Hire a mortgage broker
The importance of securing the best mortgage rate is high whether you are a first-time home buyer or even a seasoned buyer. A good mortgage broker has access to a variety of different lenders and often times will receive discounts from major lenders (ex. large banks). Hiring a mortgage broker is free and it is their job to help you to find the best rate based on your current financial situation. Hiring a broker is very beneficial because the mortgage market is dynamic, and rules and regulations are constantly changing. A good broker will be knowledgeable and up to date with these changes, and will keep you informed as well. The process of securing a good rate can be overwhelming and your broker will provide you with options and scenarios you may have not yet considered, potentially saving you thousands down the road. A mortgage broker can have access to over 60 lenders and can shop for the best rate, whereas large banks such as TD or CIBC will only offer their own products. Refer to this article for Toronto’s highest ranked mortgage brokers.
Get a pre-approval
Mortgage pre-approval is highly recommended, especially in a competitive city like Toronto. A pre-approval is confirmation from a lender that you qualify for a mortgage loan. When you are pre-approved you will know the maximum amount of a mortgage you could qualify for, you can estimate your mortgage payments and lock in an interest rate for 60-120 days. However, the amount that you are pre-approved for does not mean that you will get a mortgage loan for that amount as lenders will look at the value of your home and the amount of your down payment as well. The major benefit of a pre-approval is that when you find a home that you are ready to make an offer on, you won’t have to scramble for financing. This is especially beneficial if you are in a competitive market where you would likely lose the property if your finances are not in order.
Hire an attorney
When you are purchasing a home, you will want a Real Estate lawyer to help you to navigate decisions and protect financial transactions. A Real Estate lawyer specializes in legal matters related to transactions and will review all documentation prior to the final closing date. These documents include purchase agreements, mortgage documents, title documents, transfer documents and much more. The lawyer will also ensure that during the purchase of property, the transfer of funds is legal, binding and in the best interest of the client. If there are any disputes during the process between the buyer and seller, the attorney will provide legal representation if it is brought to court. On closing day, your lawyer will exchange the deed, mortgage and any other documents related to the sale, pass on the purchase cheque and register the deed and mortgage.
When your house closes, you will need to pay legal and administrative costs which are generally around 1.5-4% of the purchase price. Some of the mandatory costs are land transfer tax, legal fees and disbursements, title insurance, etc. Property insurance and property tax are other costs to take into consideration. Land transfer tax is calculated as a percentage of the purchase price of your home which is payable on closing. In Toronto, there is also a municipal land transfer tax you will have to pay. Use our land transfer tax calculator here.
In regard to legal fees and disbursements, you will have to pay your Real Estate lawyer for their services as well as title insurance which is purchased by your lawyer during the process. Transferring down payment funds should be done prior to closing day especially if you are taking money from your RRSP because it can take time.
A home inspection is used to provide an opportunity to identify any issues with a home before your offer goes firm. A professional inspector will examine the exterior and interior of the home and provide a report of their findings. A home inspection can be used as a contingency in your contract with the seller, which means if defects are revealed by the inspection, you are able to back out of your purchase offer free of penalty, within a certain timeframe. You could also ask the seller to fix the problems, reduce the purchase price, or give you a cash credit on the closing day to fix the problems yourself. Any abatements on price would be negotiated after the home inspection is complete and before removal of the Condition.
Real Estate conditions serve to protect the buyer and seller incase unexpected events occur before the purchase deal is finalized. Conditions are included in the purchase agreement which is legally binding. The buyer should only include conditions that are absolutely necessary, such as a home inspection condition, because having too conditions can scare the seller away. You must remove any conditions in writing in order for your deal to close successfully a few days prior to the closing date.
The purpose of a final walkthrough is to make sure that no damage has occurred between walkthroughs and when the closing is finalized. Most of the time, the final walk through is just the buyer and the buyer’s agent. It is important to communicate any issues you find to your agent or lawyer because most issues can be worked out by either negotiating or by having the seller fix it themselves to avoid holding up closing. Final walkthroughs are typically done 24 hours before closing.
Some important things to test while doing your final walk through are:
-Running water and check for leaks under the sink
-All doors open and close properly
-Heating and air conditioning
On the day of closing, it is important to bring government issued photo identification and your payment to cover the Real Estate closing costs. The last step will be signing many legal documents, and then the property is declared as yours. When the signing is complete, you are handed the keys, and the transaction is closed. Congrats, the house is officially yours!