Now that home buying season is upon us, let’s look at the rules of engagement when it comes to buying real estate. You firstimers should know that the present market is not for the weak at heart. Buying frenzy has taken most of the fun away from the most expensive purchase in your adult lives. Suffice it to say that most of you will need a mortgage (house loan) to help you buy a home. You should do your shopping with a real estate agent who has your best interest in mind. How you find this agent is usually by referral from a friend or family member. This agent will in all probability require (or at least ask) that you have a "pre-approved" mortgage. This piece of paper sometimes give the impression that the purchasers (you) are automatically approved to purchase a home. This is not the case. The pre-approval is simply a guide to your maximum affordability, according to the unverified information that you provided the bank. Too many factors exist that could seriously affect the outcome of the actual mortgage for you to believe in the pre-approval certificate. Remember it is only a guideline to your buying power. All offers should contain a "financing" clause, allowing you to withdraw your offer should the mortgage be declined. Normal conditional clauses will allow 10 days for you to get your pre-approval certificate switched to a mortgage confirmation certificate or mortgage commitment. Should your agent tell you your pre-approval certificate foregoes the financing condition, change agent!

You will require the following paperwork:

Verification of down payment

The minimum down payment required is 5% of the purchase price, if the purchase price is within the ceiling provided by Canada Mortgage & Housing Corporation (CMHC). These maximum prices are $125,000 on the outskirts of Ottawa, $175,000 within the Metropolitan Ottawa area, and $250,000 in Metropolitan Toronto. If your house price is higher than the above guideline, the minimum down payment is 10% of the purchase price. You can check for your area through the CMHC web site at www.cmhc-schl.gc.ca. The down payment must be proven as being your own non-borrowed funds. For a complete description of sources of down payment, and how to prove it is yours, you can check out my web-site.

Verification of income

Depending on your type of employment, proving your income could be very difficult. All lenders and CMHC go by maximum affordability levels using gross (pre-tax) income. For those of you who are employed in a salaried position, a recent paystub and last year’s T-4 should suffice. Some lenders also require a letter from your employer attesting to your "full-time" occupation and salary. For those who are not employees, per say, such as commissioned income earners, and self-employed people, should check out my web-site for proper methods of proving income.

Credit checks

If you require maximum financing, your credit history must be impeccable. Before you go to the trouble of seeking mortgage financing, you should know that the more often you ask for credit, the worse your credit score becomes. The reason I mention this point is for you to avoid having credit checks done by every perspective lender while you shop for the pre-approval indicated above. Shop at as few sources as you can or shop with a mortgage broker who can guarantee you the best rate from a multitude of lenders. You could also go to the Ottawa-Hull Credit Bureau (by appointment only) and check out your own credit file. The people there will explain how the ratings works, and give you an accurate idea of your position (1,2,3, etc), and allow you to leave with a copy of your file. You can then shop to your hearts content showing perspective lenders your credit bureau file without them doing a new search and potentially altering your credit scoring (too many searches). Once you have chosen your mortgage lender, then you may give that lender permission to run a credit check.