First Time Home Buyer Mortgage in Toronto

How to get a Mortgage as a First Time Buyer

Buying your first home is one of the most exciting and fulfilling experiences of your life. Being able to invest in this significant asset will provide you with a home to call your own while helping you build instant equity with every mortgage payment you make. However, there are many things you should know before you decide to buy.

One of the most important steps in the home buying process is determining if you can get a mortgage and also how much money the lender will be willing to offer you towards your home. With this in mind, you should first speak to a mortgage broker. They can assist you in determining what mortgage is available based on your credit and finances. This is the beginning of the mortgage pre-approval process.

When you meet with your mortgage broker, you should have an idea of what you are looking for in a home. You want to consider what type of home you need today, and whether or not you plan to be there for a few years or for the longer term. Some of the most critical factors that will affect your home search include:

  • The areas you would like to live

  • Home and property size

  • Type of home such as a condo or a detached house

  • Amenities that are important to you

  • Travel distance to work and local transportation

  • Wants versus needs

  • New construction, resale or custom home

These factors are helpful when discussing your needs with our mortgage brokers.

When you meet with our mortgage brokers, you will also require some documents including:

  • government-issued photo ID

  • contact information for your employer

  • proof of address, income, down payment, savings and investments

  • details of current debts

  • your credit score

This information will be used when we begin the pre-approval process.

How Much Can You Afford?

Of course, first-time buyers have to be certain they can afford a home purchase. Your pre-approval will help you determine this. However, you also want to know that you can meet your payments without putting too much strain on your budget. We can help you decide this, but you can also ask yourself some financial questions before our meeting, including:

  • How much do you currently spend on expenses and debt payments?

  • How much have you saved or invested?

  • How much do you feel you can pay towards your mortgage each month without running into financial issues?

  • How much can you or have you saved for a down payment?

  • How would homeownership expenses affect your current financial situation such as utilities, repairs, home décor, insurance, etc.?

You can also consider the following upfront costs, so you have a better understanding before you meet with our mortgage brokers:

  • the down payment

  • home inspection and appraisal fees

  • insurance costs

  • land registration fees

  • prepaid property taxes or utility bills (the buyer reimburses the seller or builder)

  • legal or notary fees

  • potential repairs or renovations

  • moving costs

  • GST/HST/QST on a newly built house or mortgage loan insurance

All of these costs add up and make an impact on the house you can afford.

Last but not least, do you know your credit score? Remember, in order to qualify for a mortgage; you have to show lenders you have been able to pay bills and debts. During the pre-approval process, we will run a basic credit check, but you might also want to get a copy of your credit report, so you know what to expect. We can offer advice on how you can improve your credit score.

With all of this information, you will be better able to decide how much of a mortgage you can afford.

How the First Time Home Buyer Incentive Program Works

As a first-time homebuyer, you can apply for the Home Buyer Incentive program. There are a few qualifiers for first-time buyers, including:

  • You require the minimum down payment

  • You can make no more than $120,000 per year

  • You are limited to total borrowing to 4 times the qualifying income 

With these qualifiers, you are allowed to apply for a 5% or 10% shared equity mortgage with the Government of Canada. This means the government shares in the upside and downside of the property value. You also don’t have to increase the amount you have available for your down payment. As well, there is no interest or ongoing payments applied to the government’s contribution.

In a nutshell, the Government of Canada’s contribution depends on the type of home. They will offer: 

  • 5% for a first-time buyer’s purchase of a re-sale home

  • 5% or 10% for a first-time buyer’s purchase of a new construction 

The homes that are eligible include: 

  • New construction

  • Re-sale home

  • New and re-sale mobile/manufactured homes 

  • Types of homes include:

  • Single-family homes

  • Semi-detached homes

  • Duplex

  • Triplex

  • Fourplex

  • Townhouses

  • Condominium units

The home must be your primary residence and be used full-time for year-round occupancy.

You have 25 years to repay the incentive. You will also have the option to make a repayment in full without a pre-payment penalty often charged by lenders. If you refinance your mortgage, this will not mean your repayment is triggered.

If you sell the property before the 25 years is up, you have to repay the full incentive at that time. However, if you do decide to sell, you have to obtain approval of the sale from the Program Administrator.

The finances are as follows:

  • The incentive is based on a 5% or 10% incentive of the home’s purchase price of $200,000, or a flat incentive of $10,000.

  • Because the government shares in your investment, the percentage they contribute applies to the current value when you pay back the incentive. For example, if your home rises in value to $300,000 and they contributed 5%, you would have to pay $15,000. 

  • If the home decreases in value, your repayment value is still reflected in the current value, so you would pay less.

If you are a first-time homebuyer, our mortgage brokers can provide all the information you need for pre-approval and the mortgage and closing process.

In-person connections are still important to homebuyers.

In an increasingly technological world, both lender and broker clients still value in-person connection throughout the home buying process. Nearly three quarters (73%) of buyers agree it is important to discuss face-to-face with their mortgage professionals. However, half would feel comfortable using more technology to arrange their next mortgage transaction (i.e. their mortgage renewal).

Buyers don’t want to manage the home buying process alone.

There is a significant decrease in the comfort level of managing the entire home buying process and mortgage transaction without having to meet with a mortgage professional (38% in 2019 compared to 45% in 2018).

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Are you financially ready to own a home?

Buying a home isn’t for everyone. Before making any decisions consider the following questions:

Are you financially stable?

Do you have the skills and discipline to handle a large purchase?

Are you aware of all the costs and responsibilities that come with home ownership?

Are you ready for this?

Book a consultation with us today and we can discuss these and any other questions or concerns you may have.

Who should you call? Your home buying team:

What about after I Buy?

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