Mortgage pre-approval and budget
The very first step of buying a new home should be to establish your budget. Of course, buying a house or a condo constitutes a big investment, but you should never forget to take all the necessary expenses that come with a real estate transaction into account.
Closing costs and other costs when buying a home
- Deposit cheque (Not obligatory but if given with your offer to purchase, becomes part of the down payment);
- Notarial fees (plus GST and PST);
- Adjustment of school taxes (July 1st to June 30th);
- Adjustment of municipal taxes (January 1st to December 31st);
- Oil costs of applicable (Seller fills tank, purchaser pays for full tank);
- Transfer tax (otherwise known as the “Welcome Tax”);
- Appraisal and Application fee for mortgage (Banks often waive this fee, GST and PST applicable)
- Building Inspection and report (GST and PST applicable);
- Mortgage Loan Insurance (percentage of face value of mortgage amount plus applicable taxes, may also be charge for opening file with C.M.H.C.);
- Moving company (Get quotes in advance, rates vary amongst companies);
- Property Insurance (is mandatory and proof will be required at the signing at the notary);
- Condo Fees (If the purchased property is a condominium, the purchaser will have monthly condo fees to pay).
When a brokerage contract is signed, the sellers advise the listing broker what they are willing to include in the sale and what they wish to exclude and these items are usually indicated in the listing details available to the buyers. However, buyers when writing a Promise To Purchase may ask for more than what is stipulated or ask that certain inclusions be excluded if they are not at all interested in those items. When asking for additional inclusions buyers should be aware that sellers will usually not respond favorably to such a request unless the offer is strong. Another situation where sellers would perhaps react favorably to additional inclusions over and above what listed would be when a home has been on the market for a while.
Here is typical list of what may be included by the home seller and/or requested by home buyers:
- Lighting fixtures;
- Specific lighting fixtures on wall;
- Window coverings (blinds, curtains, shutters);
- Curtain rods;
- Built in shelving or closet organizers;
- Other appliances;
- Ceiling fans;
- Fireplace doors and accessories;
- Central vacuum motor and accessories;
- Garage door opener(s) and remote(s);
- Alarm system;
- Hot water tank;
- Satellite dish;
- Central air conditioning unit;
- Central heat pump unit;
- Wall mounted air conditioner with outside compressor;
- Wall mounted heat pump with outside compressor;
- Above ground pool;
- Pool accessories/pool equipment;
- Basketball hoop;
- Swing set.
Keep this in mind! You pay your mortgage over and over. You pay for your new home only once at the notary. The mortgage is as important to negotiate as is the price on your new home! Shop around for your financing!
For some reason, buyers think purchasing a property is a two-step process: finding the right house and negotiating the transaction. It is really a three–part process, the mortgage pre approval is a key component. After a Promise to Purchase is signed conditions need to be satisfied, time is of the essence, and the clock is ticking. This is not a good time for you as a buyer to be just starting the process of selecting a lender and a loan. After an offer is accepted buyers often feel a bit overwhelmed and may not make the best decision possible regarding their mortgage.
The recommendation is simple. Learn about mortgages before you begin looking for your home. Pick a lender and a mortgage when you are clear-headed and under none of the additional stress that a signed sales contract could represent. A buyer who is pre-approved is showing sellers that they can indeed afford to purchase their home and showing their real estate broker that they are indeed motivated to make a purchase. In today’s market if a buyer can’t or will not go through the process of being approved many sellers will react negatively to their offer. The delay to obtain final mortgage approval after an offer is accepted usually takes 7 to 10 days and sellers are often reluctant to tie up their home for that period if the buyer is not pre-approved at the bank.
On the other side of the coin, if financing is not a problem for you but you haven’t been to the bank yet, when your offer is presented you may lose the home you want to another offer from a pre-approved buyer. Now wouldn’t that be a shame! When you put in an offer on a home, being pre–approved can make a huge difference. You’ll know what you can afford and so will the sellers! Put on your suit of armor ASAP!