There are many up-front costs associated with the buying of a new home, as such it is important for the new home buyer to be as prepared as they can be, to avoid, negative surprises.
Proper Planning can help avoid surprises. I’ve written this blog in the hopes to cover many of the key UP FRONT costs associated with a new home purchase, as I can to help the new home buyer be ready and properly plan their new home purchase.
**Please contact me for your FREE Home Closing Cost Planner**
The Down Payment
The down payment is the portion of the new home purchase that comes from you, the buyer. It is not part of the mortgage, which is advanced by the mortgage institution.
The down payment can be as low as 5%, if it is an insured mortgage loan, (please see have http://www.cmhc-schl.gc.ca/en/co/moloin/moloin_010.cfm for more information about insured mortgage loans and CHMC).
For traditional or uninsured mortgage you need a down payment of at least 20% of the purchase price of the home. Please note that even with 20% down, you will still need to be financially underwritten by the mortgage lender and may be required to make a larger down payment, so to be properly prepared the amount of down payment will have to be clearly established between the buyer and mortgage lender before the new home can be bought.
The size of the deposit varies, and is paid to the home seller when a buyer(in this case you) makes an Offer to Purchase. This shows that you are a serious and committed buyer. The deposit comes from part of the down payment and the remainder of the down payment will be due at the time of house closing.
If for some reason the home buyer does not go through with the house purchase, other than a reason listed in the purchase conditions, (normal conditions of purchase include mortgage financing approval, home inspection, etc…) the deposit is normally non-refundable.
Home Inspection Fees
Arranging a home inspection, by a professional home inspector, as part of your Offer to Purchase, is prudent. This will help you to understand the condition of the home and any issues that you should be aware of.
This cost may range depending on certain factors, including, home size, age, complexities etc…
Your real estate agent usually can provide a few different options for home inspectors, as this is a very important step in your new home purchase.
Quite often mortgage lenders may require an appraisal in order to forward the funds for the mortgage loan. They will require an approved appraiser to prepare the appraisal report, to estimate the value of the new home. The cost varies, and you’ll need to make the appraiser is approved by the mortgage lender before you arrange for the appraisal.
The price of the appraisal can vary, so it’s not a bad idea to contact 2 or 3 appraisers from the mortgage lenders approved list of Appraisers. The appraisal usually includes amongst other things information and assessment of the property’s physical structure, and analysis of recent comparable home sales:
Mortgage Loan Insurance Premium
As mentioned earlier, if you’re putting less than 20% down payment, your mortgage lender usually requires mortgage loan insurance, usually the insurance is added to the mortgage and paid on a monthly basis, with your mortgage payments, but sometimes your lender may ask you to pay it in full upon closing.
Mortgage Broker’s Fees
Mortgage brokers quite often require a fee, for their service in helping to arrange a mortgage with a lender, this is something that would have been negotiated at the start of your work with the broker, or added as more work was done, in any case you need to make sure your prepared for this and make sure they keep you abreast of any changes to fees.
Finally you are ready to close, but at closing you must pay your lawyer for his work. Legal fees can vary, depending on what work was done but you should be prepared as it can range up to a few thousand dollars, depending on what was involved in the new home purchase and must be paid at closing out of pocket as well, it is not paid by the funds advanced by the mortgage company.
There are several other costs which may or may not pertain to your new home purchase including
- Property insurance
- Title Insurance
- Land Survey
- Land Registration Fees
- Water tests
- Septic Tank
- Prepaid taxes & Utilities
- Moving Expenses
- Renovations and immediate repairs
- Condo Fees
- Estoppel Certificate Fee
- Service set up fees, ie, phone, tv, internet etc…
This Blog was written with the intent to help the new home buyer be start their preparation for their purchase, though every attempt has been made to provide complete and accurate information, there are many surprises that can arise when looking for a new home, so be diligent as you go, keep records and be sure to use qualified professionals to guide you through this process.
Please contact me for a FREE Home Closing Cost Planner.
**Much of the research for the post was done from CHMC websight**