Looking for your first home, your vacation home or anything in-between?
We find your perfect first property.
So, you want to buy your first home? Excellent! What an exciting time and a little stressful. Knowing what to expect can take away a lot of anxiety and adding in being prepared and you have the formula for a successful purchase.
My first purchase was a little half duplex in St. Albert, right next door to the school my son would attend for kindergarten. Fast Forward a couple of decades and three more kids – homes where sold and others purchased, being prepared never changed as the formula for success.
Getting the foundation in place:
1. Who are you buying a home with? Nothing about buying your first home is the same as it was a decade or two ago. In fact, we are seeing some great trends that are shifting the way we present mortgage clients to our lenders. One of the most interesting trends in multi-generational purchasing – where more than one generation pools their resources to complete a home purchase. This solution comes with a lot of benefit to everyone involved – builds credit for the younger generation, combines income for affordable living and increases the amount a family can qualify for in a purchase. Add the potential of a purchase plus improvement mortgage and a home can become anything you need it to be at a price everyone can afford. Take it one step further and we are seeing co-habituating purchasing – people purchasing together for affordability and to get into the market. They are backed with an agreement in writing and a registered title that allows for a smooth transition from one life stage to the next when the time comes. Love it!!
2. How much can you comfortably afford to spend on a house payment? For many of us,
budgeting is not a habit but rather something you did when you first moved out of home.
Budgeting however is a great way to determine how much you can afford monthly, without
becoming house-poor. Take 30 days and track what you spend – on credit cards, monthly
payments, debits from your accounts and fee’s you pay for things like banking. Every cup of
coffee every lottery ticket, every penny spent. Write all of this down and at the end of the
month review it and see where your expenses are negotiable (can be cut or reduced) or non-
negotiable (minimum payments, medical expenses, loan payments etc.) When you have a grasp
on where your money goes you will be able to choose a mortgage product that fits your stage in
life with payments you can afford.
Understanding Job Security
1. Do I have to be Full-time To Qualify For A Mortgage?
Many people believe that they have to have one stable job for a very long time before a lender will look at them for a mortgage. The
truth is, clients come from very diverse backgrounds and many do not have just one source of income. Part time, full time, self employed or retired there is a financial picture for each of you
that equals the potential to secure a mortgage. As a general rule of thumb come prepared with:- Most recent paystub – If you work for a company or organization and they pay you, your mortgage broker will need to verify how much you are paid and how often.
- Letters of employment – if you are employed by someone else, your mortgage broker will ask for letter verifying how long you have worked for them, your position, how much you make and if the position is hourly or salaried. If it is hourly are you guaranteed hours?
2. Can I buy a home if I am self-employed?
The answer is YES! Of course, you can. The paperwork looks a
little different as you are the boss, so the mortgage broker is going to ask for several documents to create a financial picture of your character for the lender. You will be asked to provide:- Income Tax returns from past 2-3 years
- Notice of Assessment proving you do not currently have outstanding taxes
- Bank Statements to show revenue in and bills out.
** Being Self- Employed means a diversity of documents to gather but understanding why and how it
benefits you to provide accurate and reliable data will move you to the finish line quickly. **3. Can I get mortgage if I am retired?
Yes you can. As a matter of fact, the product line is more
diverse for you and depending on the product, the lending guidelines may be a lot easier to maneuver. If you are a Senior and you own your home and wish to gift a living inheritance, access additional money to invest, purchase a second property or simply pay of debt and create liquid funds to supplement your pension for day-to-day expenses. There are mortgage products, both traditional and Senior specific that provide solutions. Mortgage Brokers will ask for:- T4’s for pension income,
- investment statements if you have additional investment income
- three months bank statements to verify income deposit consistently.
Let’s Talk Down Payment
1. Do I have enough for a down payment?
In Alberta the rules are simple: 5% of the first $500,000 – 10% of the balance up to $1,000,000 and 20% of any balance over $1,000,000. It is always necessary to have at least an addition $3,000 set aside for closing costs. So, add that to the down payment savings to keep yourself covered.
2. Where is your down Payment coming from?
Downpayments can come form a variety of resources including RRSP, investments, savings accounts, gifted funds from family or Government programs.
Knowing how challenging it can be to save for a purchase as large as a home, the federal government has put in place programs to assist First Time Home Buyers. The most recent program is the First Home Savings Account. This account works like an RRSP – when you deposit, it is tax deductible and it acts like a TFSA when you withdraw – it is not taxable. This type of account has a maximum deposit of $40,000 per year.
The First Time Home Buyers Incentive program allows first time buyers to access an additional 5% down for purchasing an existing home or additional 10% down if they are purchasing a new build. The additional funds are considered a shared equity program where the home owner will repay the original amount plus a small share in the increased value of the home at the time of sale
The Home Buyers Plan allows First Time Buyers you to withdraw up to $35,000 from your RRSP plan to purchase a home. This withdrawal is tax free at the time of withdrawal and requires the amount taken to be repaid within 15 years.
Gifts from family are more and more common, particularly when you understand that gifting is a living inheritance. The money being gifted has immediate value to the receiver and the tax implications are significantly less than if it is done at the time of passing. Grandparents have become key contributors to this trend in the last few years and continue to enjoy the value of this concept.
Working with a Mortgage Broker
It is important to surround yourself with professionals who have your best interests at the fore front of what they do. Mortgage Brokers, like realtors, do not get paid until you have the right product and have made decisions that work for you. In fact, it costs you $0.00 to work with a Mortgage Broker. We are paid by the lender making us affordable for you! Key considerations when choosing a professional:
What are your expectations of communication? What methods are best suited to you? Here are my Best Practices
- I send you an email outlining what was discussed, what decisions where made and what items still require attention.
- I also record our initial zoom call and send you the link to the recording. That first meeting is full of information and sets the roadmap for success. Having it available to re-watch and refer to has been a great feature my clients enjoy.
- I am available through email, phone call, zoom, texting and in-person meetings.
While walking into your bank and applying directly may seem like it is in your best interest, it may be worth a second consideration. Today there are more than 50+ lenders in the mortgage lending space in Canada, in fact it is one of few aspects of banking that has seen an aggressive evolution of accessible products. The challenge is not every product is the same, not every lender is flexible and adaptable in the same area of qualification. So, while your local banking institution is adapted in their product and their lending criteria, they do not have the flexibility a broker has. The benefit to you is as a broker I have access to the major banks AND a plethora of other choices as well.
This is the part where most people start chewing their nails and creating stress. STOP!!! Your idea of poor, good or perfect may or may not live-up to a lender’s expectations. Credit Bureaus are an opportunity to build out a picture for a potential lender and to create a plan, if needed, to get you successfully into home ownership. That is the where your Mortgage Broker can provide valuable assistance. We will pull your bureau together, go through it, addressing anything that needs to be corrected and highlight any success.
Your Mortgage Broker will walk you through the process of pre-approval, providing a home value based on your income, downpayment and credit. Working honestly and openly with your Mortgage broker will limit the bumps in the road and give you a confident home purchase value to share with your Realtor.
Getting Pre-Approved For Your Mortgage
To get you started your Mortgage Broker will have a Discovery Call to get to know you, find out your timelines and your goals. Through this call you will be directed to the application and the following documents to be provided:
For Verification of your payment:
- RRSP 3 months statements confirming your balance
- Savings in Bank Account: 3 months bank statements showing the downpayment on record.
- Gift – letter from the family member stating how much they are providing and that it will not require repayment. (they will need to prove they have the money to give)
- 2 pieces of ID -1 Picture ID to confirm you are who you say you are. 1 SIN or alternate Government issue ID
The home buying process requires non-negotiable paperwork and your Mortgage Broker should be up-front about what it takes to get things started and how additional paperwork may be required along the way. Know that the requests being asked of you are important and build a picture of your Character, Capacity to maintain the financial commitment.
Knowing how much you can afford and being transparent about “must have’s” and nice to have’s” makes house hunting far more enjoyable! To solidify the strength of the home buying process, Make sure your Realtor and your Mortgage Broker are connected. These two people will be the glue that holds your journey together. Between us we will engage with every professional in your journey and will keep everything on track and on time.
Once you have your offer to purchase accepted then the first pass-off happens between your Realtor and your Mortgage Broker. They will enlist the expertise of Lenders, Appraisers, and Home Inspectors – just to get an approved and qualified deal. Communication is key to a seamless approach to your home buying journey. The more of the people on your team who know each other and communicate well the better represented you are at every step. Here is a list of professionals who will assist you along the way:
- Mortgage Broker – responsible for lending relationships, advocacy and product aligned with your goals and Life Stage.
- Real Estate Agent – responsible for your home discovery, negotiation and “keeper of the keys”
- Appraiser – responsible for home value assessment
- Home Inspector – protector of the asset (your home) and key to long term building stability
- Home Insurance Agent – responsible for protecting you and your home from harm in the long term
- Lawyer – conduit to ensuring all stages and documentation have been ethically motivated and secured. They are the keeper of money transfer and honouring the conditions.
All of the above professional’s work with each other with one goal in mind- to get you safely and confidently through the home buying process. The strength of my network means less stress for you.
While you are packing and planning the physical move, your team is behind the scenes making sure the process moves smoothly. Your Realtor and Mortgage Broker will ensure your lawyer is identified and connected with your lender. We all will make sure you are aware of what is next, who will contact you and what they will need from you. Our collective job is to get you to the finish line on time and on budget!
Contact Us
Think of me as your personal guide through mortgage applications. Whether you’re starting from scratch or have faced rejections in the past, rest assured that I’m here to make the journey easier for you. Reach out today, and let’s kickstart your path to a successful mortgage negotiation!