A Brief House Buying Steps for first time home buyer
The first step of buying a house in Toronto is to secure your mortgage pre-approval
Locate the property meeting your demand (property type, location, features, budget, etc.)
Place an offer (normally with conditions)
The seller accepts the offer (normally after negotiation)
Fulfill or waive the conditions (arrange the financial funds, home inspections, etc) and hire a lawyer for the title and non title search to ensure the property is good in the title and with no working orders
On the completion date, pay the balance due, tax, and arrange the title change
The whole process for residential properties is normally ranging from 2-4 months. Tax for resales home involves land transfer tax (additional equivalent amount of land transfer tax for Toronto City) without HST. Tax for new home purchases involves HST without land transfer tax
The average house cost in GTA is $1M in early 2021. Before you decide to buy a house, you may need to know how much downpayment you prepare and how much you could afford to pay for a mortgage.
Generally, the down payment starts from 20% of the total amount from the main lenders which require more strict qualifications.
You also need to consider the other costs associated with the house purchase, such as land transfer tax, closing adjustment, lawyer fees, and others like legal fees, home inspector, insurance, home appraisal fee, etc. Those extra costs stand roughly around 3% of the home purchase price.
After a house purchase, you would budget the housing cost since owning a home in Canada is not cheap either.
Knowledge on mortgage
Definition: A legal agreement by which a bank or other creditor lends money at interest in exchange for taking the title of the debtor's property, with the condition that the conveyance of title becomes void upon the payment of the debt.
Fixed-rate mortgage: the rate of interest is fixed throughout the term of the loan
Variable-rate mortgage: the interest rate is adjusted periodically, based on the prime rate, to reflect market conditions.
Interest rates: largely determined by market i.e.supply and demand, some other factors have impacts as well
Canada Prime Rate: The prime rate, also known as the prime lending rate, is the annual interest rate that Canada's major banks and financial institutions use to set interest rates for variable loans and lines of credit, including variable-rate mortgages.
What lenders consider
Gross Debt Service (GDS) ratio: GDS ratio is the percentage of your monthly household income that covers your housing costs. It normally ranges from 27% to 32%
Total Debt Service (TDS) ratio: TDS ratio covers your other debt as well, normally range from 37% to 40%
In addition, for condominium purchases, the lender adds an additional 50% of the monthly maintenance fee to calculate the GDS ratio.
Fees Associated with Mortgages
Mortgage broker fees: Normally paid by the lender in residential mortgages from major lenders. You still need to confirm with your mortgage broker first.
Legal fees: Paid by the buyer, normally combined with the fee for the transfer of title.
Appraisal fees: Requested by the lender, but in many cases, paid by borrowers. You should confirm this as well.
Pre-approval Mortgage is important
Pre-approval means that a lender has stated that you qualify for a mortgage loan based on the information you have provided, and it is subject to certain conditions. A mortgage pre-approval often specifies a term, interest rate, and principal amount.
Pre-qualifying is only the first step in the process before pre-approval mortgage.