I am a First Time Home Buyer
Mortgage Managers will make buying your first home, and getting your first mortgage, easier by helping you through each of the following steps:
- Calculate Your Budget
- Calculate Your Payment
- Why is getting pre-approved important?
- What are all the costs of buying?
- How much can I borrow?
- Consider Purchase + Improvements
- How much do I need for a down payment?
- What are the first time home buyer incentives?
Calculate Your Budget
Buying your first home is exciting, but it can be a little scary too, if you are not well prepared financially. We have a great Home Budget Calculator that will help you explore your household budget to help you determine what you can realistically afford.
We also have a fantastic Mortgage Qualifier Calculator that will help you explore your Home Purchase Price and Mortgage Payment options. Your Mortgage Managers broker is also available to help you with calculating your budget and debt ratios to help make your home buying experience a pleasant one.
Getting pre-approved or pre-qualified before shopping for a home is a very important first step in the home buying process. Checking your credit rating, calculating how much you qualify for based on your income and debt load, and reviewing your income documentation are just a few of the key factors in making your home purchase go smoothly.
Once you have finalized the purchase price and have signed a Purchase & Sale Agreement, you typically only have 5-10 days to arrange your mortgage. If you try to arrange a mortgage at that point, you will be under a lot pressure and have limited time to shop and apply for a good mortgage.
Making an offer on a home before before getting pre-qualfied often results in not finding the best mortgage for your situation or perhaps even not being approved because:
- the house you are purchasing is too expensive and your debt ratio is too high
- there is an error on your credit report and you do not have enough time to fix it
- you cannot locate the required paperwork.
When this occurs, you may not be able to meet the financing condition deadline within the required time. Therefore, you will likely lose the opportunity to purchase that home, and possibly your deposit.
When applying for a mortgage, your Mortgage Managers broker will need to obtain some documentation from you in order to complete your credit application accurately. Please download a copy of our Required Document Checklist from our Library.
Costs of buying a home (Closing Costs)
Some of the costs of buying a home may include:
- Land Transfer Tax - 1% to 1.5% of the purchase price
- Property Taxes - 1% of purchase price (estimated) annually
- Legal Fees - ask your lawyer for a quote
- Home Inspection - $350 to $450
- Title Insurance - $200
- Fire Insurance - $500 to $1,000 annually
- Life & Disability Insurance - $10 - $150 per month depending on your age
How much can I borrow?
The amount that you can borrow depends on your Gross Income and your current Debt Load. Generally speaking, you can calculate the amount you can afford to pay monthly by multiplying your Monthly Gross Income by 40%. Then subtract your monthly loan and credit card payments. The amount remaining is the amount you are allowed to pay for a monthly mortgage payment and property taxes.
Purchase + Improvements mortgage
When you are buying a home, you may be able to add additional funds to do renovations or improvements to your new home. If you would like to finance these renovations, it is much easier and affordable to do when you are buying the home when you are allowed to finance up to 95% of the Purchase + Improvements. If you waited to try to finance the renovations when the mortgage is up for renewal, you will be disappointed to learn that you will only be able to refinance up to 80% of the home's value. Often it will take 5 to 10 years to accumulate enough equity to access any cash under the 80% refinance rules. If you want to include the cost of the rennovations in your mortgage, we will need to provide the bank with detailed quotes for labour and materials from a certified contractor or supplier.
Energy Efficient Rebate Programs
If you purchase a home that has an R-2000 energy efficient home, or if you do renovations that makes your home more energy efficient, you may be able to qualify for up to a 25% rebate on your high-ratio insurance. If you are making energy efficient upgrades, you will need to certify that energy-efficient improvements have been made to increase the home's EnerGuide rating by at least five points to a minimum rating of 40. To obtain certification, you will need to have your home's efficiency tested both BEFORE and AFTER your energy efficient renovations have been made and then obtain a copy of the Energy Efficiency Evaluation report. To find a local efficiency testing company, please click here.
To apply for your rebate, please complete the on-line application by clicking on your high-ration insurance provider below
Depending on your situation, you may or may not have a down payment. If you have some money saved to use as a down payment, you will need at least 5% of the purchase price Not only does having a down payment give you more options, it reduces the amount you are financing and decreases the cost of your "high ratio" insurance premium.
Down Payments can come from a variety of sources:
- Cash Savings
- Sale of a asset, like a car or truck
- Gift from an immediate family member
- An existing Line of Credit
I don't have a Down Payment!
There are numerous reasons for someone not making a Down Payment on the purchase of a property, such as:
- No Savings
- Current savings is only enough to pay for Closing Costs
- Prefer to use cash to pay off other debts
- Want to keep cash in other investments
- Want to do improvements to the property after purchase
- Will need to purchase furniture and appliances
Our No Down Payment Program: 95% Mortgage + 5% Loan
This special program is designed for clients with a good credit score and verifiable income. Under this program, the lender will first approve you for a loan for your 5% down payment (they may also be able to consolidate some of your debt to improve your debt ratios). Then, they will approve a mortgage for 95% of the purchase price. Because this mortgage is CMHC insured, the lenders are able to offer very attractive interest rates. You will have to prove you have 1.5% (of the purchase price) in your savings account to be used towards your Closing Costs. However, in reality, you will need about 3% of the selling price to cover all of your closing costs.
Home Buyer Incentives
The Provincial & Federal Governments recently announced some additions & changes to the First Time Home Buyers programs.
Federal Government Home Buyers Plan
The Revenue Canada Home Buyers' Plan (HBP) is a program that allows you to withdraw up to $20,000 from your registered retirement savings plan (RRSPs) to buy your first home. Or, if you (or your spouse) have not owned a home within the last 5 years, you can also qualify for this program. Your money must remain in your RSP for at least 90 days to qualify for this program. You can get a copy of the Home Buyers Plan Withdrawl Form from our Library.
First Time Home Buyers Tax Credit
Revenue Canada allows First Time Home Buyers, and home buyers (or their spouses) that have not owned a home within the last 5 years, you to claim $5,000 on your income taxes.
First Time Home Buyers - New Home HST Rebate
Available to buyers of newly constructed homes and is equivalent to 18.75% of the provincial portion of the HST (or 1.5 % of the purchase price), to a maximum of $3,000 per home where the agreement of purchase and sale is entered into on or after April 1, 2012. A maximum of $1,500 per home applies for agreements of purchase and sale entered into before April 1, 2012. You can find more details on the Government of Canada website.
Home Buyers Guide
CMHC's Homebuying Step by Step guide makes it easier for you by providing the information you need to make a wise homebuying decision. The Guide provides examples and worksheets that will guide you through the entire homebuying process, from the moment you make the decision to buy your own home to the moment the movers carry the first box through the front door. It couldn't be easier!
You can download a free copy of this Home Buyers Guide from our Library.
Paying Off Your Mortgage Faster
There are a number of ways that you can pay off your mortgage faster. Your Mortgage Managers broker will discuss these Pre-Payment Privleges with you when you are signing your mortgage approval documents. However, if you would like to do a little reading now, you can click this link to download a Free copy of the Financial Consumer Agency of Canada's Paying Off Your Mortgage Faster Guide from our Library.