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Steps to Buying & Financing your dream home

1. Save a Down Payment Before Getting a First Home Mortgage While Home Mortgage Ontario can offer a first home mortgage with a cash-back mortgage product for up to 5% of the value of the home, the best practice would be to save up a minimum of 5% for your first home mortgage downpayment. Cash back mortgages require high credit scores, clean credit reports, and a willingness to pay a premium in interest to get into a home without a down payment. The larger your down payment, the more likely a lender will be to finance your purchase.

Remember, saving a downpayment of 20% or more will avoid mandatory Canada Mortgage and Housing Corporation (CMHC)mortgage insurance saving you thousands in fees and interest in the long-run.

2. Create a Budget One of the most important steps to buying a house is understanding how much mortgage you can afford. Creating a budget which outlines how much you spend on a monthly basis is a good first step in determining how much money you currently have left over at the end of each month.

3. Calculate your Maximum Mortgage Amount Use our Mortgage Centre Calculators to determine how much you can afford for your first home mortgage financing.

4. Get Preapproved Before House Hunting Contacting Home Mortgage Ontario to be pre-approved for a home mortgage will provide you with a low interest rate hold for 90 to 120 days (3 to 4 months) with a lender according to your financial situation.

A preapproval is a written commitment from the lender stating the maximum mortgage amount they are willing to lend you at a particular interest rate. There are no obligations to follow through with a pre approval, but gives comfort to the buyer before making an offer on their first home. Also, the rate hold simply represents the highest rate they will offer. If interest rates are lower within 30 days of your purchased home closing date, you will receive the lower rate. Learn the difference between being pre-qualified, pre-approved, and approved by reading one of my recent blog posts here.

5. Find Your Dream Home & Make an Offer Conditional on Financing Once a preapproval is in place, shop for that beautiful home you have been looking for. You’ll have comfort understanding how much you can afford and feel confident that you have taken appropriate action in preparing for this life changing event.

Although you have been preapproved for a mortgage, it is always important to make your offer conditional on financing. Since you have no obligation to follow through on the pre approval, the lender also has no obligation. Also, if your situation changes such as a change in income, hours worked per week, increase in debt on your credit cards or line of credit, the pre-approval would be no longer valid.

6. Get Approved for a Mortgage Commitment Letter Once your offer is accepted, contact your Mortgage Specialist to get you officially approved by a lender. This step will get you a written commitment which guarantees the lender will finance your purchase, assuming all of the information you provided is true.

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