11 Dec

6 HOME PURCHASE CLOSING COSTS

Purchasing

Posted by: Ron Price

When you purchase your home, there are 6 additional costs to account for. They include:

  • Home Fire and Flood Insurance
  • Title Insurance
  • Legal Fees
  • Adjustments
  • Land Transfer Tax
  • GST

Here’s an overview of what you can expect.

Home and Fire Insurance. Mortgage lenders will require a certificate of fire insurance to be in place by the time you take possession of your home. The amount required is generally at least the amount of the mortgage or the replacement cost of the home. This cost can vary on the property size and extras being insured, as well as the insurance company and the municipality. Home insurance can vary anywhere from $400 per year for condos to $2,000 for large homes.

Title Insurance. This is a one-time fee of about $150 and it protects you against any issues, defects or fraud on your title. Your lawyer or notary helps you purchase this.

Legal Fees. Thirdly, you are required to pay legal fees. Your lawyer or notary will charge you anywhere from $700 to $1,000 to help with your purchase. There are also fees to register your title with the municipalities. All told, you’re looking at around $1,000 to 1,300, after tax.

Adjustments. An adjustment is a cost to you to pay the seller back for prepaying any property tax or condo fees on your behalf. Simply put, if you take possession in the middle of a month, the seller has already paid for the whole month and you must pay the seller back for what they’re not using.

Land transfer tax. Land transfer tax, or property transfer tax (PTT) as it’s known as in British Columbia, is a fee that is charged to you by the province. First-time home buyers are exempt from this fee if they are purchasing a property under $500,000. All home buyers are exempt if they are purchasing a new property under $750,000.

In British Columbia, the PTT is 1% on the first $200,000 of purchase and 2% thereafter. However, if the property being purchased is over $2,000,000, then it is 3% on any value over $2,000,000.

GST. GST is only paid on new construction purchases. GST is 5% on the purchase price. However, there is a partial GST rebate on properties under $450,000.

Please don’t hesitate to contact a Dominion Lending Centres mortgage professional for your home financing and mortgage needs.

6 Dec

DOCUMENTS YOU NEED FOR YOUR MORTGAGE PRE-APPROVAL

Purchasing

Posted by: Ron Price

Being fully pre-approved means that the lender has agreed to have you as a client (you have a pre-approval certificate) and the mortgage broker has reviewed and approved ALL your income and down payment documents (as listed below) prior to you going house hunting. Many bankers will say you’re approved; you go out shopping and then they  say ‘sorry you not approved’ due to some factor. Get a pre-approval in writing!
Excited! Of course. You are venturing into your first or possibly your next biggest loan application and investment of your life.

What documents are required to APPROVE your mortgage?
Being prepared with the RIGHT DOCUMENTS when you want to qualify for your mortgage is HUGE; just like applying for a job or going for a job interview. Come prepared or don’t get hired (or in this case, declined).
I assist all my clients along the way to ensure any questions are asked and YOU are prepared UPFRONT and fully PRE-APPROVED before you go house hunting.
No stress, no running around, no surprises.

Why is this important?
You can have a leg up against the competition when buying your dream home as you can have a very short timeline (ie: 1 day to confirm vs 5-7 days) for “financing subjects”.
Think? You’re the seller and you know the buyer doesn’t have to run around finding financing and the deal may fall apart. This is the #1 reason deals DO fall apart. You will likely get the home over someone who isn’t fully approved and has to have financing subjects. The home is yours and nobody’s time is wasted.
If you just walked into the bank, filled an application and gave little or no documents, and got a rate – you have a RATEHOLD. This is NOT a pre-approval. This guarantees nothing and you will be super stressed out when you put an offer in, have 5-7 days to remove financing subjects and you need to get any or all of the below documents. That’s not fun is it? Use a Dominion Lending Centres mortgage broker ALWAYS. We don’t cost you anything!
When you get a full pre-approval, you as a person(s) are approved; ie: the broker did their work of reviewing (takes a few days) to call your employer, review your documents, etc. All we have to do is get the property approved, which takes a day or two. Much less stress, fastest approval…faster into your home!

Here is exactly the documents you need MUST have (there is NO negotiation on these) to get your mortgage approved with ease. Keyword here is EASE. Banks/Lenders have to adhere to rules, audit files and if you don’t have any of these or haven’t been requested to supply them…a big FLAG that your mortgage approval might be in jeopardy and you will be running around like a crazy person two days before your financing subject removal.
Read carefully and note the details of each requirement to prevent you from pulling your hair out later.
Here is the list for the “average” T4 full-time working person with 5-15% as their down payment (there is more for self-employed, and part-time noted below):

  1. Are you a Full-time Employee?
    Last 2 paystubs: must show all tax deductions, name of company and have your name on it.
  2. Any other income? Child Support, Long Term Disability, EI, Foster Care, part-time income? Bring anything that supports it. NOTE: if you are divorced/separated and paying support, bring your finalized separation/divorce agreement. With some lenders, we can request a statutory declaration from lawyer.
  3. Notice of Assessment from Canada Revenue for the previous tax filed year. Can’t find it? you can request it from Rev Can to send it to you by mail (give 4-6 weeks for it though) or get it online from your CRA online Account.
  4. T4’s for your previous 2 years.
  5. 90 day history of bank statement showing the money you are using to put down on your purchase.
    Why 90 days? Unless you can prove you got the money either a sale of a house, car or other immediate forms of money (receipt required)…saved money takes time and the rules from the banks/government is 90 days. They just want to make sure you aren’t a drug dealer, borrowed the money and put it in your account or other fraud issues. OWN SOURCES = 90 days. BORROWED is fine, but must be disclosed. GIFT is when mom/dad give you money. Once you have an approval for “own sources” you can’t decide to change your mind and do gifted or borrowed. That’s a whole new approval.

Down Payments
Own Sources: For example “own sources” include if you are a first time buyer and your money is in RRSP’s then, have your last quarterly statement for the RRSP money. If your money is in three different savings account, you need to print off three months history with the beginning balance and end balance as of current. The account statements MUST have your NAME ON IT or it could be anyone’s account. I see this all the time. If it doesn’t print out with your name, print the summary page of your accounts. This usually has your name on it, list of your accounts and balances. Just think, the bank needs to see YOU have X$ in your (not your mom’s or grandparents) account.

GIFT: If mom/dad/grandparents are giving you money…then the bank needs to know this as the mortgage is submitted differently (this is called a GIFT).

If you are PART-TIME employee? All of the above, except you will need to bring three years of Notice of Assessments. You need to be working for two years in the same job to use part-time income. You can have your Full-time job and have another part-time gig… you can use that income too (as long as it’s been two years).

If you are Self Employed?

  1. two years of your T1 Generals with Statement of Business Activities
  2. Statement of Business Activities.
  3. 3 years of CRA Notice of Assessments
  4. If incorporated: your incorporation license, articles of incorporation
  5. 90 day history of bank statement showing the money you are using to put down on your purchase.
5 Dec

WHAT’S AN ACCEPTABLE DOWN PAYMENT FOR A HOUSE?

Purchasing

Posted by: Ron Price

Ask people this question and you will get a variety of answers.  Most home owners will say 10% is what you should put down. However, if you speak with your grandparents, they are likely to suggest that 20% is what you need for a down payment.

The truth is 5% is the minimum down payment that you can make on a home in Canada. If you are planning on buying a $200,000 home then you need $10,000.

It all can be explained by the creation of the Canadian Mortgage and Housing corporation (CMHC) by the Canadian government on January 1st, 1946. Before this time, you needed to have 20% down payment to purchase a home . This made home ownership difficult for many Canadians. CMHC  was created to ease home ownership. This was done by offering mortgage default insurance. Basically what CMHC does is it guarantees that you will not default on your mortgage payments. If you do, they will reimburse the lender who gave you the mortgage up to 100% of what the homeowner borrowed. In return lenders allow you to purchase a home with a smaller down payment and a lower interest rate.

CMHC charges an insurance premium for this service to cover any losses that may occur from defaulted mortgages. This program was so successful that CMHC lowered the minimum down payment to 5% in the 1980’s.

However, if you have little credit history or some late payments in the past they may ask you to provide 10% instead of the tradition 5% if they feel there is a risk that you may default at some time.

You should also be aware that the more money you put down, the lower your monthly mortgage payments will be. You also can save thousands in mortgage default insurance premiums by putting 20% down.  At this time,  home buyers who put 5% down have to pay a fee of 4% to CMHC or one of the other mortgage default insurers to obtain home financing. On a $400,000 home this is close to $16,000.

If you can provide a 10% down payment the insurance premium falls to 3.10% and if you can provide 20% it drops to zero.  While 20% can seem like an impossible amount to save, you can use a combination of savings, a gift from family and/or a portion of your RRSP savings to achieve this figure. The best recommendation that I can make is to speak with your Dominion Lending Centres mortgage professional to discuss your options and where to start on your home buying adventure.

19 Nov

PRE-APPROVED FOR YOUR MORTGAGE… WHAT DOES THAT REALLY MEAN?

Purchasing

Posted by: Ron Price

There is a myth out there that once you’re pre-approved for a mortgage, you’re good to go out and buy a home… with a no subject offer… DON’T do it!

A pre-approval means that based on being able to PROVE (through documentation) your CURRENT income, expenses, down payment and credit bureau you SHOULD be able to get fully approved once you find the right property (this is the first half of the equation).

Remember that there cannot be any major changes to the your mortgage application details prior to the completion of their purchase as it may affect the your qualifications and change the conditions of the approval.

I always recommend my clients put in a “subject to financing” clause with their realtor when they are putting in an offer to protect themselves.

Here’s why:

The lender can like you and your financial picture, BUT the lender doesn’t know which property you want to purchase (this is the other half of the equation). Here are 3 examples:

  • A bidding war has bid up the price and the best offer (yours) has been accepted. YIPPEE!!! The lender sends in their appraiser to determine the value of the property. The appraisal comes in at a lower price than your accepted offer DRATS!! You now have to come up with the difference between the appraised value and your offer, since lenders will only offer a mortgage based on the appraised value of the home.
  • You are buying a condo/townhouse and the strata minutes indicate that there are: leaks, electrical issues, roofing problems, etc. that the strata needs to act upon. If the Strata doesn’t have a big enough contingency fund, the lender can decline due to potential special assessments down the road.
  • Property zoning – if the zoning is anything other than residential then your options will be limited. Some condos are zoned commercial if there is a large commercial component to the complex. Industrial, Agricultural Land Reserve (ALR) in B.C., or leasehold (government or otherwise) limit a buyer’s options.
    As you can tell “you may be pre-approved” but most certainly the subject property is not!!

There are several properties that most lenders will not touch these days. Here’s a (partial) list of property details that can affect most lender’s decisions on approving your mortgage:

  • A remediated grow-op or drug lab
  • Leased land or co-op
  • Age-restricted property
  • Special assessment (pending or otherwise)
  • Any reference to water or leaks in the minutes
  • A “fixer upper”
  • Contains asbestos, vermiculite insulations or has (even partial) knob-and-tube or aluminum wiring
  • Is on land with a commercial zoning component
  • Livestock is present, etc.
  • Self-managed strata’s (no strata management company)
  • Size of the property- below 500 sq. feet,
  • Doesn’t use municipal sewage or waste
  • Over 1 Acre and/or multiple buildings
  • Ongoing or upcoming assessments or legal proceedings
  • Strata with small contingency fund

The lender reviews the details of each property in detail once you have an accepted offer in place.

It’s important that the real estate agent discloses the information to their buyer ASAP so that it can be brought to the lender’s attention. The agent should be proactive in getting all documentation pertaining to the building/property, so that the buyer can make an educated buying decision. Many of the issues stated above can affect the long-term value and marketability of a property.

If you have a “subject to financing” clause in your purchase agreement, and you can’t find a lender (for whatever reason), then you can back out of the deal with no financial repercussions.

In my opinion you need to always put in a “subject to financing clause” as that’s the best protection you have. With subject free offers you could forfeit your deposit (and facing potential legal action from the seller) should you want to cancel your contract after the agreement has been made, even though you were technically “pre-approved”.

As you can tell there is lots to discuss about buying homes including pre-approvals! If you have any questions, contact a Dominion Lending Centres mortgage broker near you.

 

5 May

GET THE BEST FINANCING WHEN BUYING FROM A BUILDER

Mortgage Tips

Posted by: Ron Price

New subdivisions are popping up all over Ontario but many unsuspecting buyers are getting trapped by the financing available by the builder. The longest ‘Hold’ period on mortgage rates for resale housing is 120 days / 4 months.

For new build housing the banks offer ‘Capped Rate’ mortgages to buyers for 6 months or more. We recently toured several new home sale pavilions and noticed bank financing is very prominent but what is concerning is the lack of details provided. Incentives such as free appraisals, down payment help, and free giveaways were being offered.  BEWARE! And read the fine print! Many of these mortgage products and incentives offered end up costing YOU by:

  • Paying a higher rate
  • Getting stuck in a mortgage with harsh penalties
  • Finding yourself in a bank collateral mortgage.
BEWARE! Did you know that 4 in 10 homeowners break their mortgage during the term? You do not want to get stuck in a bank collateral mortgage, with harsh penalties. See for yourself. Bank collateral mortgages and insurance have been chronicled in the news and on TV as SCAMS. Please GOOGLE the following CBC Marketplace episodes: COLLATERAL MORTGAGES – WHAT YOU NEED TO KNOW; THE POSTED RATE SCAM & IN DENIAL – MORTGAGE INSURANCE CANADA.

 

Don’t Get Stuck with a High Down Payment

With new construction, builders typically require a 10%-20% down payment. However, mortgages in Canada allow a minimum 5% down when purchasing. Although the builder may require a higher down payment to secure the home, on closing you can put a minimum of 5% down. This strategy could help you eliminate debt while getting you the home of your dreams. You need a solid strategy to present to your builder that works for you.

Understand your Financial Capacity

It puts you in the best position if you sit down with a professional mortgage broker and review your credit report and entire financial position to ensure you are buying comfortably and knowledgeably. You cannot get this depth of review from the bank which is DANGEROUS because it is imperative that you fully understand your financial capacity going forward. Two items that we consistently find biting the homeowner long after committing to purchase is HST and upgrade costs. As experts, we help to ensure this does not happen.

Strategize for the Extra House Expenses

New homes come with many extra expenses after closing. Examples are decorating, window coverings, a lawn mower, garden tools, small appliances, landscaping, decks, furniture, patio furniture, barbecue etc. etc. etc, and the list goes on. What happens is that much of these get purchased on credit cards and on ‘time’ with deferred payments of 12 to 15 months into the future. All of this needs to be planned for, otherwise you may find yourself in financial difficulty in which you to look to refinance and find that the amazing mortgage product you signed up for with all the incentives advertised by the builder ends up costing you thousands in penalties.

Contact The Price Team for Invaluable Advice

Folks we are the number one mortgage source for many reasons, one of the most important being that WE ARE TRUSTED MORTGAGE ADVISORS! We look out for your best interests. We offer more mortgage options and professional advice than the banks. Invaluable advice about how to ensure your initial mortgage approval does not get derailed just before closing. We have new home buyers coming to us all the time literally days before closing because the bank suddenly declines their financing at the eleventh hour. How stressful is that? YOUR APPROVAL WITH US IS GUARANTEED! WE ALSO GUARANTEE TO GET YOU A BETTER RATE THAN WHAT THE BANK OFFERS YOU. Even if you get your initial financing at time of purchase from the bank, you can still come to us for a better rate prior to closing. Please remember, we are on your side, we are here to protect you and to obtain the best rate, terms and strategy for you going forward.

18 Apr

GOING FIRM IN A CRAZY MARKET

General

Posted by: Ron Price

It’s a Sellers market out there…and a hot market too!

With it can come disappointment if you are not properly prepared.

You, your realtor and the seller all think you have been pre-approved and you are on solid footing. You purchase only to find out there is a blemish with your credit, or because you are a contract worker not a permanent employee; the bank tells you after you have purchased without conditions, you are declined. Buyers are sent scrambling after they have waived financing and low and behold there are issues, issues they never even considered. If financing cannot be secured, buyers risk being sued by the vendor.

Thorough Analysis Needed Prior to Going ‘Firm’

We have had a couple of cases come to us just two weeks before closing, in crisis. We had to pull all stops to attempt to find financing. Both clients were surprised to find out after purchasing and going firm that the bank pulled the plug on financing even though they were ‘pre-approved’. The bank never pulled credit for the ‘pre-approval’s’ causing them to miss that both clients had issues, one client having a former bankruptcy and the other a collection.   They would have never qualified for a prime bank rate with these  major issues flagged on their credit bureau.  Fortunately to our relief and our clients, we were able to get both these mortgages approved, and even successfully negotiated a fabulous rate with a prime lender for the client with a collection.

Again, the benefit of dealing with a mortgage broker with a great reputation.

Even just this past weekend, a client called in a bit of a panic because there were four offers going in on a house. We re-assured the realtor that our client was fine to go in firm because we had completed due diligence on their ability to buy. If we were not able to be contacted on a weekend they wouldn’t have purchased. We help our clients in these crazy times to feel totally secure to go ahead without financing conditions if need be.

No Conditions are Putting Buyer’s at Risk

We are seeing mortgages ‘in crisis’ days before closing because buyers are not getting pre-approved. Multiple offer scenarios are resulting in buyers feeling forced to go ‘firm’ to win.

This is so dangerous and stressful for all concerned, not to mention it can also be a tremendous waste of everyone’s time. However, avoiding such a nasty scenario can be easily prevented.

The Banks Pre-Qualification is NOT a Pre-Approval

First, understand that if you are pre-approved by the bank you actually are not. You go out and buy thinking you are solid when it couldn’t be further from the truth.

You see, the banks do not pre-approve you like we do. The banks only pre-qualify you, meaning that they ask you for your income, crunch a few numbers and tell you verbally only what you can afford. That’s all. And that is not enough.

Get Your Pre-Approval from The Price Team so You Have Peace of Mind

All this can be avoided if you get pre-approved by us at the lowest rate in Canada, in the first place. We verify your income, employment, credit and down payment in writing to ensure there will not be any surprises prior to you shopping for a house. We  do a thorough analysis, you can count on, especially if you need to go firm on financing.

When we pre-approve you, the only thing still outstanding is the property you buy, which must be marketable and in good condition. When these conditions are met, a smooth buying experience ensues.

With our pre-approval you can go out and buy with complete confidence. You can bank on that!