Getting Started With A Builders Mortgage What we ll need to get started on your pre-approval Verification of employment income: most recent T4, Tax Return and Notice of Assessment, Letter of Employment, recent Pay Stubs Verification of additional income: Child Tax Benefit Notice Verification of investment: most recent Investment Statement Verification of down payment: Gift Letter, most recent Savings statement, RRSP statement Depending on your down payment, you may have a conventional mortgage or a CMHC insured mortgage Conventional mortgage down payment is at least 20% of the purchase price or appraised value and a 3 rd party certified appraisal required. Canadian Mortgage and Housing Corporation (CMHC) mortgage- CMHC is Canada s national housing agency that provides mortgage loan insurance. This enables borrows to realize their dream of home ownership with as little as 5% down. CMHC also assists homeowners in renovating or refinancing their properties with as little as 20% down. With less than 20% down your mortgage will need to be insured by CMHC. With a 20% down payment or more, your mortgage may or may not have to be insured by CMHC, premium applies (insurance premium =.6% to 3.35% of loan amount) Conditions apply, so ask your ACU Mortgage Specialist for details. Determining what type of build RTM, Contract build or Self Build RTM if you are building a ready to move home. There are 2 types of ready to move homes. 1) Mobile Home that is ready for occupancy upon completion of set up. 2) Modular Home - constructed off site and is transported and placed on a proper foundation. Contact Build is set up in stages. Funds are advanced when stages of build are complete. Self Build a self build doesn t follow a specific contract as typically you will be doing a majority of the work your self.
Picking a contractor Must participate in New Home Warranty program Click here to find out if your builder is registered with the New Home Warranty Program of Manitoba Inc. http://www.mbnhwp.com/builder_members.htm Possible costs to consider when building a house. Legal fees Land transfer taxes Value of Property On the first $30,000 On the next $60,000 (i.e. $30,001 to $90,000) On the next $60,000 (i.e.$90,001 to $150,000) On the next $50,000 (i.e. $150,001 to $200,000) On amounts in excess of $200,000 Rate 0% 0.5% 1.0% 1.5% 2.0% Disbursements GST if applicable (new home) Property taxes Appraisal fees Property (fire) Insurance Mortgage administration fee Condo fees Title Insurance/Water Quality Test Mortgage payment protection (life and disability insurance) Service hook-up (hydro, telephone, interenet,tv,gas,water) Moving Expenses Appliances Furniture, paint, carpeting, window coverings Lawn mower Landscaping Driveway Air conditioning Decks Cost overruns/upgrades (quotes for additional upgrades not included in contract)
The down payment where will it come from? Gifted down payment requires confirmation letter, this letter will confirm the gift amount and that the amount is not repayable. Personal savings verification of your down payment will be required if it is not on deposit with the ACU. Equity in the sale of existing home (bridge financing may be required) RRSP Funds first time home buyers can use RRSP funds as a down payment. Ask for the Home Buyers Plan for more information go to www.cra.gc.ca Your down payment is important, as the amount will determine if you need to have your mortgage insured by a third party such as CMHC. Now that your Mortgage has been approved, we will require Signed builders contact and quotes for work not included in contract example landscaping, decks, driveway etc. Offer to purchase for land Builders permit (Proof that they have been approved) Blue prints Occupancy permit Proof of New Home Warranty Verification of Fire Insurance during build(builder may supply this) Confirmation of credit facilities out lining terms and conditions of build(lender will provide this, see terms and conditions for details) Other important information pertaining to your mortgage Amortization The maximum amortization is 25 years for CMHC insured and all other mortgages. This means your payments may be extended over a 25 year period. Keep in mind, the shorter your amortization, the faster you pay off your mortgage and the more you save on interest costs, but the higher your payment will be. Payment frequency Choose a payment frequency that suits you cash flow and budget. For ease of budgeting, have the payment dates coincide with your payroll schedule. Options include: monthly, semi-monthly, bi-weekly, and weekly.
Serviceability How much house can I afford? Here are two guidelines that you will need to consider: GDSR (gross debt service ratio): the total monthly home related expenses including mortgage payment, heating cost, property taxes and condo fees, should not exceed 35% of your gross family income. TDSR (total debt service ratio): the total monthly debt load including: personal loans, car loans, credit card payments, lease payments, mortgage payments, heating costs, and property tax payments should not exceed 42% of your gross family income. Choosing a mortgage product Fixed vs. Variable Fixed Rate Mortgages A fixed rate is a locked-in interest rate that will not increase for the term of the mortgage loan. Variable Rate Mortgage A variable rate fluctuates based on prime rate, payment may changed to have loan paid off in the correct amortization period. Open vs. Closed Open Mortgages An open mortgage is flexible. That means that you can usually pay off part of it, or the entire amount of it at any time without penalty. An open mortgage can be a good choice if you plan to sell your home in the near future. It can also be a good choice if you want to pay off a large sum of your mortgage loan. An open mortgage can be converted to a closed mortgage at any time. Closed Mortgage A closed mortgage cannot be paid off before the end of its term. A closed mortgage is a good choice if you d like to have a fixed monthly payment. With it you can carefully plan your monthly expenses. But, a closed mortgage is not flexible. There are often penalties, r restrictive conditions, if you want to pay an additional amount. A closed mortgage may be a poor choice if you decide to move before the end of the term, or if you want to benefit from a decrease of interest rates.
Property Taxes Property taxes are based on a calendar year Jan 1 to December 31. Each municipality will have their own property tax due date. Only one party (vendor or purchaser) will pay the taxes. Therefore, the party that is actually paying the taxes is entitled to a credit by the other party. ACU Tax Account- a tax account will be set up to collect property tax payment, at the same frequency as your selected mortgage payment. TIPP Tax Installment Payment Plan the municipality/city in which your home is located may offer a TIPP program. With this program, 12 equal installments are paid each year. See your local RM Office/City Office for details. Mortgage payment protection Protecting your self and your home is important. No one can foresee the future, so you want to ensure that you and your family are well prepared in the event of a death or injury. ACU offers life and disability coverage. Life coverage pays outstanding insured loan amount tax-free in the event of your death, freeing your family from financial stress. Disability Coverage pays you insured monthly payment tax-free while you are off work due to sickness or injury, protecting your assets and credit rating. Terms and conditions of build An ACU staff member will make onsite visit during build. Down payment/equity portion must be used towards project prior to loan proceeds being advanced, verification of this to be obtained for our file. Any costs over and above original estimates must be approved by lender and will not automatically be approved. -You may qualify for additional funds from your original application, providing you have additional down payment and the ability to debt service increased payment. -all un-approved cost overruns will be the responsibility of the member. Property value is based on either actual cost supported by quotes or appraisal, which ever is the lesser of the two. All dispersal over $10,000 are subject to a 7.5% hold back of the invoice amount, these funds will be held at the ACU for 40 days from invoice date, funds are guaranteed to contractor as long as there have been no builders lien registered against property.