Buying a home is one of the biggest purchases of your life and you have a lot of questions about the home buying process. The amount of new information in the marketplace can seem overwhelming. Here are just a few of the things you need to consider as a first time home buyer here in BC:
- Can I qualify for a mortgage?
- How much can I afford to borrow?
- Where can I get the best mortgage rates?
- What mortgage term is right for me?
- What other costs should I expect?
- Can I use my RRSP funds for a down payment?
- What do I need to know about payment options, mortgage portability and other conditions.
As a first time home buyer in BC and Canada, there are opportunities available only to you that are unavailable to repeat purchasers:
- The Province of BC offers Property Purchase Tax exemptions for first time buyers of qualifying properties (includes a price cap). BC Property Transfer Tax
- RRSP Home Buyers Plan. Canada Revenue Agency RRSP Homebuyers Program
Whenever the down payment is lower than 20%, most lenders are required by law to insure the mortgage against default. This default insurance is provided by three main institutions in Canada: CMHC, Genworth Financial Canada and AIG. The insurance premium is a one time amount which is normally included in the mortgage. Because the risk to the lender increases as the down payment gets smaller, the insurance percentage gets larger accordingly.
As an alternative to default insurance (or in combination with), RRSP Home Buyers Plans can be used to withdraw funds tax free up to $25,000 from your existing RRSP to use as a downpayment. This can help you to reduce or eliminate the potential default insurance premiums, and can also help you obtain more purchasing power by combining your RRSP funds with the maximum mortgage you can afford. The federal government’s budget has added more reasons for Canadians who aren’t yet homeowners to consider entering the real estate market . Under the new federal budget, first-time home buyers can qualify for a $750 tax credit, to help with closing costs, such as appraisal or legal fees.
Utilizing the expertise of a Mortgage Consualtant is a good place to start if you are looking to buy a home within the next few months. Getting a mortgage pre-approval will help you determine the right price range and what you can afford. At this stage it will also allow the Mortgage Consultant to review your credit to make sure there are no suprises. A wide selection of lenders will guarantee a rate hold for up to 120 days when pre-approving potential borrowers for a mortgage.
So now you’ve found the home of your dreams, whats next…..
Your mortgage consultant will now take the next step to secure a mortgage for your new home purchase.
After discussing your mortgage options and determine what suits your needs at that time, your mortgage application will be sent on to a lender for review and approval.
The lender will review the application and send their offer back to your Mortgage Consultant . That lender will then issue a “Mortgage Commitment” which must be accepted and signed by the borrower.
- A Mortgage Commitment will usually have a number of conditions and documentation requirements and your Mortgage Consultant will prepare this documentation for you and send it to the lender on your behalf. This documentation usually includes confirmation of your employment and income, verification of your down-payment and appraisal of the property to confirm its value.
- Next, a Solicitor will work on your behalf to review
- The offer to purchase,
- Copies of the Mortgage Commitment,
- Any Potential encumbrances, liens, easements, restrictions, encroachments, or other claims registered on title.
- Contact the lending institution and arrange transfer of the funds
- Contact the utilities and property tax department to determine amounts, if any, required for closing the mortgage
- You then meet with the Solicitor shortly before the closing date to review and sign closing documents
- On the closing day, your Solicitor and the vendors’ Solicitor exchange documents, funds, keys and register all documents on title.
Interest rates are at an all time historic low and housing prices are more attractive making this a more affordable time to buy your first home.