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Buying Step 1: Are You Ready to Buy a Home?

Do You Know What You Want in a Home?

Whether or not you are a first-time home buyer, you need to ask why you want to buy. Do you need to move, or is buying an option and not a requirement? What property features do you want that you do not have now? Do you have a purchasing time frame?

Whatever your answers, the more you know about the real estate marketplace, the more likely you are to effectively define and achieve your real estate goals.

Once you get an idea of what you want in a home, it is very helpful and practical to talk to an experienced REALTOR^® who knows the local markets, current market conditions and the many facets of the complex business of real estate. An agent can answer your questions, give you a realistic picture of the market and help you clarify your real estate goals.

To contact Stephen Marsden, click here.

Do You Have the Finances to Buy a Home?

It is important to get prequalified for a mortgage before you begin your house hunting quest. This way, you will only view homes you can afford and get excited about. Why get excited about something you can't buy!

• Purchasing a home involves one-time costs as well as monthly expenses
• The largest one-time cost is the down payment. It usually represents 5-25% of the total price of the property
• In additional to the actual purchase price, there are a number of other expenses that you might be expected to pay for. These are listed in the table below.

Typical One-Time Expenses

• Typical monthly costs incurred with home ownership are mortgage payments, maintenance, incurance, condo fees, property taxes and utilities.

Homes and financing are closely intertwined. Financing is the difference between the purchase price and the down payment and is commonly referred to as the mortgage. There are a many different kinds of mortgages and different lenders, so be sure to shop around to make sure you get the mortgage that best meets your needs and at the best price.

In addition to a down payment, purchasers also need cash for closing costs (the final costs associated with completing the transaction). While some people purchase with little or no money down, it means higher monthly mortgage payments, so most homebuyers choose to put down some cash.

Speak with a REALTOR^® for details.

Get Your Financial House in Order - Establish Your Credit

You need good credit to get a mortgage. For at least one year prior to purchasing a home, you should assure that every credit card bill, rent check, car payment and other debt is paid in full and on time.

Prepare yourself for the complex adventure of buying a home: do your research, work with a REALTOR^®, plan ahead, know what you want, what you can afford and establish your credit. This will make your real estate experience run more smoothly.

Sources for your Down Payment

Saving for a down payment for a home can be a difficult challenge for first-time home buyers. Fortunately there are some government programs to help you save the funds for your home purchase.

Home Buyer's Plan

The Government of Canada's Home Buyer's Plan allows qualified buyers to withdraw a maximum of $20,000 from their RRSP's to purchase or build a house. If your spouse is also eligible, you can each withdraw up to $20,000 towards the down payment, for a total of $40,000. No income tax is deducted from these funds, as long as they are repaid to your RRSP according to the government's repayment schedule.

How the Plan Works

You may participate in the plan if you (or your spouse) have not owned a home which you have occupied as your principal residence in the last 5 years.

Repayment Schedule

The money you withdraw from your RRSP must be repaid over a period of no more than 15years to retain its tax deferred status. Your repayment period starts the second year following the year you made your withdrawal. For example, in October 2003 you withdraw $15,000 from your RRSP to finance to purchase of your home. Your first annual repayment would be $1,000 and is dueby December 31st 2005.

Mortgage Insurance

CMHC & GE Capital make home ownership a little easier by allowing buyers to put as little as 5% down. This means that GE or CMHC will insure the mortgage on your home (against default in payments) for up to 95% of the lending value of your home. This helps make home ownership a reality for many Canadians who can afford monthly mortgage payments but would have trouble saving for a larger down payment. The program is open to both new and repeat home buyers who buy a home in Canada and occupy it as a principal residence. Maximum house prices apply to loans greater than 90% of the value of the home.

The premium for mortgage loan insurance is calculated as a percentage of the mortgage loan and is based on your down payment as a percentage of your home's purchase price (see chart below)

• You can pay this premium in a single lump sum, or add it to your mortgage and include it in your monthly payments
• A representative of your lender or mortgage broker will calculate the premium amount, as well as the application fee

How do You Qualify?

To be eligible for Homeowner Mortgage Loan Insurance, you need the following:

• The home has to be located in Canada
• A down payment of at least 5% of the purchase price of the property
• Home-related expenses have to be within 32% of your gross household income
• Total monthly debt payments have to be within 40% of your gross monthly household income
• To be able to pay closing costs equivalent to at least 1.5% of the purchase price

Table of Insurance Premiums*

*Additional premium surcharges may apply

CMHC FLEX DOWN

Traditional mortgage loan insurance products require borrowers to have a minimum 5% down from their own resources to purchase a home. With the Flex Down product, purchasers with a strong credit management  history, and who are able to meet their debt requirements, are able to access a wider variety of sources for their down payment.

To get started on your journey to home ownership, Contact me.

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