Home Buyers Guide
Congratulations! Buying a new home can be such a rewarding experience.
This guide has been created to help you through the steps of purchasing your new home. Whether you are buying a condo, house, fixer-upper, or brand new home, this Homebuyer’s Guide will help you navigate the process.
You can also download the PDF version of this guide!
It will explain who the participants are in the home buying process and what they do. It will also help you understand the mortgage approval process, and the costs involved in purchasing a home. Use this guide to provide you with reliable answers to your questions. Your home buying team will be able to discuss any of the areas in more detail.
Again, congratulations on buying your new home.
Table of Contents
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Company History
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About Cory McLean
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Purchasing Support
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The Home Buying Process
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Your Support Team
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Documentation Required
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Descriptions of Closing Costs
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Cost Checklist
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Payment Options and Calculations
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Moving Checklist
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Suggested Websites
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Gift Letter
-
Mortgage Glossary
-
References
1. Company History
Axis Mortgage Inc.
Axis Mortgage Inc. has been providing our customers across Canada with financing for nearly 7 years. The firm was originally opened by Cory McLean in 2001 and operated under a different name until March of 2007. The recent transition to join the Verico network has allowed the company to grow and keep up with our customers ever changing needs. Axis Mortgage associates pride themselves on their ability to assess the customer’s entire portfolio and choose the right products for their needs.
We research lenders to find the mortgage that is best for you. Our lenders include but may not be limited to:
- TD Canada Trust
- Bank of Montreal
- CIBC
- Scotia Bank
- National Bank of Canada
- Firstline Mortgages
- Laurentian Bank
- First National Financial
- Bridgewater Bank
- Resmor
- ING
- ATB Financial
- Equitable Trust
- MCAP
- Xceed
- AGF Trust
- Home Trust
- Wells Fargo Financial
- GE Money
- Cervus Financial Group
- Maple Trust
- Merix Financial
2. About Cory McLean
My name is Cory McLean and I am the mortgage broker/owner of Axis Mortgage. I have seven years experience as a mortgage broker, and have arranged financing for hundreds of customers across Canada.
I bring a true passion to the business, which drives me to source out the best options for you. I take great pride knowing that I am able to secure your financing when another institution was unable to, or to source out a better product that may have been unavailable to you at a different institution, or secure you an interest rate that may save you substantial amounts of money.
The Lethbridge area has been my home for the past 15 years. I have a great knowledge of our market and the trends that may affect your purchase. Part of my job as your mortgage broker is to share this insight to help make your transaction a smooth one.
I believe there is much more to your mortgage than interest rate. While I assure you, you will receive the lowest interest rate available to you, I will look at more than just the rate: Amortization scenarios may determine what you can be approved for, potential pay out penalties will determine what term you are interested in. Your hard earned, after tax dollars should also be considered when structuring your financial viability of a particular mortgage. It is this extra time spent that will assist you in achieving your goals with your new home and that is my goal!
3. Purchasing Support
So you have decided to purchase a new home and you are stressed out. Don’t worry, whether you are purchasing privately, with a realtor, or from a home builder there will be support in place. You may have many questions, such as when and where to I give my down payment money?, when do I sign papers at the lawyer’s office?, etc. Our team at Axis Mortgage Inc. will see to it that these questions are answered. If you are working with a realtor or home builder we will be in contact with them to see that the timing of your transaction is as smooth as possible.
Your offer will be subject to the approval of your mortgage qualification. In this process we will be in contact with your realtor or home builder to see that we have the proper documentation to work with. We will also see that they are “kept up to speed” on the progress of your file. They will be notified just after you are notified that your financing is in place.
The Lawyer that you have selected to register your new mortgage will be an integral part of your transaction. Your Axis Mortgage associate will see that the lawyer receives the documents required in a timely fashion.
4. The Home Buying Process
Step 1: Pre-Approval: When you first decide you want to purchase a home, it is wise to get a pre-approved mortgage. The pre-approval will tell you how much you qualify for, ensuring you are looking at homes in your price range. This will also act as a rate hold for you. Most lenders will hold your rate for 90-120 days.
Step 2: House Hunting: Once you know your price range, your realtor will begin researching the available properties and will show you homes that fit your criteria.
Step 3: Offer In and Accepted: Once you’ve found the home you are interested in, you will make an offer. The offer will be “subject to financing,’” meaning that the offer depends on whether or not you are able to obtain a mortgage. Your offer may also have other conditions, such as “subject to a satisfactory home inspection” or “subject to review of the condominium documents.” Once the offer is accepted, you will provide a copy of the purchase agreement along with the property feature sheet to your mortgage associate.
Step 4: Lender, Insurer, Appraisal: Your mortgage associate will work with the lender, insurer, and appraiser (if required) to get you final approval on the financing. Your mortgage associate will ask you for further documentation at this time. You will need to collect the requested paperwork and submit it to your mortgage associate in a timely fashion.
Step 5: Firm Sale
Once you have met all of your financing conditions, your mortgage associate will instruct you to remove the “subject to financing” condition from your purchase contract. This is done with your realtor. You may remove other conditions at the same time (if they have been met), such as “subject to a satisfactory home inspection.” Once all of the conditions are satisfied, you have a “firm sale.” Instructions from the lender will be sent to the lawyer’s office at that time.
Step 6: Moving Details: The lawyer is now receiving and preparing the mortgage documents. Use this time to start preparing for the move. See the moving checklist on page 13 for some of the steps you may need to take.
Step 7: Lawyers: The lawyer will call you in to sign, usually as soon as they can have you in. This is when the lawyer will ask for the remainder of your down payment. The completion date is the day the money is given to the sellers and the property is transferred to your name.
Step 8: Move In: Usually your possession date will be the day after the completion date. This is the day that you receive keys and can move into your new home.
Step 9: First Mortgage Payment: Unlike rent, which is paid at the beginning of the month, you make your mortgage payment at the end of the month. For example, if the purchase of your home was completed on June 1, and you chose monthly payments, you will not have a mortgage payment until July 1 (at the end of one month). If you chose weekly payments, the payments would come out at the end of every week. You will receive the details of the mortgage repayment from your mortgage lender.
5. Your Support Team
When you purchase your home, there are a number of key players who will help you throughout the process.
Your Realtor: Your realtor is your partner in the home buying process. Once your Realtor understands what type of home you are looking for, he or she will begin researching the market on your behalf. The realtor will search all of the available properties for sale and will show you the ones in your price range that meet your criteria. Once you have found the home you are interested in, your realtor will prepare an offer and represent you in the negotiation process.
Generally you do not pay a fee to the realtor who represents you when you are buying a home. The realtor is paid by the seller of the home. Realtors are licensed through provincial bodies and are knowledgeable about the markets they work in.
Your Mortgage Associate: Your Axis Mortgage associate is another key partner in the home buying process. Your associate will take time to understand your financial needs and will research the market to find the best mortgage for you. Your mortgage associate will represent you to the lenders, and will negotiate terms on your behalf. Usually there are no fees to use a mortgage associate, as they are paid by the lenders. However there are instances where fees are required to secure your financing. Any fee will be disclosed to you prior to moving forward.
Lender: Your mortgage associate will choose the lender that best suits your requirements. The majority of your contact with the lender will be after your mortgage funds. You will receive contact information for when you want to make any changes to your mortgage in the future.
Insurer: If you have less than 20% of the value of the property as your down payment, you may be required to have mortgage insurance. Mortgage insurance protects your lender against any losses incurred. Your mortgage associate and lender will arrange this insurance for you. The mortgage insurance companies in Canada are Canada Mortgage and Housing Corporation (CMHC), Genworth Financial and AIG United Guarantee.
Appraiser: The appraisers role is to provide the lender with a market value of the home. The market value is the price at which the home would sell with reasonable exposure on the market to a large number of buyers. Your mortgage associate will arrange the appraisal for you. If you are putting less than 20% down there will not be an appraisal required. The insurer will appraise your home with their internal computer systems. If you are putting 20% or more down the appraisal will carry a cost to you.
Home Inspector: A home inspector provides you with information on the construction of your home. The inspector will inform you of any repairs that need to be done in the near future, and will let you know what types of repairs you can expect in the next few years. Your realtor can provide you with some names of quality home inspectors.
Lawyer: Your lawyer (or notary) will transfer the property to your name, and will draw up and register the mortgage documents. Your lawyer liaises with your lender and realtor to ensure they have all of the required paperwork to process the sale. Your mortgage associate will refer you to a lawyer if you need one.
6. Documentation Required
In order to process your mortgage application, mortgage associates require documentation to support your mortgage application. Please note that there may be other conditions not listed here that they might require.
Proof of Income
Please provide the following documents for proof of income:
Employees:
- Employment confirmation letter
- If you are salary, confirm your salary amount and length of employment
- If you are paid hourly, confirm your pay per hour, number of hours worked per week, and length of employment
- A current pay stub
- A T4 or Notice of Assessment*
Commissioned or self-employed:
- Three years of financial statements
- Three years of Notices of Assessment
Down Payment Verification
The insurer usually does not allow a down payment to be borrowed. This is why we verify the source of your down payment. Please provide the following documents:
- If your down payment is from savings in your bank account, provide three months of bank statements . The statements must state your account number and name and be the three most recent statements.
- If your down payment is from investments (RSP, GIC, stocks, bonds), provide a copy of your most recent account statement.
- If your down payment is a gift, a “gift letter” (see page 17) is required together with proof that the funds have been deposited into your bank account. Again please make sure that your bank statement has your name and account number on it.
Additional Documentation
Please provide the following additional documentation:
- Offer to Purchase and MLS listing for the new property
- Offer to Purchase and all condition removals for the existing residence if you are selling one
- Void cheque for the account from where mortgage payment will be withdrawn
- Name and number of the lawyer you will use for this transaction
*Notice of Assessment is the summary form Canada Revenue Agency sends after your income tax has been filed. It specifies what you claimed on your taxes last year. If you do not have a copy of your Notice of Assessment, you can call Revenue Canada at 800-959-8281 or visit the link to CRA on our resources section to obtain a copy.
7. Descriptions of Closing Costs
The following is a list of closing costs homebuyers can expect with their mortgage. Be prepared for:
1. Legal Fees
A lawyer or notary will be necessary in the home buying process. Your lawyer will prepare the mortgage documents, have you sign the documents, and will transfer the property to your name. The cost may vary depending on the lawyer and the work required. Our estimate is approx. $800-1000.
2. Appraisal Fees
An accredited appraiser will look at your home and determine if the price you have offered is what the home is worth. The appraiser will compare recent sales of similar properties to determine the estimated value of your home. He or she will provide a report to your lender that confirms the value. This is only required if you are putting more than 20% down (in most cases). Costs are estimated at $300.
3. Property Purchase Tax
N/A in most provinces.
4. Property Tax Adjustment
You may have to pay some of your annual property taxes at the time of closing. This would be done when you sign at the lawyer’s office. Because every situation is different, it is best to confirm with your lawyer what you will owe.
5. Interest Adjustment
If you have chosen monthly mortgage payments, and your payment comes out on the first day of the month, you may have an interest adjustment. If the purchase of the home closes on May 29, for example, you will have to pay for three days of interest on your mortgage (May 29-31). If the purchase closes earlier in the month, you may have a larger interest adjustment. It is best to find out from your mortgage associate what your interest adjustment will be.
6. Title Insurance
Title insurance is sometimes used instead of a survey or real property report, and may be requested by your mortgage associate, lender, or lawyer. Your mortgage associate, lender, or lawyer will discuss title insurance with you if it is applicable for your transaction. Costs are estimated at $200.
7. Fire Insurance
Fire insurance ensures you have adequate coverage to pay off your mortgage in the case of fire. The lawyer will want proof that there is fire insurance in place when you go in to sign the papers at his or her office. Ask your mortgage associate for a referral to an insurance agent who will be able to assist you. Cost will vary depending on the value of the home and the insurance provider.
8. High Ratio Insurance Premium
When borrowers have less than 20% of the value of the property as a down payment, they must pay a mortgage insurance premium. The premium varies, so you should check the amount with your mortgage associate. Most people will add this premium onto their mortgage. You also have the option of paying this amount up front. This premium is charged to you by the insurer.
9. Home Inspection
Many people choose to have home inspections, although most of the time it is optional. A home inspector will look through your home and provide you with his or her professional opinion on the construction of the home. The home inspector will advise of any maintenance required, and will let you know what kind of maintenance you can expect in the next few years. Costs will vary but are estimated at $300.
10. Mortgage Processing Fees
Depending on your application, you may have a mortgage processing fee. This is a fee charged by the lender and/or mortgage associate to process your application. These fees will be disclosed to you prior to your proceeding with a mortgage commitment. These fees are a rarity with Axis Mortgage Inc., and are only applicable under unique circumstances.
11. Survey
Most financial institutions require surveys or real property reports. Surveys confirm where the home is sitting on the lot and make the lender aware of anything unusual about the property. You may be able to get an acceptable copy of the survey from the previous owners, and save the survey fee.
12. Utilities Connection Charges
Some utilities charge a move or connection fee. You will need to contact each utility provider to find out their charge.
8. Cost Checklist
The following list outlines some of the costs you can expect when you buy your home. As these costs are only estimations, you will want to confirm them with the service providers.
| Legal Fees | $ |
| Appraisal Fees | $ |
| Property Purchase Tax (if applicable) | $ |
| Property Tax Adjustment | $ |
| Interest Adjustment | $ |
| Title Insurance | $ |
| Fire Insurance | $ |
| High Ratio Insurance Premium | $ |
| Home Inspection | $ |
| Mortgage Processing Fees | $ |
| Survey | $ |
| Utilities Connection Charges | $ |
| Other | $ |
| Total estimated cost | $ |
9. Payment Options and Calculations
If you’re interested in calculating your monthly mortgage payments visit the Mortgage Calculators section of this website.
Advantage of Frequent Payments
Paying off your mortgage is a more flexible process than you may think. By taking advantage of options that allow you to pay more frequently, you will pay the mortgage faster and save thousands of dollars on interest.
|
Payment Rate |
Payment Amount |
Years to Pay Off Mortgage |
Estimated Interest Paid over the Mortgage’s Lifetime |
|
Monthly |
$639.87 |
25 years |
$91,940.85 |
|
Bi-Weekly |
$319.90 |
21 years |
$74,927.96 |
This example is based on a $100,000 mortgage with a 6% interest rate calculated semi-annually, not in advance, and assumes that the interest rate remains constant for the full 25-year amortization period.
10. Moving Checklist
The following list is for reference purposes only. There may be others that need to be contacted.
| Service | Telephone | Date Completed |
| Movers | ||
| Fire Insurance Company | ||
| Gas Company | ||
| Power Company | ||
| Telephone Company | ||
| Internet Service Provider | ||
| Post Office | ||
| Car Insurance Company | ||
| School(s) | ||
| Credit Card Providers | ||
| Bank | ||
| Magazine Subscriptions | ||
| Employers | ||
| Sporting/Recreational Groups |
11. Suggested Websites
Visit the following websites for information about mortgage products and calculations:
12. Gift Letter
This letter is to confirm that _________________________________ is making a gift of
$_______________________ to _________________________________________
for the purchase of the property located at:_____________________________________.
The undersigned confirm
- that the gift is genuine and does not need to be repaid.
- that no part of the gift is being supplied by a third party who has any interest in the sale of the subject party.
Gift given by:
Name(s)____________________________ ________________________________
Signature(s)_________________________ ________________________________
Address _____________________________________________________________
Telephone _________________________________
Date _________________________________
Gift Received by:
Name(s)____________________________ ________________________________
Signature(s)_________________________ ________________________________
Relationship to Gift Grantor
___________________________________ _________________________________
Date______________________________________
13. Mortgage Glossary
The following definitions are from the Canadian Institute of Mortgage Brokers and Lenders (CIMBL) online dictionary (see References):
Agreement of Purchase and Sale
A written agreement between vendor and purchaser in which the purchaser agrees to buy certain real property and the vendor agrees to sell upon terms and conditions as set forth in that agreement.
Amortization
Term used to describe the time over which the mortgage is to be paid, assuming equal payments. The life of a loan, e.g. a mortgage with a 25-year amortization period means that if all regular payments were made on time and the terms (payment, interest rate) remained the same, it would take 25 years to reduce the balance to $0.
Amortization Schedule
A table showing the amounts of principal and interest comprising each level payment due at regular intervals and the outstanding principal balance of the loan after each level payment is made.
Appraiser
An appraiser determines the market value of a house based on its condition and the selling price of comparable houses recently sold in the area.
Assumption of Mortgage
The act of assuming liability for an existing mortgage on a property by the purchaser of that property. With builders’ loans, the assumption is usually evidenced by written agreement.
Closing Date
The date on which the sale becomes final, the new owner takes possession of the property, and funds are transferred from the purchaser to the vendor.
Commitment
A letter / document issued by a lender reciting the basic terms of a loan which when accepted by the borrower forms a binding contract.
Conveyance
The transfer of an interest in property from one person to another.
Debt Coverage Ratio
The percentage of the borrower’s income used for monthly payments of principal, interest, taxes, heating costs and condo fees (if applicable).
Home Inspection
A visual inspection of the major components of a home, by a qualified individual, giving the homebuyer a true and unbiased picture of the home’s condition.
Interest Adjustment Date
The date one month prior to commencement of amortization when accrued interest computed on the moneys advanced becomes due.
Interest Rate
Interest Rate is the percentage charged on outstanding loan balances.
Interim Financing (Construction Financing)
Interim loans are used to provide construction financing until the permanent loan can be funded.
Maturity Date
The final day of the term of the mortgage.
Mortgage
Any charge on real property as security for a loan.
Mortgagee
The lender
Mortgage Insurance
Required if you are contributing between 5% and 25% of the value of the property as the down payment.
Mortgage Term
The length of time the interest rate is guaranteed for a mortgage. Mortgage terms normally range from 6 months to 5 years or more, after which time you can repay the balance of the principal owing or re-negotiate the mortgage at current rates.
Mortgagor
The borrower
Pre-Authorized Cheques
Direct withdrawals of due payments from a borrower’s bank account in accordance with authority granted by the borrower.
Prepayment Clause
A clause inserted in a mortgage that gives the mortgagor the privilege of paying all or part of the mortgage debt in advance of the maturity date.
Prepayment Penalty
The sum of money (usually equal to an amount of interest) a mortgagee may require from a mortgagor to repay all or part of any outstanding principal.
Prime Rate
The rate at which financial institutions lend to their best customers.
Second Mortgage
A mortgage placed on real property which is already encumbered with one mortgage. Determination of first, second, third mortgage is by priority or registration (time and date).
Survey
A property survey is a process by which land boundaries and areas are determined and defined and improvements may be plotted thereon. Surveys are also used for locating and identifying property lines, improvements on the land and easements on the land.
Surveyor’s Certificate
A formal statement signed, certified, and dated by a surveyor giving the pertinent facts about a particular property and any easements or encroachments affecting it.
Term
In a mortgage, term is the actual length of time for which the money is loaned.
Title
The means of evidence by which the owner of land has lawful ownership thereof.
Title Insurance Policy
A contract by which the insurer, usually a title insurance company, agrees to pay the insured a specific amount for any loss caused by defects of title to real estate, wherein the insured has an interest as purchaser, mortgagee or otherwise..
Total Debt Service Ratio (Single Family)
The ratio of an amount equal to the annual mortgage charges and acceptable installment account payments to an amount equal to the effective gross annual income of the borrower.
14. References
Canadian Institute of Mortgage Brokers and Lenders. The Mortgage Dictionary. N.d. 27
July 2004 <http://www.cimbl.ca/consumers/dictionary.ihtml>.
