We’re pleased to provide a First-time Home Buyers’ Primer. Read it in its entirety or select the situation that best meets your needs. Determining what you can afford
Assessing the down payment
Finding funds for your down payment
House hunting
Choosing your mortgage
Making an offer
Retaining a lawyer
Finalizing the sale
Adding up the costs
Determining what you can afford Some say you should stretch to buy as much of a home as you can afford, because with regular pay raises and increased earnings potential, the big payment today will seem like less of a payment tomorrow. The other school of thought says that you should refrain from borrowing as much as you qualify for because it is wiser not to stretch your financial boundaries. Are you in a position where you expect to make more money soon? Would you rather be conservative and fairly certain that you can make your payment without stretching yourself financially? Make sure that whatever you do, it’s within your comfort zone. We have helped many members with this difficult process and welcome the opportunity to work with you.  top
Assessing the down payment There are many options for down payments starting as low as 0% down. OPPA Credit Union offers a No Down Payment Mortgage that requires just 1.5% of the purchase price to cover closing costs. This mortgage works by providing you with cash back when you take a five-year posted rate mortgage. That money is then used to cover your required down payment. Typically, lenders require mortgage loan insurance for loans made to anyone who wishes to purchase a home with less than 20% of the purchase price. The Canadian Bank Act prohibits most federally regulated lending institutions from providing mortgages without mortgage loan insurance for amounts that exceed 80% of the value of the home or purchases with less than a 20% down payment. Loan insurance is not something that is paid up front. Rather, it is added to the mortgage amount you are borrowing after the down payment is taken into consideration. For example, a purchase price of $150,000 with 5% down would equate to a mortgage amount of $142,500. If insurance of about $3,918 is added to your mortgage, the grand total for financing would be $146, 418. In simple terms, mortgage insurance is not an out-of-pocket expense. It is added to your mortgage and included in your weekly, bi-weekly or monthly mortgage payments. For more information about mortgage loan insurance, visit the Canada Mortgage and Housing Corporation or Genworth Financial Canada. top
Finding funds for your down payment We help our members come up with strategies for raising a down payment: - What about accumulating funds for your down payment by directing money to your savings account through automatic payroll deduction?
- How about a gifted down payment from a parent or relative?
- What about taking advantage of your ability to use your RRSPs as a down payment? If you’re a first-time home buyer, you can withdraw up to $20,000 tax-free from your RRSP to use as a down payment. However, certain conditions apply, including the requirement to repay the funds within 15 years or else be taxed on the amount you have not paid back.
- What about a personal loan or line of credit for a down payment?
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House hunting Make sure you choose a real estate agent who has your best interests at heart – especially if the agent is working for both you and the seller. Check references. Ensure the person has a solid sales record in the neighborhood you want live in. Check out the credit union’s MovePlus service to have a real estate agent referred for you. Then, have fun house hunting. Although you may be tempted to look at homes beyond your means, try to stick to those in your price range. top
Choosing your mortgage It’s important to choose the type of mortgage that meets your needs and lifestyle. Your Member Service Advisor can help you sort through the options. We offer the same types of mortgages you’ll find at a bank, with highly competitive rates.
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Making an offer Once you’re ready to take the big step, make an offer that is conditional on a home inspection and final financing. By having an inspection performed by a professional building inspector you can ensure you know what you’re buying. The inspector may identify repairs that are needed and will confirm that the house is structurally sound. Usually you’ll get a written inspection report. If you don't, ask for one – it’s well worth the investment. When you put an offer on a home, you also need to make a deposit. This shows the vendor that you’re serious about the purchase. Typically, the deposit is $1,000 to $1,500, although it may be higher if it’s a private sale. The deposit forms part of your down payment and is held in trust by the lawyer until closing. top
Retaining a lawyer You’ll need to retain a lawyer to assist you with the sale. Look for somebody that you can work with, who’s open about fees and closing costs, and who specializes in real estate law. The MemberMOVE service can help you select a lawyer. top
Finalizing the sale Once you’ve met the conditions of the purchase and finalized your financing, you’re ready to finalize the sale. The signed sale papers become the legal Agreement of Purchase and Sale. Ensure you review the documents with your lawyer. After the Agreement is signed and accepted, your lawyer will order a series of searches from various municipal offices to ensure that the vendors haven't been sued, that they've paid all their property taxes and water, electric and gas bills, and that there'll be no outstanding mortgages or liens on the property once you become the owner. Your lawyer will notify the property tax and utility offices that you will be the new owner. The OPPA Credit Union will be in contact with your lawyer to ensure the correct funds are available on closing. Typically, your lawyer pays the relevant parties on your behalf, including additional closing costs that you may not have considered. On closing day, your lawyer will meet a representative from the seller's law firm at the land registry office. There, your payment will be exchanged for the keys to your home and the two sides will trade closing documents. Your legal representative will then register the new deed and mortgage, so anyone doing a search will see that you're the owner. Finally, you pick up the keys and YOU'RE IN! top
Adding up the costs
When buying a home, the purchase price is always payable "subject to the usual adjustments" at closing. This means that any amount that the seller has already prepaid will be adjusted so that the home buyer pays the excess amount back to the seller, and vice versa. However, there are additional closing costs that can include: - Municipal property and school taxes.
- Monthly condominium maintenance fees (if applicable).
- Utilities, such as hydro, water and fuel oil.
- If it’s a new home, you often need to buy kitchen appliances, tools, gardening equipment, cleaning materials, and perhaps some new furniture, carpets or curtains. It's a good idea to tally up the costs of items you think you'll need in the short term and factor these expenses into your initial costs.
- Land transfer tax, sometimes known as the "welcome tax.” Most provinces levy a one-time tax based on a percentage of the purchase price of the property.
- Property insurance – All homes must have adequate insurance coverage against fire, and other risks of loss, theft and liability. You may find that insurance on your new home is more costly than your previous residence. Your mortgage lender will require that you provide your lawyer or notary with proof that your home insurance is in place by the closing date.
- Moving costs – Whether the move into your new home is a do-it-yourself affair or you hire movers, there will be costs involved. If you plan to move during the peak spring and summer months, you should contract for service two to three months in advance if possible.
Realistically, you should estimate your closing costs to be approximately 1.5% of your purchase price.
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