With topics such as affordability and house prices getting a fair bit of attention it may be difficult to cut through the clutter to understand what you, as potential homebuyers, should be asking yourself and others when searching for that perfect home. CIBC has asked some of their trusted experts to provide insight and answers on some of the more frequently asked home buying questions.
These experts include: Stephen James Wu, a CIBC Mortgage Specialist with 7 years experience helping CIBC customers find a mortgage product that best suits their needs; Shawna Martin, a CIBC Mortgages Specialist who has worked for 2 of Canada’ largest FIs and handled portfolio volume of up to $100MM; and Dana Senagama, a Senior Market Analyst for the Canada Mortgage and Housing Corporation (CMHC), who is involved in analyzing and forecasting all components of the GTA housing market.
- How Much Can I Afford?
- How Much Do I Need For My Downpayment?
- What Should I Look for in a Home?
- How Can I Save For My Downpayment?
- What do I need to qualify for a CIBC mortgage?
- How do I find out what my credit rating is?
- Do I need Mortgage Insurance?
- Is now a good time to buy/sell my home?
Have a question that is not listed above? Visit us in branch, call us at 1-800-465-2422 or visit cibc.com
How Much Can I Afford?
Buying a house essentially comes down to 2 key commitments:
- The amount you can afford as a downpayment
- The mortgage payments you can comfortably carry while still enjoying life
There's a general rule for calculating how much of your household income should go to household expenses, including mortgage payments. Typically, household expenses should not exceed 32% of your gross income (i.e. your total household income prior to any tax or other deductions).
Click here to calculate the maximum price of the home you can afford.
How Much Do I Need For My Downpayment?
While it is possible to buy a home with as little as 5% down, the amount of your downpayment will determine whether you'll have a conventional mortgage or an insured, high-ratio mortgage.
What's the difference?
- A conventional mortgage means your downpayment is at least 20% of the purchase price
- A high-ratio mortgage means your downpayment is less than 20% of the purchase price
High ratio mortgages must be insured by a third party such as the Canada Mortgage and Housing Corporation (CMHC) and require you to pay an insurance premium.
What Should I Look for in a Home?
Taking the time to narrow down your house-hunting priorities can help your real estate agent provide you with a range of properties that meet your criteria. In turn, increasing your chances of finding the house that's right for you.
Here are some important questions to ask yourself:
- Is this home the right size? Are there enough bedrooms and bathrooms?
- Is the yard big enough? Does it have a finished basement?
- Is it in your general price range?
- What is the condition of the home? How old is the furnace and wiring? Take a look at the roof and the foundation.
- Take a look at the neighbourhood. What's the condition of other homes in the area? Does the community appeal to you?
- Is there good access to public transit and major roads? Are there good public facilities like schools, hospitals, shopping and recreation facilities in the area?
- Is this an older, more established neighbourhood or a new development?
- How do the municipal taxes compare to those in other areas? Are there any development plans that will affect the neighbourhood?
- Are there any zoning bylaws that might affect you - such as your ability to have a home office in your house?
- Does the property have the potential to increase in value?
How Can I Save For My Downpayment?
For many first-time homebuyers, saving what's required for a downpayment can seem overwhelming. However, it can be as simple as managing your budget differently.
You can start saving for your downpayment:
- By setting aside money each month just as you would a regular monthly payment
- By opening a CIBC RRSP Regular Investment Plan to help you save tax free
- With a cash gift from a parent or relative
Let CIBC help you with a strategy to reach your goal of buying your first home faster, click here.
What do I need to qualify for a CIBC mortgage?
The minimum mortgage amount CIBC offers is $10,000. A guarantor may be required for any mortgage if the applicant is unable to meet the lending criteria.
To obtain a mortgage, the property must meet certain eligibility requirements. It must be:
- Located in a built-up area with municipal services such as water, sewer and hydro
- Structurally sound, have good plumbing, central heating and wiring that meets municipal standards
You must also meet certain income and employment requirements:
- 2 years of continuous employment or 3 years of continuous self-employment (T-4 confirmation)
- A realistic equity in the property and a level of income sufficient to meet the mortgage payments
- A 5% downpayment
For more information on mortgage requirements, please visit us in branch, call us at 1-800-465-2422 or visit our CIBC mortgages page
How do I find out what my credit rating is?
You have the right to see the information in your credit bureau file, which includes your credit rating. Contact one of Canada's credit bureaus to receive a copy of your credit report by mail, free of charge. For a fee, you can also view your credit report online. Check your report carefully - if there are errors in the payment information on your credit report, you should send a letter to the credit-reporting agency requesting rectification of your records.
For more information, contact one of the credit bureaus directly at:
TransUnion Canada: 1-866-525-0262
Equifax Canada: 1-800-465-7166
Do I need Mortgage Insurance?
Typically lenders will require mortgage loan insurance if a borrower has a down payment of less than 20% of the purchase price of the home.
By protecting lenders against borrower default, Mortgage Loan Insurance creates an opportunity for Canadians to realize their dreams of homeownership. And when you buy your home sooner, you grow equity faster AND benefit from interest rates that are comparable to someone buying with a 20% downpayment.
Visit cmhc.com for more information
Is now a good time to buy a home?
This question cannot be answered with a simple yes or no. The decision to buy or sell a home is very much dependant on each home owner’s individual situation. Affordability is a key issue. Potential home buyers should make sure that they are comfortable with the amount they will spend on their monthly mortgage payment and other housing related costs, relative to their household income and other non-housing-related expenses they may have.
Canada Mortgage and Housing Corporation, as Canada’s national housing agency, has created a tool called Home Buying Step-by-Step that provides Canadians with a straight forward way to assess whether they are ready to buy a home and, if so, how much they can afford. The guide contains questions and worksheets on the following:
- Employment situation and income;
- Personal finances, including savings;
- Mortgage qualification and calculating the mortgage amount and payments; and
- Other housing related costs (e.g. closing costs, moving costs, property taxes, maintenance costs, utilities etc.)
I would encourage all home buyers, whether they are buying their first home or not, to check out the Home Buying Step-by-Step tool here. The use of this tool could be done in conjunction with seeking advice from a financial advisor.
Aside from assessing their own situation as it relates to the potential purchase of a home, households should also be aware of broader housing market trends in the community they wish to live in. Home buyers can access to a wide array of up-to-date housing market information on the CMHC website.
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