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Mortgages 101 – Tips for First Time Home Buyers

September 28, 2011

Sorry to all the First-Time Home Buyers for the delay in posting our final step. Back to school was a bit more hectic this year than usual and the kids’ hockey schedule seemed a bit more jammed packed then past years…

CONGRATULATIONS FIRST-TIME HOME BUYER! Your offer has been accepted and the excitement of being a first-time home buyer really starts to kick in. As a first-time home buyer, the next thing you need to do is contact your Mortgage Broker so that you can finalize your mortgage application.

Take note first-time home buyers, your broker will need to collect the following items and documents from you to start shopping your mortgage around to over 25 different lenders that want your business:

Mortgage Application – at this point of your experience as a first-time home buyer, your mortgage broker will already have collected some of the information required to process your mortgage application. There might be a couple of additional pieces of information that your broker needs to collect from you now that your purchase offer has been accepted.

Passport or Drivers License – a copy of your Photo ID and your fellow first-time home buyer applicants if not already collected earlier.

Agreement of Purchase and Sale – a copy of this written contract shows the price, terms, and conditions under which you agree to purchase your property. It must be signed by both the purchaser and the vendor.

MLS Listing – a copy of the listing or feature sheet of the property with an original photograph of the property. If you require Mortgage Insurance (i.e., if the Loan To Value of your property is above 80% a photograph is considered mandatory by both mortgage insurers Genworth Canada or the Canadian Mortgage and Housing Corporation.

Salary or Income Verification – this is required for yourself and any other co-applicant i.e., your spouse. Though T-4s and pay stubs are often suitable to begin financing, a salary letter from all employers will be required from the lender. It should confirm annual gross income, position, and length of time on the job. It should also outline any other income e.g., car allowance, bonus, overtime, etc.

Down Payment Verification – a bank statement showing three months accumulation or copies of Guaranteed Investment Certificates or Bonds. If monies are coming from your family a gift letter is required. Your mortgage broker can supply the form to be used. RRSP statements are acceptable. You will want to eliminate any doubt a lender may have regarding the source of your down payment so proper documentation and full disclosure up front will prevent problems closer to closing.

Once all this documentation and information has been collected your mortgage broker will prepare and process your application, order an appraisal and begin the process of narrowing down from a group of over 25 lenders which lender has the best rate, terms and conditions for you. Depending on the complexity of your application and the lender obtaining an approval can take anywhere from 24 – 72 hours.

This completes the seven steps that every first-time home buyer should be aware of. With the help of a trusted mortgage broker and a good real estate agent, your experience as a first time home buyer experience can truly be a great one.