Frequently Asked Questions
Home Buying Process
How much can I afford to pay for a home?
To determine 'affordability' you will first need to know your taxable income along with the amount of any
debt outstanding and the monthly payments. Assuming it is your principal residence you are purchasing,
calculate 32% of your income for use toward a mortgage payment, property taxes and heating costs. If
applicable, half of the estimated monthly condominium maintenance fees will also be included in this
Second, calculate 40% of your taxable income and deduct all of your monthly debt payments, including car
loans, credit cards, lines of credit payments. The lesser of the first or second calculation will be used to help
determine how much of your income may be used towards housing related payments, including your
mortgage payment. These calculations are based on lenders' usual guidelines.
In addition to considering what the ratios say you can afford, make sure you calculate how much you think
you can afford. If the payment amount you are comfortable with is less than 32% of your income you may
want to settle for the lower amount rather than stretch yourself financially. Make sure you don't leave
yourself house poor. Structure your payments so that you can still afford simple luxuries.
What is a home inspection and should I have one done?
A home inspection is a visual examination of the property to determine the overall condition of the home. In
the process, the inspector should be checking all major components (roofs, ceilings, walls, floors,
foundations, crawl spaces, attics, retaining walls, etc.) and systems (electrical, heating, plumbing, drainage,
exterior weather proofing, etc.). The results of the inspection should be provided to the purchaser in written
form, in detail, generally within 24 hours of the inspection.
A pre-purchase home inspection can add peace of mind and make a difficult decision much easier. It may
indicate that the home needs major structural repairs which can be factored into your buying decision. A
home inspection helps remove a number of unknowns and increases the likelihood of a successful purchase.
How does the appraisal affect the mortgage process?
An appraisal of real estate is the valuation of the rights of ownership. The appraiser must define the rights
he intends to appraise. The appraiser does not create value, the appraiser interprets the market to arrive
at a value estimate. As the appraiser compiles data pertinent to a report, consideration must be given to the
site and amenities as well as the physical condition of the property. An appraiser may spend only a short
time inspecting the property, however, this is only the beginning. Considerable research and collection of
general and specific data must be accomplished before the appraiser can arrive at a final opinion of value.
Due to the many types of value, such as Fair Market Value, Insurance Value, Tax Value and Value In Use,
the need to precisely define the purpose of the appraisal is essential.
What should I expect for closing costs?
Closing costs are approximately 1.5% of the Purchase Price. .The following are approximate costs:
- Appraisal Fee: $200.00
- CMHC FEE (if applicable): 165.00
- Survey Certificate (if applicable): 250.00
- Home Inspection 250.00
- Legal Fees (approx): 750.00
- Tax Adjustment (if applicable)
- Interest Adjustment (if applicable)
- Property Transfer Tax (if applicable)
What types of taxes are associated with the purchase of a property?
The Property Purchase Tax (PPT) is calculated at 1% on the first $200,000.00 of the purchase price of the
property and 2% on the balance over $200,000.00. In addition, GST may be applicable.
What is Property Transfer Tax and do I have to pay it?
- This tax is charged by the Provincial Government and is collected by your lawyer at closing.
- Each Province varies as to the amount but it is usually a percentage of the purchase price. For example in
British Columbia, the amount the purchaser must pay is 1% of the first $200,000 and 2% of the balance.
- You are exempt from paying PTT in British Columbia if you have never owned a home anywhere. You must
finance at least 70% of the purchase price and the maximum home price must not exceed $300,000.00.
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