Buying first house in Canada-some tips
If you are reading this blog, most probably you are an immigrant to Canada and again most probably from Asia. Unlike back home, here some professions are regulated ad real estate agents, plumbers etc, some thing that is not there back home.
Therefore, it would be good idea to take advice of an expert. My experience has been that you would need same sets of precautions to chose a real estate agent as you would take otherwise in India or Asia, but here in Canada probably redressal would be fast and easier, that is, should you have a feeling that you have been tricked into a bargain by real estate agent.
What has been seen in the past that there have been some cases that some properties who were long been not selling were passed on to unsuspecting buyers. Unless you happen to like a property beyond reasoning, it would a better idea to find out the re-sale value and time to sell the property, should you need to sell it for upgrading it or otherwise.
Before buying a house, you must have a comparison of the rent that you would have to pay for similar property and its mortgage installment. This is just to ensure that you do not overstretch yourself. Find out how much added expense will be incurred in taking on a mortgage. Before you embark on your housing search, it would be a good idea to get a pre-approved mortgage, especially if you’re a first time buyer.
A pre-approved mortgage lets you know how much money you qualify for, so when you’re looking at houses, you will know what you can afford and can shop in comfort. When you sit down with your lender or his agent to pre-qualify, it’s a good idea to review all your questions at that time.
To determine affordability, your mortgage agent will look at your Gross Debt Service Ratio (GDS) and your Total Debt Service Ratio (TDS). The GDS ratio is based on what you can afford to pay each month and it includes mortgage payments, taxes and heating. Our maximum GDS ratio is 32%.
Agents also help you estimate the carrying cost with the Total Debt Service Ratio. The maximum TDS ratio is 37 per cent (40 per cent if it’s CMHC) and this includes items covered under GDS plus all other financing obligations.
This pre-qualifying stage is also the time to find out about the differences between conventional mortgages and high ratio insured mortgages. Ask about assistance for first time homebuyers such as the five per cent down payment allowed under the ``First Home Loan Insurance Program`` sponsored by the Canada Mortgage and Housing Corporation (CMHC) and the federal government’s ``RSP Homebuyers Plan`` letting you use funds from your RSP to purchase a home.
Treat your pre-qualification meeting with your mortgage agent as a fact-finding mission to go over closing costs, too, such as land transfer taxes, legal fees and other disbursements. And let’s not forget that if you buy a new home from a builder, you will pay the seven per cent GST on its purchase price. A good rule of thumb is to budget about three per cent of the purchase price for closing costs.
Before you’re automatically pre-qualified, your mortgage agent will need to run a credit bureau report and receive written confirmation of income and how much you plan to put down on your purchase.
Once you’re pre-qualified, the interest rate at which you pre-qualify is frozen for 60 to 90 days from the time of your application. If rates drop below what you pre-qualified for, you’ll get the lower rate and if they rise, you’re covered. Just because you pre-qualified for a mortgage at a certain financial institution, you’re by no means obligated to obtain your mortgage through that particular bank.
Wish you a happy home searching!!!.