First time home buyers, this is the blog post for you. Firstly, I want to say congratulations on making the decision to purchase your first property. Above anything else, this is an exciting time in your life and I want to provide you with all of the information you need.
You may have heard that buying your first home can be stressful. That there is a lot to think about and consider when buying a property. And, that’s all true. There’s a lot that goes into buying a home from working with a realtor to getting a mortgage. In this blog post, I’m going to shed some light on the process of receiving a mortgage to fund your first purchase.
Let’s get started!
Qualifying for your first home.
The very first step is qualifying for a mortgage, which means contacting a mortgage broker as soon as you decide you’re wanting to buy a home. While you can work with your bank to get a mortgage, it’s important to note that the bank only has their rates available to them. A mortgage broker has access to many of the bank’s rates, which means we can push to find you the best rate.
To qualify for a home, you will need to be pre-approved. During this step, I will check your credit, income and down payment to make sure you qualify for the price you want to be in. I’ll let you know the price you can qualify for. This will help you during the home buying process.
When you reach out to me to see if you qualify, I will ask you a number of questions. The first one being if you’re an employee or self-employed.
If you are an employee you’ll need:
- Job letter
- A recent pay stub
- Possibly last two years T4’s
The job letter should contain your income, tenure at your job, contact for your bank to confirm employment, full time or part-time and position. This should all be on a company letterhead. There could be other documents that may be requested depending on your job and if you work overtime, do shift work or are on commission. The most common additional documents that I may ask for are your most recent two years T4’s.
For every employee, the situation will be different. Your qualifying will depend on your job and how long you’ve been there. Generally, you simply need to be at a job past your probation in order for your income to be used to qualify.
If you’re self-employed, you’ll need:
- Two years experience being self-employed
- Two tax returns and notice of assessments.
It’s possible if you were in the same field of work and a similar income to be less than two years self-employed and still get a mortgage.
If it’s not enough to qualify for the purchase price you want, you may qualify for a mortgage called stated income. This requires a minimum of 10-35% down payment.
These are the first pieces of information I need to qualify someone for them to become a first time home buyer. But, as I mentioned before, every situation is different and it’s best to reach out and we can go through the qualifying process together. You can pre-qualify yourself on my website through my mortgage application and then we can set up a phone call to review and go over your situation.
Setting up your down payment.
There are many ways to set up your down payment. You can save up your own funds through work, you may be gifted the funds from a direct relative or if you qualify, you may use funds from a line of credit or credit card.
The minimum amount needed when purchasing your first home is 5% of the first $500,000 and then 10% on any portion above up to a maximum of $999,999 for a purchase price.
For example, if your home price was $600,000, then the down payment needed would be $25,000 for the first $500,000 and $10,000 for the next $100,000 portion for a total of $35,000.
Saving your own money.
If the funds are from your savings, the bank likes to have a most recent 3-month record even if the funds were saved previously to the most recent three months. The banks will only want the record in most cases, but they can ask for a bigger record if they so choose.
When you’re gifted funds for a first time home, it must be from your mother, father, brother, sister or Grandparents. Others may be considered, but it happens through a case by case basis based on your personal situation.
Line of credit.
In order to borrow your down payment from a line of credit, there are special qualifications. The best way you can qualify for this is to have a credit score of 680 and above and low debt. This is a specialized program and best fits First Time Buyers with the above noted
Important information to know.
As a first time home buyer, you are exempt from the BC Property Transfer Tax up to a purchase price of $500,000 and a partial discount from $500,000 to $524,000. You will also be eligible for a discount on your yearly property taxes as long as your new first time home is an owner-occupied home. That means you, yourself, have to live in the home you’re purchasing. The discount on property taxes is for everyone who lives in their home.
As a first time home buyer, you’re able to withdraw up to $35,000 from your RSP’s tax-free per applicant for the down payment. You will have to repay within 15 years.
Making an offer.
Once you find the home of your dreams that you qualify for, it’s time to make an offer. Your realtor will be able to advise you on how aggressive you can go on a certain home and still have the seller agree to your price. During the negotiating process, you’ll agree upon a price, subject dates and completion date. Once you know these specifics, it’s important to let me know and I’ll work to make the funds available.
We’ll discuss the type of mortgage, terms you would like to take and which lenders are offering what terms and rates. We will have already gathered most of the documents needed, but I may have to ask for additional ones during the finance process.
Once we receive and send in all documents needed to the chosen lender, they will communicate back to us that they have accepted everything.
Once this subject is complete you will have put down a deposit to be held at your Realtors brokerage which will form part of your down payment. The final step before moving into your first home and becoming official first time home buyers is to meet with your lawyer or notary to sign the documents.
They will let you know what you need to bring to the appointment and will also let you know the exact amount needed to fund the purchase. This will be a certified cheque that you will bring them later before funding.
The final step is to move into your new home and start unpacking.
Reach out today.
If you’re ready to become a first time home buyer and are interested in working with a mortgage broker, contact me today. We can set up a time to chat to discuss the steps it will take for you to become a homeowner. I look forward to hearing from you soon.