Buying a home

1. Your income: Knowing that you have the funds to make your mortgage payment every month, plus other housing expenses, is a must. This means you need some sort of financial stability or savings to draw from, no matter your career.

2. Your budget: Find out exactly how much money you can afford to spend each month on your mortgage and house expenses by making a budget. Once you’ve added up all your lifestyle and essential spending and saving, you can direct the extra towards your dream home.

Our budgeting worksheet allows you to organize and document all of your income and your expenses each month. So you’ll know exactly how much you can afford. There’s no guessing when there’s a spreadsheet involved.

3. Your credit score: A mortgage gets you the house of your dreams, and a healthy credit score—700 or above—gets you a mortgage. Before you get too attached, do a quick credit check, this can save you from heartbreak later.

4. Your preference: Do you want a house or a condo? Knowing what kind of living situation best suits your preferences and lifestyle streamlines your house hunt. Curious about how you know? Use this decision tree to find your dream home. 

5. Your preferred location: Save time on your house hunt by narrowing down the neighbourhood you’d like to live in. This can also prevent you from getting attached to a house that’s an hour and a half away from your work. Download our worksheet for a few categories to consider and fill out the characteristics that matter most to you. 

So now that you’ve decided to take the leap, you’ll want to know what exactly you can afford to buy. Let’s talk pre-approvals, pre-qualifications and down payments.

Pre-qualification is the first step to pre-approval and a great tool to see the amount of mortgage you will qualify for. It helps you and your mortgage provider know how much you can borrow and how much you’ll need for a down payment and closing costs.

The mortgage provider won’t look at your credit report or check your finances  in the pre-qualification process.  They’ll estimate how much you can be approved for based on your finances, including your income, assets and debts. 

Mortgage pre-approval does not guarantee that a mortgage provider will give you a loan. The mortgage provider does background checking at first and gives you and holds an interest rate if you’re approved within 90 days.

It will give you a price range you can shop within, and the confidence your home seller needs once you’ve made an offer to close the deal.

Your credit score and your down payment affects the interest rate a mortgage provider offers you. If you have a low credit score (under 700 on a scale between 300 and 900), the down payment by the lender to qualify for a mortgage may be more than if you had a higher credit score.

The mortgage you qualify for is based on:

• If you can afford monthly mortgage payments.
• How much confidence a mortgage provider has in your credit by looking at your credit score, which affects the interest rate a provider can offer you.
• The size of your down payment, which is directly related to the size of the loan you’ll be taking out on the remaining portion of the property’s sale price.

Mortgage providers might say these words when you are ready to buy a home —open, closed, variable, fixed—the list goes on. 

Here’s a breakdown:

These terms share more about your type of mortgage based on your down payment:

• Insured mortgage: It is Canadian law that if you’re making a down payment of less than 20% of the price of the home, then you'll need mortgage default insurance. This protects the mortgage provider who’s giving a loan without the security of a substantial down payment.
• Conventional (Uninsured) mortgage: If you’re making a down payment of more than 20% of the price of the home, then your mortgage doesn’t require mortgage default insurance.

Amortization vs. term: What’s the difference?

• Amortization: The length of time over which you can pay off your full mortgage (with interest). The longer your amortization period, the lower your mortgage payments will be—but the more you'll end up paying in interest.
• Term: Your term is the amount of time that you’re committed to your mortgage provider, interest rate and payment options. At the end of your term, you can renew your mortgage under the same conditions but at a new interest rate based on the current market, renegotiate your mortgage with the same provider or move your mortgage to a different provider.

The next terms define the interest rate you choose for your mortgage. There are two main mortgages:

• Variable rate mortgage: With a variable rate mortgage, the interest rate can change according to your bank's mortgage prime rate and the Bank of Canada’s prime lending rate. If you think it'll be a couple of years before rates go up and you can handle some potential changes in your payments, a variable rate can save you a lot of money short and possibly long term.
• Fixed rate mortgage: Fixed-rate mortgages guarantee a fixed interest rate for the length of your term. If rates go up in the near future, you may want to get a fixed interest rate to get current low rates. This is also good if you have a budget and need to make on time monthly payments.

The difference between closed and open mortgages:

• A closed mortgage can’t be repaid without prepayment penalties during its term, except if there are exceptions in the mortgage agreement. Also, you will get a better rate.
• With an open mortgage you can make extra payments, pay off your mortgage entirely, or change lenders at any time. But, an open mortgage typically has higher rates.

Here’s a checklist of what needs to happen when you make an (accepted) offer and move into your new home:

• Make a conditional or unconditional offer
• Get a lawyer
• Get final mortgage approval (conventional or insured)
• Transfer the deposit to show that you’re serious about the place
• Get a property appraisal
• Transfer the rest of the down payment to the seller and take possession (YAY!)
• Receive final approval and send documents to the lawyer
• Get a home inspection
• Buy title insurance through the lawyer