When purchasing a new home for the first time, you may run into a little surprise, if your mortgage broker failed to advise you on closing costs!
To satisfy this condition which lenders will impose on you, you will need to be able to demonstrate your ability to pay an additional 1.5% of your purchase price at closing, on top of your down payment!
For example, if you are purchasing a home for 237,000$, the bank will ask to see your down payment:
5% of purchase price (11,850$)
1.5% for closing costs (3,555$)
For a total of 15,405$.
A list, and great tool, to help prepare for the closing costs can be found here: http://www.cmhc-schl.gc.ca/en/co/buho/hostst/wosh_007.cfm
Any previous homebuyers who have had the unfortunate shock of learning you needed to prove more than you thought you did should blame their mortgage broker/agent for the failure of preparing them.
If you don’t necessarily know what to budet for, print out the checklist (url above) and bring it to your mortgage broker. They can help you go over the list and ensure you are on track for a smooth closing.
Another surprise I’ve received from feedback of first time homebuyers, is CMHC’s mortgage insurance premiums that need to be paid if you are putting down less than 20%. This is generally paid upfront by the lender and added on top of your mortgage amount, to be paid out on a monthly basis (included in your mortgage payment.)
If you have any questions or concerns, please visit our website at www.mortgageforces.ca