Mortgages

Your gross debt service ratio compares your monthly housing costs against your monthly gross income. Generally, your monthly housing costs should be less than 32% of your monthly gross income.

The total debt service ratio looks at all your debt including housing, credit cards, and loans. Generally, your total monthly debt should be no more than 40% of your monthly gross income.

Online calculators like the Mortgage Qualifier Calculator on this site are very helpful in determining what you can afford.

The biggest upfront cost to consider is the down payment. Conventional mortgages require 20% of the property purchase price. As a first-time buyer, you can use your RRSPs to help fund the down payment through the government's Home Buyers Program.

If you have a down payment of less than 20%, you will need a High Ratio Mortgage. These mortgages are insured by a third party like the CMHC for a one-time fee.

Online calculators like the Mortgage Qualifier Calculator on this site are very helpful in determining what you can afford.

Once you are pre-approved, ensure your down payment will be ready and that you have 3%-4% of the purchase price available for closing costs and other expenses.

Remember the following formula: down payment + amount you can borrow - closing costs = your maximum price

• Review real estate websites and scout for sale signs in your preferred areas to get a solid understanding of properties in your price range.
• Establish a list of must-haves like the number of bedrooms, number of bathrooms, square footage, parking, and whether the area is good for kids and pets.
• Assess how long you plan to stay in this home. If you think you will move again soon, you may have more flexibility around certain criteria.

Your realtor will make viewing appointments, explain documents, present documents to the vendor on your behalf, and more.

When your realtor helps find your home, they generally earn a portion of the fees paid by the seller.

To find the right realtor, ask friends, family, co-workers and people in the neighborhood for referrals. Visit local real estate offices to find a specialist in your price range and area. When you have a list of candidates, interview them to determine compatibility.

An Offer to Purchase is a legal contract. Be sure about making your offer, but also understand that no single property will be perfect; aim for one that fits most of your needs.

Your offer will include:

• Offer price, deposit amount, and down payment amount
• Possession and closing dates
• Expiration date and time of offer
• List of fixtures (items you want with the home, like window coverings, appliances, etc.)
• List of subjects

Obviously, you want the inspection to go well, but there are occasions where major issues are discovered and you may choose to revoke your offer, discount the offered price, or accept the defect as part of the original offer.

If you are being rushed to forego a home inspection to “speed things along,” be wary. Step back and remind yourself that this is one of the largest investments in your life and you need all the information available to make the right decision.

Counter-offers can go back and forth until an agreement is reached or one of the parties declines the offer and ends the negotiation.

Waiting to hear if your offer has been accepted can be the most difficult time in the process. When your offer is accepted, you are required to make a deposit making up part (or all, in some cases) of your down payment. The deposit amount varies, but may be up to 5% of the purchase price.

A mortgage is a document that outlines the terms, conditions, and repayment of the mortgage loan. If you have been pre-approved, you will have already completed some of the steps.

What you need to apply:

• A payroll statement or T-4 slip; or, if you are self-employed, income tax returns for 3 years
• Social insurance number
• Approved offer to purchase, real estate listing and/or a picture of the home
• Confirmation of down payment and closing cost funds
• Detailed information on your finances including income, assets, and debt
• Survey certificate and assessment details (if required)

If you don't have a lawyer in mind, your financial advisor or realtor will be able to suggest someone.

Once the mortgage documents are prepared, your legal representative will explain the mortgage and details. You will sign the documents and the lawyer will register the mortgage and obtain the mortgage funds, tax adjustments, down payment, and closing costs.

Your lawyer will also handle other required details like preparing ownership transfer documents, preparing a statement of adjustments outlining the disbursement of funds, and delivering the final amount due to the seller.

Then you’ll sign for your mortgage with your lender and confirm any outstanding details.

• You may want to arrange for a moving company. You can obtain insurance on your possessions while they are in the care of the movers.
• Make sure you advise the appropriate individuals of your new address. Canada Post offers address change cards and a mail forwarding service to make the transition easier.
• Before your first mortgage payment, you may owe an interest adjustment to your lender. Interest is payable from the time the funds are provided (your closing date) to the time the mortgage is scheduled to start. Ask your financial advisor if an interest adjustment payment is expected.

You've done it! Enjoy your new home!