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A Comprehensive Guide to the Homebuying Process: Demystifying Mortgages

Keith Uthe Demystifying Mortgages • July 10, 2023

Are you planning to buy a home but find the mortgage process confusing? Don't worry; the experts at Keith Uthe Demystifying Mortgages are here to help you demystify mortgages and guide you through the homebuying journey. In this comprehensive guide, we will walk you through the critical steps and questions you need to consider when purchasing a home. From understanding income requirements to selecting the right mortgage, we've got you covered.


What's the homebuying process? 

Many home buyers believe they should start to look for the home that they want first, and this often leads to disappointment and frustration as their expectations often exceed their financing capacity for a home. Below we will look at critical steps and questions that a home buyer must consider.


1. What is the minimum income required to buy a home?

There are important details home buyers need to know and understand about their income and employer as they decide to enter into the home-buying process. It is now only about what your income is. We also need to consider what you have for other liabilities as well as, together, they determine your debt service ratios, and these ratios are crucial to determining how much mortgage you can qualify for. Debt servicing involves the gross debt service(GDS- mortgage, taxes, heat, condo fee) not exceeding 39% of the usable gross income and total debt service (TDS- GDS plus all other liability payments) not exceeding 44% for standard high ratio mortgages. If you are putting 20% down or more, there are some further options we can consider.

Do you have permanent employment, or are you on probation? Are you an employee or on contract? Are you paid hourly, salary, bonus, and/or commission? How fast can your employer provide a letter of employment, and do you need to provide them with authorization for the lender to complete employment verification?


2. Mortgage Pre-approval

This is the most critical step in the process that absolutely cannot be skipped unless you have enough liquid cash in the bank that you do not need a mortgage. Wouldn't we all wish that was the case? Since this is not the current reality, a mortgage pre-approval is critical. This will inform you of what your maximum mortgage amount should be based on your current income and debts, as well as provide a hold on the rate. Home buyers must know that a pre-approval is not worth the paper it is written on as far as providing any kind of guarantee to receive final approval of financing. No matter if the pre-approval comes from a mortgage broker or your bank, it has the same negligible value for approval. The lenders will not do a final review of your documents and complete confirmations for final credit approval until you have a live deal where they also consider the property you have under contract. 


2. Selecting your Realtor

Once you have your pre-approval, you should then begin interviewing realtors to find who is the best fit for you and your family. Many home buyers decide to use a friend or family member, and there are, unfortunately, times when this can cause strain on that relationship if things are not going how you had hoped. Also, consider what types of real estate the realtor typically sells, what communities, and do they have a specialty such as condos, commercial, investment, or single-family homes. 


3. House Hunting

This can be the most intensive and frustrating part of the process. However, some good homework can really help home buyers.


Setting out your needs and wants is important and your realtor should go through this with you. Your realistic needs are the most important to look for, as wants are endless.


Drive and walk around neighbourhoods that you are interested in that meet your purchase power. Check out the neighbourhood at rush hour, in the evening on the weekend. This will give you a feel for traffic, the people that live there, their behaviours, and community culture.


If there are schools in the community, find out what time they start and finish and drive by the to see what traffic is like and how it may impact you if you purchase a home on the same street.


4. Making an Offer

Your realtor will help guide you in making a competitive offer. What you need to understand is the purpose and need for a financing condition and home inspection. Both of these help protect you as a buyer from unknowns. The financing condition gives the lender time to review the property and your documents to approve your mortgage. The home inspections allow you to hire a professional to review all the major components of a home to check their current working condition and note any items of concern for deferred maintenance or requiring repairs. This could help you to negotiate a lower price for these items.


5. Appraisal

The lender may require an independent third-party appraisal on the property that you, the buyer, pay for. This will determine the current market value of the property, and the lender uses this as part of the final approval for your loan.


6. Solicitor

The final step in the process is signing the mortgage with your solicitor. Your solicitor will receive a set of mortgage instructions from the lender, and it will have a set of trust conditions that the solicitor must fulfill. You will need to provide items like a photo id, void cheque, and balance owing for a down payment and legal fees. You should obtain a quote from your lawyer ahead of time on what the cost will be for their services. Once the mortgage documents are signed by you, the lawyer has to sign them and send them back with the requested documentation to the lender for review. Once they say it is all okay, then they are ready to fund the mortgage through your lawyer.

Don't forget to get quotes on your property insurance and ask Keith Uthe Demystifying Mortgages, your mortgage broker, for recommendations. The other consideration is setting up your utility services. In my mortgage broker business, I have a utility specialist to whom I introduce clients like Keith Uthe to discuss their utility options.


How to choose a mortgage? 

Choosing a mortgage can be a daunting task which is where a licensed and skilled mortgage broker comes in. They have access to multiple A lenders, Alt-A, B, and private lenders and understand the different lender policies, mortgage types, and terms. It is important to remember that rate is not everything. The lowest-rate mortgage may come with special conditions and limitations that could handcuff you in the future should you need or decide to sell or refinance. Terms such as prepayment privileges, payout penalties, portability, freedom to refinance, or having a bonafide-sale clause are all important to consider and understand. 

If you find a home that you really like with only a few tweaks to cosmetic items, then a purchase plus improvements mortgage may be an excellent option for you, or you may prefer to work on those items over time. Discuss this possibility with Keith Uthe, your mortgage broker.


Mortgage rates fluctuate constantly, and lenders do often offer unpublished rate specials, so your internet search for rates will only take you so far. Most rate sites only publish the lowest available rates for triple AAA clients, and if your file has any variance to that, you likely will have a different rate. Again, mortgage brokers like Keith Uthe have access to multiple lenders and rates, so they can provide you with the options available to you.


With the proper preparation and a team of professionals at Keith Uthe Demystifying Mortgages around you, the financial process can be done with a limited amount of stress, and be sure to find the best financing opportunity for you.

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New Mortgage Qualification

How the New Mortgage Qualification Rules Could Soon Affect Homebuyers

By Keith Uthe Demystifying Mortgages • September 11, 2024
In response to the COVID-19 pandemic and in an attempt to protect the economic future of Canadians, the Canadian Mortgage and Housing Corporation (CMHC) announced in early June that it would be tightening its qualification rules for mortgage insurance from July 1, 2020. Fortunately, they are two other mortgage insurers: Genworth and Canada Guarantee and neither of them are changing their qualification rules. The CMHC policy change will only restrict those who want to buy a home with less than a twenty percent down payment, have a credit score lower than 680, and if they will be able to qualify based on a lower limit on gross and total debt servicing ratios. This will mean that some potential homebuyers will have to continue renting due to their inability to qualify for a mortgage. It may also push those who were working and were on the fence about buying to rush to get into homeownership not knowing there are other mortgage insurer options available through a mortgage broker. The soon-to-be-implemented mortgage rules are created to provide a view to the greater world that our federal government is taking measures to limit personal debt. The month of June has seen a short-term burst of buying while the month of July will likely see a drop in the real estate sales market as a result of both the policy change and pent up buyers from COVID-19. For rental housing providers, the new change will imply that there will be more tenants for longer as tenants may be unable to qualify for a mortgage or the mortgage amount they want, as they will need to increase income or reduce debt to do so. This translates into a greater opportunity for wealth growth by real estate investors as real estate is the most stable investment for long-term wealth growth. For CMHC, it will lower their insurance portfolio risk and thus that of the federal government. For the other mortgage insurers such as Genworth and Canada Guaranty, it is an opportunity for them to take a greater market share by not following CMHC in these policy changes. This policy will end up helping CMHC fulfill its real estate market projections. What better way to ensure your predictions than to influence the market by putting in new policies that will help to fulfill what you predict. In this case, limiting buying power which may translate to fewer sales. Unfortunately, this means tenants will remain tenants for as long as the federal government continues to create a nation of renters one policy at a time. As a potential homebuyer, it is evident that it may be much more difficult for you to qualify for a mortgage. Therefore, now more than ever, it is imperative to enlist the services of an expert mortgage broker to help you find out whether you can qualify for a mortgage. If you’re looking for a licensed mortgage broker or specialist in Calgary, Alberta, get in touch with Keith Uthe. I represent you, the client, to multiple lenders so that you have the largest selection of lenders, best terms, and the opportunity to achieve your homeownership goal. I work with many lenders who do not have to use only CMHC as their mortgage insurer. As long as other mortgage insurers do not follow suit on the policy change, I will continue to offer options for High Ratio insured mortgage clients. For my real estate investor clients, this policy should mean many tenants will likely remain tenants for long, thus making the rental housing provider market stronger. As an independent mortgage specialist with Mortgage Alliance Enrich Mortgage Group and a Legacy Certified Real Estate Investment Advisor, I have the knowledge and qualification needed to fulfill my clients’ requirements. By offering my clients quick and effective mortgage solutions, I not only guarantee them results they desire but also enable them to capitalize on growth opportunities to secure their future. I provide a range of professional mortgage services to clients across Calgary, Red Deer, Lethbridge, Edmonton, and Medicine Hat in Alberta. To learn more about the services I offer at Keith Uthe Demystifying Mortgages, please click here . For more information about how this policy change may impact you or if you want to book a free consultation, get in touch with me by clicking here . Alternatively, if you know someone who is considering buying a new home, have them contact me now to discuss their mortgage options.
Parents Co-Signing Mortgages

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By Keith Uthe Demystifying Mortgages • September 2, 2024
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Mortgage Refinancing

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By Keith Uthe Demystifying Mortgages • August 1, 2024
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By Keith Uthe Demystifying Mortgages • July 1, 2024
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By Keith Uthe Demystifying Mortgages • June 3, 2024
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