Most individuals will obtain a pre-approval prior to shopping
for a home, so if you are one of those individuals, I'm assuming
you have already reviewed the section under Mortgage
Pre-approval. If you are one of those individuals
who opted to make an offer on a property without taking the
steps to a pre-approval, then we advise that you also read
through the Mortgage Pre-approval section as it will answer
many of your questions when getting ready to purchase a home.
Once you find that perfect home/investment property and your
offer has been accepted, it is time to execute the mortgage
search and finalize on a specific product that fits your financial
needs. Depending on whether your offer is considered
a ‘firm offer’ or a "conditional offer",
it will determine the urgency in getting the mortgage paperwork
in order.
In order to avoid missing out on any short term promotions
(especially during the spring and fall months), make sure
to contact your mortgage advisor and begin the closing process
as soon as any offer has been accepted.
Keep in mind that a firm offer means you
will buy the property as outlined in the offer of purchase
and that there are no conditions attached. Once the vendor
accepts the offer, you are both bound to the agreement.
A conditional offer on the other hand means
you will buy the property if those certain conditions are
met. We recommend that a condition on financing be included,
especially for high-ratio insured mortgages or if you haven’t
been pre-approved by a reputable organization prior to making
the offer.
We recommend adding a condition on financing clause for 3
to 5 business days, so that we have ample time to provide
you with the necessary approval documents.
In order to expedite your approval we require the following
documents and information:
- Copy of the accepted Purchase and Sale agreement
- Copy of the MLS listing (if listed on MLS service)
- Completed and signed application (unless you were pre-approved
with our office already)
- Confirmation of your down payment: it may be from your
savings, RRSP, equity from the sale of another home (copy
of sales agreement would be required if property sold
less than 3 months), or a gift letter for any money that
has been gifted
- If you are a salaried employee, a letter of employment
outlining your name, base salary, hours worked per week
and length of service along with a recent pay stub and
possibly your last years T4 may be required
- If you receive the majority of your income from commission
sales, three years of personal taxes (T1 Generals) as
well as three years of notice of assessment will be required
to calculate an average…A two year average may
be used if the down payment is greater than 20%.
- If you are considered self-employed, three years of
personal taxes (T1 Generals) as well as three years of
notice of assessment will be required to calculate an
average…A two year average may be used if the down
payment is greater than 20%.
- If you are self-employed and you have incorporated your
company, some lenders will also ask for three years business
financials and three years business tax returns along
with the three years T1 Generals and three years of Notice
of Assessments
Closing the deal and taking possession
After the mortgage has been approved and all
conditions waived, make sure to inform your lawyer of the
mortgage particulars or have them touch base with the mortgage
advisor to obtain all the relevant mortgage particulars
Keep in mind that you should also save approximately
1.5% - 2.0% of the purchase price for dedicated closing costs.
Here is a summary of some of the costs that
are included in this quick formula. By no means is this an
exhaustive list…
Appraisal – approx cost
of $250 - $350 depending on the area
Home Inspection – Prepared by a qualified
inspector that can help pick up on any property defects or
poor maintenance – approx cost of $350 - $500
Legal Fees and Disbursements – Your
lawyer will be able to quote you the fee for transferring
title in your name, registering your new mortgage, plus any
disbursements (courier costs, photocopies, etc). Approx range
of $1,200 - $1,700
Title Insurance or Land Survey – The
lender that will be issuing your mortgage or your lawyer will
specify whether a survey is required or if title insurance
will be acceptable in lieu. Title insurance may run anywhere
between $400 and $500, meanwhile a survey could very well
cost a few thousand dollars. Survey's aren't asked for as
much these days, but try making a point to have the seller
supply you a copy before closing, thus pushing the cost burden
onto them.
PST on the CMHC or GE Insurance Premium –
This amount cannot be rolled into the mortgage unlike the
entire insurance premium, so you will have to budget for it.
This amount will very depending on your down payment and whether
you required high ratio insurance at all. It will be disclosed
on the Statement of Mortgage that your mortgage advisor provides
you.
Ontario Land Transfer Tax -
- 0.5% on the first $55,000, plus
- 1.0% on balance between $55,000 and $250,000, plus
- 1.5% on balance between $250,000 and $400,000, plus
- 2.0% on balance above $400,000
The land transfer tax is due on closing and will be reflected
in the statement of adjustments you receive from your lawyer.
Finally on the closing day, the lender will provide your
lawyer with the agreed upon mortgage amount and you will have
to make up the difference via a certified cheque, which the
amount can be obtained from your lawyer. The certified cheque
will include your down payment, less your deposit, plus any
closing costs. Once the lawyer has both your cheque and the
cheque from the bank in the amount of the mortgage, they will
proceed to register the property and the mortgage in your
name, and obtain the keys and the deed for you.
