First Steps

• Your first step should be to choose your real estate agent wisely before you even start going to look at houses. It is important that you are comfortable with him/her and that you feel you can trust them to act in your best interests. If you don't know an agent then ask a friend, family member or business associate to recommend one. The agent you choose can also take you around to open houses and then you know they are acting in your interest and not the sellers. They make good money in commissions on the house you decide to buy, so you should expect good service from a knowledgeable agent. The buyer does not pay Real Estate fees for their agent, the seller is responsible for the fees.
  
  
• The next step I would suggest is to see your banker and obtain a pre-approved mortgage. He/she should outline for you all the costs involved and tell you what you can afford and how much of a mortgage you can be approved for. The Pre-Approved Mortgage will cost you nothing and there is no commitment, but it will tell you how much house you can afford. Another advantage to this is they will guarantee the rate usually for 60 -90 days and if interest rates are on the rise this can work to your advantage, if the rate goes down they will still give you the lowest rate. Just keep in mind that the bank has guidelines and while you may be able to afford a payment it also depends on your life style and you should take this into consideration when deciding how much house you can afford.
  
  
• Ok you still want a house but the bank didn't approve you, well you still have other options. Go see a mortgage broker, they will take your application and attempt to find financing for you either with another institution or private financing. They will charge you a fee for this service but if they find you financing it will be well worth it. Again remember the financial institutions are still all competing and while one may not be willing to take a higher risk mortgage others may. A mortgage loan is judged on different criteria than a unsecured loan or a car loan, with a mortgage they have security that will most times increase in value, and therefore is less risk. If after this finance shopping you still were not able to find financing, you still have gained the knowledge of what you need to do in order to get a mortgage in the future so the time has not been wasted.
  
  
• Check out the tools I have put on this website for you they will help you calculate a payment, inform you of the criteria the bank uses in approving a mortgage, and ways to save money with prepayments, weekly, bi-weekly payments or reducing your amortization period, and a breakdown of all the costs involved for a home purchase.
  
  

Amount of Down Payments Required

25%

The Charters governing financial institutions only allow financial institutions to lend up to 75% of the purchase price or appraised value, unless the mortgage is insured. (see CMHC Mortgage Insurance)

5% - 24.9%

A minimum of 5% down payment is required on homes insured through Canada Mortgage & Housing (CMHC). Note: Normally, the minimum down payment comes from your own resources. However, a gift of a down payment from an immediate relative is acceptable for dwellings of 1 to 4 units. For eligible borrowers, additional sources of down payment, such as lender incentives and borrowed funds, are also permitted through CMHC’s Flex Down product. Check with your lender for qualifying criteria and availability.

Shopping for a Mortgage

• Now about being a savvy customer, remember that the bank is competing with all the other banks for your business, and in so doing will offer incentives, freebies and rate discounts to get your business. They are not doing you a favour by lending you money, they stand to make a lot of money over the life of a mortgage. What they won't tell you and I have often seen them do is to waive fees, give rate discounts or offer cash back. So negotiate or shop around and find one that will gives you the best deal.
  
  
• Appraisal Fees - The cost of an appraisal is approximately $200.00. It is a requirement depending on the loan to value ratio, that the bank obtain an independent appraisal from a qualified appraiser. This also safeguards you from paying to much for a property. So negotiate or shop around to get this fee waived.
  
  
• Mortgage Rates - In my experience the banks can and do give rate discounts of up to 1 full percentage point depending on the term of the mortgage. Now one percent may not seem allot, but consider this, on a mortgage of $100,000.00 at 5% versus 6% the interest saving just over 12 months is approximately $725.00 which is better in your pocket than in theirs.
  
  
• Cash Back Incentives - Of course the amounts and percentages, and distribution may vary from institution to institution but given an example of a $100,000.00 mortgage you can get up to 3% or $3000.00 of the mortgage amount back in cash, or 3.25% if invested in an Retirement Savings Plan depending on the term of the mortgage taken. You can use the cash back for legal costs, new furniture, appliances, renovations or anything. Look at the following table as an example.
  

  Term Selected	Cash Back	Cash Back to RRSP
  7 yr closed	$3,000 3%	$3,250 3.25%
  5 yr closed	$3,000 3%	$3,250 3.25%
  4 yr closed	$2,250 2%	$2,500 2.25%
  3 yr closed	$1,750. 1.75%	$2,000 2%

  
  
  These rates are subject to change and are only provided as approximations see your financial institution for exact amounts and rates offered.
  
  
• Other Incentives - Bonus points on your Visa or MasterCard Gold Credit Card. (e.g. 100,000. Mortgage - 5,000 Reward Points)

I am sure there are many other incentives or bonus's that can be obtained but I think these are the main ones. My whole point here is to show you that your mortgage business is in demand in a very competitive industry and you have room to negotiate and should shop around. Oh and don't forget to "ASK" if they don't offer the rate cuts or incentives, they don't always tell you up front, they don't want to pay it out if they can avoid it. So weigh it all up and get the best deal and as you can also see it will save you a lot of money.

Home Inspections

• A home inspection, by a qualified company can be useful after an offer is presented, if made as a condition in the Offer to Purchase. It could save you thousands of dollars in unseen home repairs,  the cost of the inspection is the responsibility of the buyer. Home Inspectors are independent third parties who represent you and prepare a thorough report of the mechanics of a home including roof, electrical system, heating/cooling system, plumbing, foundation and insulation where visible. Ask your representative, they can refer you to a reputable company that charges reasonable fees. Inspections can run from $200.00 to $400.00.
  
  

Lawyers

• Lawyers fees can vary from firm to firm. My suggestion here is again to ask your friends, family members or your agent to refer you to a lawyer that charges reasonable fees and is reputable . Get a few names and phone around for the best rates. The fee I am referring to here is the fee over and above the disbursements that they will pay on your behalf such as land transfer tax, GST etc. The disbursements are fixed rates or amounts that would be the same at any lawyers office.
  
  

Borrowing from your R.R.S.P's (Registered Retirement Savings Plan)

• The Home Buyers' Plan permits first time buyers to withdraw up to $20,000 each from their RRSP's to put toward their down payment to enable them to buy their first home.  There is no tax withheld on the money withdrawn from the RRSP account.  The amount borrowed must be repaid over a period of time, not exceeding 15 years.
  
  An idea that has been exploited and some banking institutions will co-operate with is to top off your RRSP eligibility by borrowing the funds to take advantage of your maximum contribution for the year. Because the RRSP eligibility is cumulative if an individual has not been able to take advantage of maximizing there tax deduction for previous years this amount can be sizeable. The tax savings for you can be very advantageous.
  
  

Making an Offer

1. Your agent should provide you with background information on the area, market conditions, prices of comparable houses sold in the area to help you make an informed decision.
   
   
2. Your agent will draw up your offer and go over every detail with you. The offer is known as an Offer to Purchase. The offer will usually be made conditional on financing, home inspection and availability of a survey. These conditions allow you time to arrange and ensure your mortgage loan is approved, and a satisfactory home inspection is completed. Even with a Pre-Approved Mortgage the property requirements must be met and an appraisal on properties of mortgage loan with loan to value ratios of over 65% will be completed. Most Mortgage lenders require a survey or Title Insurance  on the property, but in most cases the seller will have an old survey available. The cost to have a survey completed is approximately $600.00, however most financial institutions will accept Title Insurance if a survey is not available which is offered at a reasonable cost.
   
   
3. Your agent will communicate to the sellers agent that he has an offer to present on the property. A suitable time will be arranged with the buyers agent, sellers agent and the vendor which is usually done expediently.
   
   
4. The seller may accept, reject or countersign the offer. A counter offer may reflect a change in price, closing date or other variable.
   
   
5. The offer may go back and forth until an agreement is reached on price and conditions or details