When buying a home, there are several financial steps and considerations you need to take care of to ensure stressless and secure financing:

Determine Your Budget

Existing Home Owner 

If you have an existing property, MGRE recommends selling it prior to purchasing another. This action reduces stress and you’ll have a better understanding of your finances. 

At MGRE we can assist you with either the buying or selling of your home.

New Home Buyer 

If you are a new home buyer, make sure you take into account The Home Buyer’s Plan if you have RRSPs to draw from and the First Home Savings Account (if you contributed to a registered account.

General Rule about Lenders

Lenders will want to ensure that you are able to carry a mortgage without due hardship.

Gross Debt Service Ratio

The Gross Debt Service Ratio (GDS) calculates how your income compares to your Mortgage expenses. 

Most Lenders say that no more than 30-32% of your Gross Annual Income should go to home-related expenses. 

Total Debt Service Ratio 

Total Debt Service Ratio (TDS) looks at how your income compares to any and all debt you may have. 

Most lenders say that your total debt payments should not be more than 37% – 40% of your gross annual income.

Getting a Pre-Approved Mortgage or a Mortgage. 

As one of your largest investments, it is worth both your time and money to spend some time reviewing your options: 

• Check RateHub so you can review at a high level your budget based upon income, your down payment and any other financial obligations.
  • Payment calculator
  • Affordability calculator
  • Land transfer tax calculator
  • CMHC insurance calculator (based on the percentage of your down payment)
• Get a Pre-Approved Mortgage. Your lender, a bank or other financial institution, or a broker, can assess your financial situation and provide a conditional commitment to lending you an amount. 
• Rely upon your Lender to provide you with Mortgage options and choose the one that best suits your financial situation and long-term plans.
• RateHub provides up to date information for new buyers and existing homeowners looking to move-up.

Costs to consider when Buying

Various costs in addition to the Mortgage need to be taken into account: 

• down payment
•  cost of mortgage insurance (dependent on the size of your downpayment) from CMHC (Canadian Mortgage and Housing Corporation), Sagen and Canada Guaranty
• land transfer tax
• any Lender fees, eg. Loan processing 
• appraisal of the property (your lender will likely require a home appraisal to ensure the property’s value matches the loan amount).
• professional home inspection to identify any issues with the property
• title insurance on the property property taxes  
•  set-up fees for new home utilities, eg. Hydro, internet 
• home insurance
• moving costs 
• lawyer’s fees
• any appliances that may need to be purchased as agreed upon in your offer 

Reviewing the Loan from your Lender 

Once you’ve shopped around and have determined your Lender, consider their fine print: 

• interest rate
• frequency of payment (have they provided you with an Amortization Schedule and a Term Schedule?) 
• closing costs 
• any prepayment penalties 
• your contact person to ensure that you have no issues the day of Closing 

Lender Interests: 

Not only is your Lender interested in ensuring monthly payment, but they will have an Appraiser check out the home in order to ensure that the property value’s amount equals the loan amount. 

Stay in touch with your lender to ensure all necessary documents are submitted and the loan is processed smoothly. Be prepared to provide any additional information they request.