Below are the basics of purchasing a home. To receive our Complete Home Buying 101 Guide , over 30 pages of the most useful and helpful home buying info you can find, please contact us to receive a no obligation copy.

A Great Time To Buy!

Fluctuating interest rates have delayed the plans of many purchasers to buy for the first or even second and third time. Pent up demand among people currently renting will impact housing prices especially in urban centers. Demand for trade up housing is also strengthening. This should see the average price of a home increase slightly during the current and following year as more Canadians enter the housing market.
Housing in most parts of Canada is as affordable now as at any time since the seventies. A number of factors work in favour of potential buyers including:

Canadian government programs such as the RRSP Home Buyers Plan.
The implementation of the 5% downpayment program now available to all purchasers.
A large selection of houses available in all price ranges, assuring buyers of a wide choice of designs, sizes and types of housing.
Lower interest rates and the highly competitive mortgage market have resulted in more flexibility and a range of financing choices that benefit the homebuyer.
Household incomes are becoming more secure as the economy improves.

Finding the Right Home

Now that you have decided to make a move, how do you go about it? When it comes to the largest purchase in one's life, the key phrase is "you had better shop around". It is not necessary to settle on the first home you view.

Decide where you want to live based on such things as transportation, distance to work, proximity to schools, daycare, recreational facilities, shopping, health care etc. When you hear "10 minutes to downtown", find out if that was determined during morning rush hour or 2:00 a.m. in a Mustang Shelby!

Another crucial aspect of your decision on which home to purchase will be your choice of new or resale. If new is your decision, after checking out different sites and models make sure to contact the New Home Warranty Office to establish the frequency of complaints, if any, of any particular builders you may be interested in. A real estate agent interested in giving you exceptional service will be most advantageous if searching the resale market. You will desire an agent whose attitude and availability indicates they are working for you. Once you have given your agent your list of wants and needs in a house i.e. single or double garage, en suite bath, finished or unfinished basement, townhome, single, one or two story etc., you will want to see a list of homes to view in the right price range in the districts you have chosen.

A real estate agent to suit your needs can be recommended by Capital Mortgages

Affordability and Financing

Prior to embarking on your housing search, visit or contact Capital Mortgages Inc. to arrange a pre-approved mortgage. This is especially true for those who are first time purchasers.
A pre-approved mortgage will let you know just how much of a mortgage you qualify for and subsequently how much you may purchase for based on availability of downpayment. Doing this will let you house shop in comfort knowing what you can afford. Having a pre-approved mortgage will also tell any potential vendor you are serious about purchasing and are negotiating with the knowledge and strength of knowing exactly how far you can go.

When discussing your affordability with your mortgage agent he/she will be looking at your Gross Debt Service Ratio ( GDSR ) and your Total Debt Service Ratio ( TDSR ). The GDS ratio is based on what you can afford each month including mortgage payments ( principal and interest ) property taxes, heating and condo fees if applicable. The maximum GDS ratio allowable is 32% of the gross family income. Your TDS ratio is based on those elements of the GDS ratio and all other family monthly obligations. The maximum TDS ratio is 40% of gross family income if this is a high ratio mortgage ( less than 25% downpayment).

If these ratios are at or near the maximums, your mortgage agent can aid you in completing a budget analysis based on net income looking at current and projected budgets to determine what you can actually afford and what size of mortgage payment is realistic.

During this pre-approval stage is the time to find out about the difference between conventional and high ratio mortgages. Also talk about assistance to first time home buyers from the federal governments RRSP Homebuyers Plan letting you use funds from your RRSP to purchase a home. Go over closing costs for any potential purchase, land transfer taxes, legal fees and other disbursements. Before you are automatically pre-approved, your mortgage agent will need to run a credit bureau report and receive written verification of employment and income as well as a downpayment.

Once you are pre-approved the interest rate at which you are approved can be held for up to 120 days dependent on the lender chosen. If interest rates should drop in most cases your rate will drop accordingly. If they should rise you are protected at the rate received in the pre-approval to the date indicated.

We shop the market to get you the best deal!

Selecting the Right Mortgage

The basic choices to look at in selecting a mortgage include:

-conventional or high ratio mortgages
-prepayment privileges
-short term vs. long term
-specialty mortgages that are creatively the best of both worlds
-closed or open mortgages
-fixed rate vs. variable rate mortgages
-A conventional mortgage is a loan for no more than 75 % of the appraised value or purchase price of the property, whichever is less. A high ratio mortgage is usually for more than 75 % of the appraised value or purchase price. This type of mortgage is also referred to as an NHA mortgage because it is granted under the provisions of the National Housing Act and must by law, be insured through CMHC or GE Capital for which the borrower pays the application and insurance premium.

A closed mortgage usually offers a lower interest rate than that of an open mortgage of the same term, but the open mortgage lets you pay off the mortgage any time without penalty.

The term you select is also important. Short term mortgages are appropriate if you believe interest rates will drop substantially come renewal time. Long term mortgages are suitable if you feel current rates are reasonable and you want the security of budgeting for the future. This is especially important for first time home buyers. For this reason CMHC dictates a minimum term of three years for first time home buyers with 5% downpayment. The key is to feel comfortable with your mortgage payments.

A fixed rate mortgage allows you to budget precisely for whatever term you select, anywhere from 6 months to ten years and occasionally to 25 years. A variable rate fluctuates with the market.

Prepayment Privileges

It is possible to go on at length discussing the features of the many different mortgages available. Our best advice is to research your options. We know the prepayment privileges of the various financial institutions on the LSS Network. These let you pay down your mortgage faster and combined with weekly or bi- weekly payment frequencies can save you years off your mortgage as well as thousands of dollars in interest.

Other options to consider are portability and assumability. Both are important if you should decide to sell your home before the term matures and especially if you plan to buy again after you sell.

Mortgage Life/Disability Insurance

SECURITY for your largest lifetime investment. Although many of us are reluctant to discuss our mortality it is something we must face. For most people their home is the single biggest investment they will make in a lifetime. They understand the need for house insurance for protection against fire and other forms of serious damage. But what if either spouse dies, and more unfortunately if both pass away by accident leaving children? Are their homes and families protected when their mortgage payments can no longer be made? These are questions that need answering if the future of home and family is to be made secure.

Capital Mortgages has forged an alliance with our own LSS system insurance quotes as well as an affiliation with outside sources to help you secure the most cost-effective mortgage insurance to meet your needs. Your mortgage balance can be paid in full in the event of the demise of one or both spouses. These quotes are available with each mortgage approved on the system.

Available soon *Disability Mortgage Insurance*

Lawyers

The same advise applies to selecting your lawyer as to your real estate agent or new home builder.Competitive fees, excellent service, knowledgeable, approachable and, in a word, VALUE. Make sure that you get the right combination of price and service.

Once your offer is signed and accepted make sure your mortgage agent receives a copy as well as your lawyer. Your lawyer will then order a series of searches from various municipal offices. This is to ensure that the vendors have not been sued and that they have paid all realty taxes, hydro, water and gas bills: and that there are no past liens on the property once you become the new owner.

Your lawyer will also draft a number of closing documents, and will review the closing documents drafted by the lawyer for the vendor, since both lawyers participate in this process.

The lender that your mortgage agent has placed you with will coordinate with your lawyer to draft their appropriate documents. The lawyer will notify the property tax offices as well as the utility offices that you will be the new owner as of the day of closing.

Prior to the actual closing you will visit your lawyers office to sign the closing documents. At this time you will bring a certified cheque for the balance of the closing funds, because the lawyer pays the relevant parties on your behalf ( land transfer to the government, balance owing to the vendor etc. ).Part of that amount covers the lawyers fees and the disbursements incurred. The lawyer will obtain the mortgage funds directly from the lending institution.

Closing Costs

There are certain costs associated with purchasing a home. For instance:

ADJUSTMENTS: On closing your lawyer will do certain adjustments to the purchase price. These are for prepaid expenses which will be prorated between the vendor and the purchaser. For example, a typical adjustment will be for property taxes paid to the City or municipality. The amount of prepaid taxes will be adjusted as of the closing date and one party will be required to reimburse the other.

CMHC/GE APPLICATION FEE: Those that insure your mortgage charge an application/appraisal fee to process your application.

APPRAISAL FEE: An appraisal is required to verify the value of the property being mortgaged. The lender will require an independent, certified appraiser to evaluate the property. Your mortgage agent will normally order this for the lender. This cost is payable by the borrower.

CMHC/GE INSURANCE PREMIUM: An insurance premium is paid to CMHC or GE to cover high ratio mortgages ( those that are mortgaged for more than 75 % of the value ). This fee is pro-rated to the mortgage amount.

GST: Goods and Services tax is payable on newly constructed homes not on resales. Check with your developer if this is included in the price quoted.

LAND TRANSFER TAX: This is a sales tax on the purchase of your home. A simple guideline for the amount of tax payable on purchases under $250,000.00 is to multiply the purchase price by 1% and subtract $250.00.

LEGAL FEES: These fees are payable to your lawyer for registering the mortgage and to cover any of his related disbursements. These disbursements vary and it is best to get a quote from your lawyer.

PST: An 8% provincial sales tax applies to the insurance premiums for CMHC/GE. Your lender deducts this amount from the advance of funds.

SURVEY: "In general", lenders require a survey to confirm that the house does not encroach or cross over the property lines. If the vendor has an existing survey acceptable to the lender you will not require a new one. Also Title Insurance is now acceptable to many lenders as a substitute and at a substantial savings to an actual survey.

Application Checklist

To ensure that your application for a mortgage, refinancing, or mortgage transfer can be processed as quickly as possible, you should have all of the following ready should they be required:

Employment letter to state earnings, position and length of service to date (for salaried or hourly employees).
For self-employed individuals we will require three years tax returns/tax assessments and financial statements.
Confirmation of downpayment. Bank Statements, RRSP's, Gift letter or Bank Books.
Signed mortgage application for credit bureau and indicating assets and liabilities.
A copy of the Real Estate Listing or Feature sheet if purchasing resale or the floor plans and artist rendering if from a builder.
A copy of the accepted Offer to Purchase and the survey.
If a condominium the condo financial statements and an up to date Estoppel Certificate.
Our mortgage agents can help you determine how much you can qualify for and obtain a REAL preapproved mortgage for you. This allows you to act quickly when you find the perfect home. As soon as your offer is accepted, return it to your Capital Mortgages Inc. mortgage agent and your deal is almost complete.