Whether you’re a first-time homebuyer or looking to upgrade, navigating the mortgage process can be daunting. But don’t worry – we’re here to make it easy. Our team has helped thousands in Mississauga, Toronto, and the GTA achieve their dream homes. It’s our job to make sure you’re fully prepared so you can qualify for the best mortgage deal possible. We’ll give you all the essential information you need and are always available to answer your questions. Let’s make your homeownership dreams a reality!
Getting a Mortgage as a First-Time Buyer
As a first-time homebuyer, the process of obtaining a mortgage can be both exciting and intimidating. Here are the key steps involved:
1. Get pre-approved: Before you start your home search, it’s essential that we assess your financial situation and help you determine how much you can afford to spend on a home.
We always recommend a mortgage pre-approval so you know exactly how much you qualify for and what your monthly payments will be. Your pre-approval will also guarantee your rate for a period of 90-120 days. However, this pre-approval isn’t a definite mortgage approval since your financial situation will need to be verified, and the property assessed by your lender to make sure it meets their guidelines.
Getting pre-approved is a crucial first step. We prepare pre-approvals every single day and can get you started with yours today!
2. How much downpayment do you need? The minimum downpayment for a home purchase is 5% on the first $500,000 and 10% on the remainder for homes under $1M. So, for a $900,000 purchase, you need 5% down ($25,000) for the initial $500,000 and 10% on the remainder ($40,000) for a total of $65,000. If your purchase is $1 million or more, the minimum downpayment is 20%.
If your downpayment is between 5% and 20%, you are required to have mortgage default insurance, which is added to your mortgage balance. For a 5% downpayment, the mortgage insurance premium is 4%, decreasing to 3.1% if you put down 10% and 2.8% if you put down 15%.
If your downpayment funds originate from your savings, you’ll need to provide bank statements from the past 90 days. It’s now very prevalent for homebuyers to receive a portion or all of their downpayment gifted by their parents, which requires a signed gift letter stating that the funds are a gift and are not required to be repaid.
3. Your Credit Score is Important: Besides having sufficient income and downpayment, obtaining a mortgage involves another crucial consideration: your credit history. Lenders use your credit score to evaluate how you manage credit. Request a copy of your credit report from Equifax or TransUnion and review it for any errors or issues that need to be addressed. Maintaining a good credit score can increase your chances of accessing the best mortgage rates. The most important factor in having a good credit score is to always pay your bills on time, all the time. Never let a bill get past due!
4. Find Your Dream Home: Once you have an idea of your budget, begin your home search. Work with an experienced real estate agent who specializes in the Mississauga, Toronto, or GTA area to help you find properties that meet your needs and fit within your pre-approved mortgage amount. If you need help finding a reputable realtor, we can recommend someone for you.
5. Plan for all Costs: You won’t want to be blindsided by unexpected costs. You need to account for closing costs such as legal fees, appraisal fees, title insurance, and land transfer taxes. These costs typically range between 1.5% and 4% of the home’s purchase price. Many first-time homebuyers don’t factor in these expenses, but we ensure that all clients are fully aware of all the costs associated with their home purchase.
Additionally, remember that home ownership also entails expenses like utility bills, insurance, taxes, and upkeep. To gauge the overall financial picture, create a budget that includes these expenses along with your monthly mortgage payment.
If you’re a first-time buyer in Mississauga, Toronto, or the GTA, know that you’ve got a dedicated team behind you. We’ll be your guide every step of the way. As a team of mortgage experts, we specialize in helping first-time buyers improve their credit, get pre-approved, access the best rates for their situation, and we’ll advise on downpayment strategies and the documents you need to collect. But first, let’s get started on your mortgage pre-approval!
Getting a Mortgage as a Trade-Up Buyer
If you’re already a homeowner looking to trade up to a new property, the mortgage process will have some similarities to when you purchased your first home. However, there are a few key differences to consider:
1. Evaluate Your Current Home: Before beginning your search for a new home, have an experienced realtor assess the value of your current property. Determine how much equity you have and whether it will be sufficient for the down payment on your trade-up home. Your home equity is the difference between your home’s market value and the remaining balance on your mortgage Also, determine if there are any necessary repairs or renovations required.
2. Consider Your Mortgage Options: You may be able to port your existing fixed-rate mortgage, enabling you to transfer your current rate and term to the new property with the same lender and not pay early mortgage discharge fees. If you need a larger mortgage, blending your current rate with the rate for the extra funds may be possible with a blend-and-extend mortgage. However, if you have a variable-rate mortgage, porting is generally not an option, so you’ll have to break the mortgage and pay a three-month interest penalty before getting a new mortgage.
We can review your current mortgage contract and advise on what is possible.
3. Plan for the Transition: When trading up, it’s important to consider the timing and logistics of selling your current home while purchasing a new one. You need to coordinate closing dates and may need a bridge loan to bridge the gap between the two closings. Your closing dates may just not align, or you may want to do some renovations on your new home before you move in.
4. Work with a Mortgage Broker: It’s always advisable to consult with an experienced mortgage broker to explore the most suitable mortgage options for your trade-up purchase. We can help you navigate the complexities of selling and buying a home simultaneously while ensuring you secure the best financing terms.
Whether you’re a first-time or a trade-up buyer, obtaining a mortgage is a significant financial decision. It’s crucial to work with a knowledgeable mortgage broker who can guide you through the process and provide personalized advice based on your unique circumstances.
Contact Joe Purewal, Mortgage Broker
If you’re considering purchasing a home in Mississauga, Toronto, or the GTA, I’m here to help. As an experienced mortgage broker with extensive experience in the local market, I can assist you in finding the right mortgage solution to meet your needs.
Contact me today to schedule a consultation and discover how I can help you navigate the mortgage process with confidence. Whether you’re a first-time buyer or looking to trade up, together we can make your homeownership dreams a reality.
