Unimor Capital Corporation

Tag: Pre-approval

  • A Complete Guide to Buying Your First Home

    A Complete Guide to Buying Your First Home

    Buying your first home is an exciting and a significant milestone in your life. If you’re considering purchasing a home, you’re in for a unique and rewarding experience. Ontario offers a diverse range of housing options, from bustling city condos to peaceful suburban homes, making it an attractive destination for first-time homebuyers. However, the process of buying a home can be complex and overwhelming, especially if you’re new to the real estate market. In this comprehensive guide, we will walk you through the complete process of buying your first home, from setting your budget to closing the deal.

    STEP 1: Assess Your Finances
    Before you start looking at properties, it’s crucial to evaluate your financial health. Review your income, savings, debts, and credit score. Your credit score is particularly important because it will affect the mortgage terms a lender will offer you. It’s also the right time to start saving for a down payment if you haven’t already.

    STEP 2: Establish Your Budget
    Next, you’ll want to establish a realistic budget. Before you start looking at homes, you need to determine how much you can afford. To do this, consider the following factors:

    • Down Payment: In Ontario, a minimum down payment is required, which varies based on the purchase price of the home. For homes priced up to $500,000, the minimum down payment is 5% of the purchase price. For homes priced between $500,000 and $1 million, you need to put down 5% on the first $500,000 and 10% on the remaining amount. Homes priced over $1 million require a 20% down payment.
    • Additional Costs: In addition to the down payment, you’ll need to budget for closing costs, which can include legal fees, land transfer tax (unless you’re a first time homebuyer), home inspection fees, and more. These costs can add up, so it’s essential to factor them into your budget.
    • Monthly Expenses: Consider your current monthly expenses, such as rent, utilities, and insurance. Your new home may have different monthly costs, such as mortgage payments, property taxes, and maintenance. Ensure that you can comfortably manage these new expenses within your budget.

    STEP 3: Obtain Mortgage Pre-Approval
    Once you have a clear budget in mind, it’s time to obtain mortgage pre-approval. This step involves working with an experienced Mortgage Broker, to determine how much you can borrow and at what interest rate. A mortgage pre-approval provides you with a clear understanding of your purchasing power and can help streamline the home-buying process. To get pre-approved for a mortgage:

    • Gather Financial Documentation: Be prepared to provide your financial information, including proof of income, employment history, and details about your assets and liabilities.
    • Complete an Application: Make sure the information you give is accurate and complete, this will ensure a smooth application process.
    • Choose a Mortgage Type: There are various mortgage types available, including fixed-rate mortgages, variable-rate mortgages, and hybrid mortgages. Consult with your Mortgage Broker to determine which type is best for your financial situation.

    STEP 4: Start Your Home Search
    With your budget and pre-approval in hand, it’s time to begin your home search. Ontario offers a wide range of housing options, from single-family homes to condos and townhouses. Consider your lifestyle, preferences, and future needs when searching for the right property. Here are some tips for finding your ideal home:

    • Hire a Realtor: Working with a qualified real estate agent can make the home-buying process more manageable. Realtors have local knowledge, access to property listings, and negotiation skills that can be invaluable.
    • Create a Wish List: Make a list of must-have features and preferences for your future home, such as the number of bedrooms, location, proximity to schools or public transportation, and any specific amenities you desire.
    • Research the Neighborhood: Explore the neighborhoods you’re interested in to ensure they meet your needs. Consider factors like safety, local amenities, schools, and commute times to work.
    • Attend Open Houses: Visit open houses and schedule private viewings to get a feel for different properties. Pay attention to the condition of the home, the neighborhood, and any potential issues.

    STEP 5: Make an Offer
    Once you’ve found the perfect home, it’s time to make an offer. Your real estate agent will help you prepare a written offer that outlines the purchase price, any conditions, and the closing date. In Ontario, it’s common to include conditions such as a home inspection and financing approval. The seller can either accept, reject, or counter your offer. Here are some key points to keep in mind during this process:

    • Negotiate Wisely: Be prepared to negotiate with the seller to reach a mutually agreeable price. Your real estate agent can provide guidance on the negotiation process.
    • Include Contingencies: Including contingencies in your offer, such as a financing condition, can protect you in case unexpected issues arise.
    • Deposit: When your offer is accepted, you will need to provide a deposit, typically held in trust by the seller’s brokerage. This shows your commitment to the purchase.
    • Home Inspection: Consider arranging a professional home inspection to identify any potential issues with the property. You can use the inspection report to negotiate repairs or a reduction in the purchase price if needed.

    STEP 6: Secure Financing
    With an accepted offer in hand, it’s time to finalize your financing. This involves working closely with your Mortgage Broker to complete the application process. Be prepared to provide updated financial documents, and ensure that all conditions in your offer, such as financing approval, are met. Your Mortgage Broker will then arrange for a property appraisal to determine the home’s value.

    STEP 7: The Legal Process
    The legal process of buying a home involves several important steps:

    • Hire a Real Estate Lawyer: You’ll need to hire a real estate lawyer to handle the legal aspects of your home purchase. They will review the purchase agreement, conduct a title search, and ensure that the property has no outstanding liens or issues.
    • Land Transfer Tax: In Ontario, you’ll need to pay a land transfer tax when you buy a property. The amount depends on the purchase price and other factors. First-time homebuyers may be eligible for a rebate.
    • Closing Costs: Your lawyer will provide you with a statement of adjustments that outlines the closing costs you need to cover. These costs may include property taxes, utility bills, and legal fees.
    • Property Insurance: You will need to arrange for property insurance to be in place at the time of closing.

    STEP 8: Finalize the Deal
    As the closing date approaches, you and your lawyer will work together to ensure all necessary paperwork is in order. This includes signing the final documents, transferring funds to cover the purchase price, and closing costs, and conducting a final walkthrough of the property to ensure it’s in the agreed-upon condition.

    STEP 9: Closing Day
    Closing day is the culmination of the home-buying process. On this day:

    • The seller’s lawyer transfers the property’s title to your name, and your lender provides the funds for the purchase.
    • You’ll receive the keys to your new home, and the property officially becomes yours.
    • Your lawyer will register the transfer of the property and pay any outstanding fees, including land transfer tax, if applicable.
    • Your lender will set up your mortgage payments as per your agreement.

    STEP 10: Move In & Settle In
    Congratulations, you’re now a homeowner! After closing day, it’s time to move into your new home and settle in. Here are some essential steps to consider:

    • Utilities: Ensure that you transfer or set up utilities such as electricity, water, gas, and internet in your name.
    • Change of Address: Update your address with important institutions such as your bank, employer, and any government agencies.
    • Home Maintenance: Begin regular maintenance tasks to keep your home in good condition.
    • Enjoy Your New Home: Take the time to explore your neighborhood and make your new house feel like home.

    Buying your first home is an exciting and rewarding journey. By following the steps outlined in this comprehensive guide, you can navigate the process with confidence. Remember to establish a realistic budget, obtain mortgage pre-approval, work with a real estate agent, and conduct thorough research to find the right property for you. With careful planning and the support of professionals, you’ll soon be enjoying the benefits of homeownership in this beautiful province.

  • What Does Mortgage Pre-Approval Mean?

    What Does Mortgage Pre-Approval Mean?

    There’s a common misconception among some homebuyers that if you’ve got a pre-approval, your mortgage is basically guaranteed. This usually isn’t the case. Having a pre-approval doesn’t guarantee the lender will fund your mortgage. Below, let’s explain what a mortgage pre-approval is and whether it’s worth getting one.

    What is a mortgage pre-approval?
    A mortgage pre-approval is a conditional approval granted by a lender based on a preliminary review of your financial situation and creditworthiness. Conditional approval means that they are approving you based on some conditions/assumptions that will have to be confirmed later on.

    While this preliminary approval usually requires a credit check, information about your debts and income are based on details you provide to your broker, which are then shared with the lender. A pre-approval is often based on that information alone, without the lender verifying the documents or knowing which property you’re going to buy.

    For these reasons, a pre-approval isn’t binding until a lender has a chance to do its own due diligence and fully verify your financial information. It will also have to review details of the property you plan to purchase, which can include requiring an appraisal and/or inspection. A mortgage pre-approval is sometimes called mortgage pre-qualification. Each lender can have its own definitions for what it means and what is needed to get one.

    Where do I get a mortgage pre-approval?
    You can get preapproved by different kinds of mortgage lenders and mortgage brokers. A mortgage broker can help you quickly compare and choose from many of the following types of mortgage lenders:

    • Big Banks
    • Credit Unions
    • Mortgage Companies
    • Trust Companies
    • Insurance Companies

    Each lender will have its own mortgage offerings that you need to compare. Aside from the interest rate, ask your mortgage broker about the fees, penalties, and other costs. Ask about mortgage prepayment options and find out about the kind of customer service that they offer. For example, does your mortgage company provide online access to your account? Is there an app where you can track your balance and payments? Is it easy to contact them to make changes or inquiries?

    What do I need to get a pre-approval?
    Your mortgage broker can give you specific details on the documents needed. Each lender will have different expectations, and some documents might not be needed right away.

    Your mortgage broker will need to understand:

    • Your income
    • Your debts
    • Your assets
    • You may be asked to provide documents for your pre-approval, including things like:
      • ID (driver’s license, passport, etc.)
      • Proof of employment (such as a recent pay stub)
      • Proof of your down payment
      • Proof that you can pay for closing costs (usually 1.5% of the purchase price)
      • Information about your other properties if you own any
      • Separation agreement, child support information, student loans, and car loan information

    What Happens After I Get Pre-approved?
    Once you are preapproved, you should make sure you understand the terms of the pre-approval. You will need to know:

    • How long the pre-approval is valid (usually 60-120 days)?
    • What happens if rates go down? Will your rate drop also?
    • Anything else you don’t understand about the lender or mortgage.

    Also, once you have a pre-approval, you should avoid the following:

    • Don’t change jobs before you move, even if the new job has a higher pay.
    • Don’t apply for other credit, including store credit for furniture, vehicle loans, credit cards, etc.
    • Don’t make any major purchases without checking with your mortgage broker first.

    Pros & Cons of a Pre-Approval

    The Pros:

    • The process is generally quick, and a lender can let you know roughly how much you qualify for based on the preliminary financial information you provide.
    • Peace of mind while house-hunting. Having a pre-approval can give you greater confidence when shopping for your house, as you can set an appropriate budget based on the mortgage you qualify for.

    The Cons:

    • Not all lenders offer pre-approvals, which could limit rate options somewhat for those wanting a pre-approval.
    • A pre-approval usually isn’t a guaranteed approval, so it is still wise to have a financing condition included in your offer.

    Should you get a pre-approval?
    Yes, you should always plan ahead and know what you can afford. Pre-approvals are often a good starting point when shopping for a mortgage.

     

  • How You Can Benefit from Other Home Buyers’ Mistakes

    How You Can Benefit from Other Home Buyers’ Mistakes

    Most homeowners admit to making at least one mistake when they purchased their home, according to the 20th Annual RBC Home Ownership Poll. Listed below are the top mistakes made by first-time home buyers:

    The Property Needed Work
    Even those buyers with home inspections encountered issues after they moved in.

    Not Having a Bigger Down Payment
    A small down payment meant that many buyers found themselves overwhelmed by the costs of keeping a home.

    Not Getting a Home Inspection
    By skipping this step, some buyers found themselves faced with astronomical repair costs. Particularly those who had purchased older homes with ancient plumbing and wiring.

    Not Knowing the Closing Costs
    Some ill-informed buyers didn’t account for additional costs such as the land transfer fees, the title fee, lawyer’s charges etc…

    Not Getting Pre-approved for a Mortgage
    By not obtaining a pre-approval, many home buyers fell for homes that were out of their price range.

    Falling in Love with the Wrong House
    Buyers found they ignored obvious structural or electrical problems because the home had 10’ ceilings or a great stone fireplace. Beware of buyer’s remorse.

    Not Checking the Market Value of the Neighbourhood
    Some purchasers paid too much for homes that were renovated above and beyond neighbouring properties. This may price them out of the market when it comes time to sell.

    Focusing on Interest Rates
    New buyers felt compelled to buy because mortgage rates were low. Experts recommend buyers focus on the mortgage product that works for them instead of just trying to score a super-low rate.

  • What Does ‘Pre-Approval’ Mean?

    What Does ‘Pre-Approval’ Mean?

    Getting pre-approved by a lender makes it easier for buyers to find the home they want within their price range. However, it does not guarantee you’ll get the mortgage. It is simply a certificate saying that through a quick calculation of your finances, the lender has determined what you can afford.

    During the pre-approval, the lender will also fix the interest rate, which is usually good for between 60 and 90 days. If a better rate promotion occurs during the buyer’s fixed period, the buyer is usually eligible for that as well. It is likely the pre-approval will lead to a mortgage, but there have been situations when this has not been the case. The best way for buyers to ensure success is to understand what the lenders look for and to be prepared. Another way is for buyers to work with their mortgage broker, who can flag any potential challenges.

    A lender will determine a buyer’s debt load by calculating the Gross Debt Service (GDS) Ratio and Total Debt Service (TDS) Ratio. The GDS Ratio is the proposed housing costs, including mortgage payments, taxes, heating costs and 50% of condo fees, if applicable, and shouldn’t be more than 32% of the buyer’s gross monthly income. TDS calculations take into account all the buyer’s other debt obligations and shouldn’t be higher than 40%.

    Once a buyer has made a conditional offer on a home, the lender will gather all the documentation required to approve the mortgage, including a credit report. Other items a lender will need are a letter from an employer confirming the buyer’s salary, information about other sources of income, bank accounts, loans and other debts, proof of financial assets, sources of the down payment and deposit, and proof that the buyer has the funds for closing costs.

    Problems can crop up during the mortgage approval process. For example, the buyer’s credit score may be too low, the buyer might not have the right source for the deposit funds or the closing costs may not have been deposited in an account. The buyer’s GDS and TDS ratios might also be too high.