The purchasing process from application to ownership consists of six main steps:

1. Choose your team.
2. Apply for a pre-approved mortgage.
3. Make an offer to a purchase property.
4. Complete the deal.
5. Remove subjects.
6. Go to the lawyer's office.

1. CHOOSE YOUR TEAM.

You need the following team members:

• A mortgage broker
• A realtor
• A home inspector
• A lawyer or notary
• An insurance broker

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THE MORTGAGE BROKER

The main role of a mortgage broker is to find the lending institution with the best rates and terms to suit your needs. Due to the volume of mortgage dollars that brokers process they are able to obtain discounts on most mortgage rates.

Mortgage brokers work flexible hours and can usually arrange an appointment at a time to suit you. Most will meet you in your home or at a location convenient to you. Most important of all - they specialize in mortgages and keep up with changes in real estate law and in the many products offered by the lending institutions.

Mortgage brokers are professionals with extensive training in the field of mortgage lending. In most provinces, brokers have to pass exams (e.g. in British Columbia the exams are set by the University of British Columbia) before they use the title 'mortgage broker.' They are also provincially licensed.

In contrast, traditional loans officers employed by banks or a credit unions do not have to pass exams relating to mortgages. They are expected to have a basic knowledge in many areas but mortgage applications are only a small part of their jobs.

Bank and credit union employees are less well qualified than mortgage brokers and they are generalists rather than mortgage specialists. In addition, bank and credit union employees rarely offer the same discounts available from mortgage brokers.

Check with your friends and neighbours to see if they can recommend a mortgage broker to you. As with anything, there are good and bad brokers. You want someone with whom you feel comfortable and whose knowledge you trust and respect.

It is a good idea to write a list of questions before meeting with a mortgage broker. The answers he/she gives you, will indicate that broker's level of knowledge. You may want to interview a couple before you choose.

See also Mortgage Broker Fees

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THE REALTOR

A Realtor will know what properties are on the market, in which neighbourhoods, and at what prices. By accessing multiple listings on their computer networks they are able to eliminate houses that do not suit your requirements, or are out of your price range.

The Realtor can make appointments for you to see the homes that interest you. Realtors are aware of current market conditions and what prices are realistic. They assist in making an Offer to Purchase, and can advise you regarding what conditions you should include in any offers.

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THE HOME INSPECTOR / THE BUILDING INSPECTOR

It is always a good idea to pay for a building inspection on any house you are considering purchasing. You are paying many thousands of dollars for a house, why not spend a couple of hundred dollars first to ensure the property is sound.

An professional inspector will provide a detailed written report on the present condition of the building and indicate whether any repairs are necessary and their approximate cost. Your Realtor can usually help you find a good inspector.

THE LAWYER OR NOTARY

Your lawyer ensures that your legal interests are protected when you buy a property. Your lawyer will review any contracts involved in buying, such as the Offer to Purchase and the mortgage document, your lawyer will be responsible for many of the closing arrangements.

THE INSURANCE BROKER

An insurance broker can provide you with the necessary insurance, including house insurance and mortgage life insurance.

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2. APPLY FOR A PRE-APPROVED MORTGAGE.

It is a good idea to meet with your mortgage broker, or a loans officer before going house-hunting. The mortgage broker will calculate the price range of properties you can consider. The application will also give you an interest rate guarantee to protect you against increases in mortgage rates for 60 to 120 days.

At the end of this meeting you are then able to tell your Realtor that you are 'pre-approved' for (or have a 'pre-arranged' mortgage for; or you are 'pre-qualified' for) a mortgage for 'X dollars'. Most realtors are then willing to spend more time with you as they then know that you are a serious, qualified purchaser.

The mortgage broker will need to know, fairly accurately, the following information:

• Your gross annual income (net income in the case of a self-employed individual)
• How much money you have for your downpayment
• Your assets and liabilities
• All monthly payments that you are required to make

The mortgage broker will usually ask your permission to perform a credit bureau enquiry at this time. If you have had prior credit problems, this may effect the rate that the broker can obtain for you. Inform the broker of any possible problems.

Your mortgage broker will calculate the amount of the mortgage for which you qualify. Together with your downpayment, you will then have an accurate idea as to the maximum amount that you can spend on a house.

Even though YOU  have been pre-approved for a mortgage you should still have a 'subject to financing' clause in your Contract of Purchase and Sale. The value of the property you wish to buy is part of the final approval process, and an appraisal may be necessary. Mortgage applications may be declined because lending institutions are not willing to mortgage properties, even though the applicants are well-qualified.

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3. MAKE AN OFFER TO PURCHASE A PROPERTY.

When you know your price range, put together a list of your other needs and wants.

For example:

• Do you have to be close to schools, public transportation, or shops?
• How many bedrooms and bathrooms do you need?
• What style of property do you want (e.g. 1950's, or new)?
• Do you enjoy or hate gardening?
• Do you need a yard for pets?
• Do you need medical facilities in the immediate area?
• Do you want a workshop area?
• Do you want a garage?

Realtors have access to a wide range of available properties and can advise you of the current sale prices of comparable houses. They hear about new listings and price reductions before they get listed or advertised. Realtors will arrange appointments for you to view homes and find out for you what items are included in the sale price.

Once you have selected that 'special property' you wish to purchase, the Realtor will help you negotiate with the vendor.

Your offer (purchase agreement) should include:

• a description of the property - civic address and legal description
• the price you are offering to pay
• the amount of your initial deposit, and when it is to be paid. The deposit is part of your downpayment and is to indicate your 'good faith' when signing the contract.
• the date you wish to pay for the property (the 'completion date' or 'closing date')
• the date you wish to move into it (the 'possession date')
• the date the buyer assumes responsibility for property taxes, rates, utilities etc... (the 'adjustment date')
• what your offer includes in the price (e.g. appliances)
• various 'subjects' or conditions to your offer, and the dates by which they are to be removed - for example:
  • 'subject to the purchaser obtaining a mortgage in the amount of $..... by...(date)'
  • 'subject to the purchaser obtaining a building inspection by...(date)'
  • 'subject to the sale of your present residence by...(date)'
  • 'subject to your lawyer's approval by...(date)'
• the time limit your offer is open to acceptance

The vendor might choose to accept your offer as is, or the vendor might make a counter offer on one or more points. It is also possible that the vendor may decline your offer completely.

If the vendor counters your offer (e.g. the vendor wants a higher price for the property), a time limit will be imposed on you. At this point you can accept the changes to the contract or walk away from negotiations. An experienced and 'cool-headed' Realtor is invaluable at this stage as emotions are often running high.

Sometimes vendors may add their conditions to a sale - such as 'subject to confirmation the purchaser can complete the purchase of...(property) by...(date)'.

Once both purchaser and vendor agree to all terms and conditions and the Contract of Purchase and Sale has been signed, dated, and witnessed, you have an accepted offer and are in a binding contract, subject only to the conditions being satisfied.

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4. COMPLETE THE DEAL.

Once you have an accepted offer on the property you wish to buy, you will need to give some information to your mortgage broker. Either you (or your Realtor) will provide a copy of the Purchase Agreement to your mortgage broker - please do this as soon as you can. It would also help if you could provide a copy of the listing, showing the legal description, property taxes, tax roll number, lot size, and zoning.

The broker will ensure all the necessary documents, such as employment verification and proof of downpayment have been provided.
The mortgage broker and purchaser will then confirm the following - the exact mortgage amount, the interest rate, the term, the payment frequency.

The broker may need to order an appraisal and survey. This can take from a few hours to a few days, depending on location and how busy the market is.

Meanwhile, the Realtor will be overseeing any other conditions that need to be satisfied. For example, a building inspection may be required and the Realtor will arrange for the inspector to view the property.

What if the building inspector locates a problem? Your Realtor will discuss the next step with you. There are various solutions, depending on the problem.

• You could decide that the problem is minor and accept the property as is.
• You could try to negotiate a reduction in purchase price.
• The vendors could fix the problem to your satisfaction.
• You could refuse to remove the 'subject to...' and walk away from the deal.

5. REMOVE SUBJECTS.

Once all conditions have been satisfied, your Realtor will meet with you to sign another form to remove 'the subjects'. You now have a binding contract and non-completion can result in serious legal consequences.

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6. GO TO THE LAWYER'S OFFICE.

Mortgage instructions will be sent to your lawyer from the lending institution. These instructions consist of the mortgage and property details. Your Realtor will have sent your lawyer a copy of the purchase agreement and confirmation that your deposit has been paid.

Your lawyer will then do the appropriate searches to determine what charges are listed against the property (e.g. the vendors mortgage). These must be satisfied by the vendor before title can be transferred to you.

Approximately one week before your closing date, you meet with your lawyer. He or she will explain the mortgage documents to you and witness you signing them. Your lawyer will request a copy of your fire insurance on the new property, with loss payable to the lender.

Your lawyer will explain the statement of adjustments and disbursements. This statement lists the various expenditures and where the money is coming from to pay for them.

For example:

• The contract amount of the purchase
• Less the amount of deposit you gave the Realtor
• Less the amount of your mortgage forwarded by the lending institution to your lawyer
• Add the amount of the downpayment you still owe
• Add the portion of property taxes you owe the vendor   OR
• Subtract the portion of property taxes that the vendor owes to you
• Add or subtract any other adjustments that are required (e.g. land or property transfer tax)
• Add the lawyer's fees.
  
  
• The balance is the amount that you will have to pay to the lawyer 'in trust' to complete the transaction. Most lawyers will require a bank draft or certified cheque

Once the vendors lawyer has received the money, your Realtor will be given the go-ahead to hand you the keys.

Congratulations on completing the purchase of your new house!

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