At West Haven Group, we talk a lot about the search for the right property and the importance of working with an excellent real estate agent, but it is just as essential to have a solid mortgage professional. Without the right financing in place, your dream home just isn’t going to come to fruition.
For today’s article, we will be focusing on first-time homebuyers—but stay tuned for a follow-up on refinancing! Below we cover the top four things Tyler recommends when it comes to getting a mortgage for the first time.
1 – Set a realistic budget
The first step of getting into real estate is deciding what you can afford. It is crucial that you think about your own budget prior to reaching out to a mortgage professional or a real estate agent. Many people want to be told what they can afford, but no one knows you and your lifestyle as you do. Do you like to travel, eat out often, shop for all the latest trends? You need to identify what your monthly spending habits are and decide if you are willing to change these for the right property.
It is common to become fixated on the maximum amount you qualify for but this amount is not necessarily what you actually want, or are able, to spend on a monthly basis. It’s important to remember that there will be property taxes, utilities, and most likely strata fees in addition to your monthly mortgage payment.
A good mortgage professional will ask these questions upfront so it is helpful to have your answers ready to get on the same page with what your needs are.
Pictured above, Tyler and Damon from the Pilot Mortgage Group
2- Find a mortgage professional you trust
When you are looking to acquire a property, you want to find a great mortgage professional. Ideally, you want someone who focuses only on mortgages, rather than a multitude of financial areas, and someone that has access to a variety of options. A mortgage broker, such as Tyler and his colleagues at Pilot Mortgage Group, are examples of this as they focus solely on mortgages and have access, and most importantly knowledge, on a variety of different options as opposed to someone who works at a bank and therefore only has access to that one financial institution.
You should try to find this person through someone you trust—recommendations make for the best professional relationships. Make sure you do your homework as they will ultimately be responsible for securing and locking in your financing.
Tyler told us that brokers are often referred to as the Quarterback of real estate as they are in charge of dealing with the lender, realtor, and lawyer –and although we aren’t known to use sports analogies at West Haven Group, we agree that this description is accurate. Brokers are responsible for getting your property deal past the finish line…or should we say goal posts?! Either way, a lot of experience is important.
3 – Have a timeline in mind
There are two different timelines to consider—your timeline to buy a property and your life timeline.
Let’s start with your timeline to buy a property. It is important to understand the process it takes to qualify for a mortgage and then be actually approved once you’ve found the right property.
Pilot Mortgage Group offers a clear process that sets out the following steps and estimated time for each so you know exactly what to expect:
Complete Introduction Form (2 min)
Provide Financial Application (10 min)
Gather and Provide your supporting paperwork (20 min)
Complete your Mortgage Consultation (30 min-1 hour)
Receive your Certificate of Pre-Approval
Choose a lender to work with (10 min)
Review your approval paperwork with your Broker (15-45 min)
Close your Purchase with your elected Legal Professional
You should be ready to buy within the next 120 days before you get a pre-approval as that is how long that rate will last—and you will have to requalify again if it expires.
Next up – it is also vital to know what your life plan is. Are you going to be happy to live in this property for five years or do you think you’ll want to upgrade sooner? Are you a couple with two incomes but planning to start a family soon so may have either a maternity or paternity leave coming up? What’s your risk tolerance in terms of interest rates fluctuating? A good broker will walk you through all of those questions before presenting the options that are best suited to you.
Be ready to close the deal
As discussed above, it’s important that you’re ready to ready to purchase a property within four months once you start talking to a mortgage professional—particularly when you are in a hot market like right now. You need to be fully prepared to go into multiple offer situations and you, therefore, need to have all of your financing prepared and ready to go.
There is a lot of pressure on buyers to have very short subject removal time periods (three days or less) or even go subject-free. It is crucial that you are working with an excellent realtor that you trust explicitly so you aren’t exposing yourself to unnecessary risk – and if you do decide to take some risks, that you are well educated and have done all the necessary due diligence.
Remember – just because you are preapproved does not guarantee to finance, it is dependent on the property itself and the banks’ appraisal of its worth.
Working with a fantastic real estate agent will help put you in a competitive sport, even with subjects, by being calculated in the offer.
Want to learn more?
Pilot Mortgage Group offers some incredibly helpful yet easy-to-digest videos series for First Home Buyers, Move-Up Buys, and Refinancing—so basically any type of purchase you can think of.
Having the honour of being recognized in the top 1% of realtors in Greater Vancouver, we only work with the best, and the team working at Pilot Mortgage Group truly are the best—we can’t recommend them enough. And don’t hesitate to get in touch with us to help realize your real estate goals!
The recent property bull market in Vancouver has been great for home-owners. It has however created a gap in housing affordability and attainability for the next generation. As it stands, many millennials are struggling to make it onto the first rung of the property ladder, and the bank of Mom and Dad is quickly becoming the only option for financing availability. There are a number of options available that can help you to guarantee a mortgage for your child, however, they do have inherent risks and considerations to take into account.
I Want to Help My Kids Buy a Home- What Are My Options?
With higher property prices and restricted rates of lending, obtaining a first home can be an arduous task. Many parents wish to help their children through the process, whether that is through financing, lending, or using their own funds/liquidity to finance a purchase.
When it comes to securing a mortgage for your child, you have a number of options available to you. Some may be more suitable for your circumstances, and all of the options have their own pros and cons, which we’ll cover in more detail.
1. Loan Your Child the Money
The first and probably most obvious option to help your kids purchase their first home is to loan them the money.
A loan agreement with your child can be as simple as a conversation over the dining table, however, depending on the reliability of your children, it may serve better to have the agreement formalized in some way.
In doing so you are able to set an interest rate (this figure is up to you) and clearly stipulate the terms of your loan and agreement.
It’s important to understand that if you formalize the loan, you would have to declare any interest on your tax return. Moreover, depending upon the size of the loan, it is likely that your child would have to pay mortgage lenders insurance, as part or all of the downpayment has been borrowed.
Furthermore, although this may be the most accessible option to help your children, it is also creating another debt load, which may work against them if they need to apply for a mortgage for the remainder of the property value. If you have the liquidity available to finance the entire purchase, however, giving your children a loan to help guarantee a mortgage for them could become a viable option- provided you trust them enough to pay you back!
2. Gift Your Child the Money, or the Property
This is probably the easiest and cleanest way you can finance a property purchase for your children. Although it may not be an option to gift the entire amount, for most situations gifting the money often makes the most sense from a:
Tax perspective There are no tax consequences for gifting the money. If you are providing the 20% downpayment (or more) it will guarantee your child a mortgage whilst avoiding mortgage lenders insurance. In addition, gifting the money to your children can help to avoid probate fees, if you planned to hand it over upon your passing anyway.
Legal perspective Once gifted, that money is no longer your property, nor can you be held liable for anything it is used for.
Gifting a property in and of itself is also an option, however, you may incur a capital gain if the properties fair value at the time of the ‘gift’ is more than what you paid for it.
3. Co-Sign or Guarantee a Mortgage
Both of these options will see you accept some form of liability on behalf of your children.
Becoming a co-signer to the mortgage adds your name to the title of the property, meaning that you are also a co-owner. As a co-owner of the property, you are equally liable to ensure that repayments take place. This could also put your financial future at risk should you need a loan of your own, as you may now be considered a higher risk.
It can, however, become a good investment opportunity for both you and your child, if the property value appreciates over time.
Becoming a guarantor means you are guaranteeing payment of the mortgage in the event that your child cannot. In most cases, this will use your own property equity, or take into account your other financial instruments or assets, as collateral. This also means, however, that any default will negatively affect your own credit scores too.
So Can I Guarantee a Mortgage for My Child?
The short answer is yes. The methodology for guaranteeing your child’s mortgage, however, will be dependant upon your family circumstances.
Loaning your child money, whether it is formally or informally, can open their access to financing that may otherwise be unavailable.
Gifting a downpayment may allow your child to avoid mortgage lenders insurance, claim the first homebuyers grant, and claim the primary residence exemption (freeing them from future capital gains on the property).
Co-signing or becoming the guarantor means you assume some liability and responsibility for the property, and access to finance will take into account your own financial situation.
Before committing to any of these options, however, it’s also important to ask yourself some of the tough questions:
If your child hasn’t saved enough for a downpayment, will they be able to make their mortgage repayments?
Will their debt-to-income ratio allow them to access finance for the remainder of the purchase?
Are you over-extending yourself by co-signing the mortgage, or guaranteeing the loan?
Will money become a point of contention?
If you have accounted for these potentialities and are looking for the most appropriate way to guarantee a mortgage for your child, speaking with a licensed Realtor can help you to understand the property risks and state of the market, and put you in touch with their network of brokers. For more information about financing, or helping your kids to find the right property, reach out and connect with us!