)
- all types of properties on owned land are eligible.
How can I find out how much I qualify for without filling out an application?
You can use Canquest Mortgage calculators to determine how much your gross income will be able to handle.
I have a lot of debt and I would like to add that to the mortgage when I purchase my first home.
Sorry! You are unable to add your other debts to your mortgage. You would have to own a property and use the equity to consolidate at a later date providing the property value on your new home has gone up. The mortgage has to have been going for 1 full year before you can take out the equity through the conventional lenders.
What if I want to get out of the term of the mortgage early? There are payout penalties on every mortgage. When you are taking a fixed mortgage rate there is a 3 month interest penalty or a IRD - Interest Rate Differiental. When you are in a Floating rate mortgage the penalty is usually 3 month interest. Make sure you read the penalty options before you commit to the mortgage.
- View Canquest "Mortgage Process"
- View Canquest "Cash Back Mortgages"
- View Canquest "Understanding the Costs"
- CMHC Premiums