Over the past few weeks, I’ve conducted weekly interviews with our CMO Kerri-Lynn (KL) so we could document and share her recent home buying experience. As a first-time homebuyer, she learned what it took to lay the foundation for her purchase, built a team of real estate professionals and went to multiple viewings. She also entered three bidding wars (and won one, of course!) and gave us some great insight on what’s happening in the Toronto housing market.
This week, we quickly chatted about what comes after your offer on a home is accepted. Note: it’s a whole lot of paperwork!
Cait: So you won the bidding war, you know your closing date and you’re feeling excited. What’s next?
KL: At this point, most people have their mortgage broker on board, because that’s how you get pre-approved. But, if you haven’t already done so, the minute your offer is accepted, you need to find and hire a real estate lawyer. If you don’t already have one in mind, ask both your mortgage broker and real estate agent for recommendations. Family and friends who have recently bought homes might have some, too. And if I could give one tip, it would be to find a real estate lawyer who will give you an all-in price, like what you see on ClosingCosts.ca; that means the legal fees, title insurance, disbursements, etc. will all be included in the price. If you don’t find a lawyer who does this, be prepared (i.e. budget) for it to cost more than their original quote.
Cait: As the buyer, what were your responsibilities after you hired your lawyer and before your closing date?
KL: Well for all buyers, once you have a real estate lawyer, it’s your job to coordinate between sending one set of documents to your mortgage broker and another set of documents to your lawyer. To get some of those documents, you need to make appointments to get things like home insurance or maybe even life insurance. On top of that, you’ll also be coordinating your actual move. There’s just so much going on! I had to start collecting all the documents each person needed and sending files over whenever I got them. As soon as I started doing this, I realized how important it was going to be for us to keep track of everything. I don’t know how anyone gets through this part without a checklist, so I decided to create one myself and with the help of CanWise!
Cait: Walk us through the documents you had to send to your mortgage broker.
KL: Ok, you first need to give them a copy of the MLS listing, as well as your purchase agreement, so they have all the details about the property itself. You also need to sign a borrower disclosure form, which explains how your broker is being paid (by the lender you get a mortgage from, not by you personally). To get your financing in place, your broker needs things like two years of T4s (or Notices of Assessment if you’re self-employed), some sort of employment confirmation (pay stubs, letter from employer, etc.) and a void cheque for the account you want your mortgage payments to be withdrawn from. Your broker also needs confirmation of your down payment. Then you have to give them a copy of your photo ID and sign a consent form, which consents to a credit check and also says that all the information you’ve provided to your broker is accurate. Finally, they need a copy of your home insurance policy (or else the bank won’t give you a mortgage!) and the contact information for your real estate lawyer.
Cait: I see you also had “Mortgage Protection Plan” on your list. What’s that?
KL: That’s mortgage insurance – not mortgage default insurance, but life insurance for your mortgage. Not everyone has to get it, but CanWise recommends it, unless you have full life insurance. We actually opted to get full life insurance instead. Regular mortgage insurance is underwritten post-claim, which means they accept everyone (regardless of your health) and then the details of what you can claim don’t get sorted out until you actually need to make one. It also comes with a declining balance, which means the amount you can claim declines with the balance of your mortgage. So yea, we decided to get term life insurance instead, which means if one of us passed away, we’d get the full amount that we signed up and pay premiums for.
Cait: And at what point did you have to buy home insurance?
KL: You need to get home insurance before your house closes! This is really important, because your lender will not loan you a mortgage unless you have it. Getting home insurance is a process in itself, as you have to collect a lot of information for the provider so you can answer questions about the property. Sometimes you even need to coordinate with the seller’s real estate agent to get some information about a house.
One tip for homebuyers in Toronto: always include sewage backup insurance in your home insurance policy. Toronto has a huge sewage backup problem. It makes your insurance premium go up, but it’s worth having.
Cait: What did your real estate lawyer need, in comparison?
KL: The checklist is a little shorter. We had to give our lawyer two pieces of ID, a void cheque, a copy of our home insurance policy and our mortgage broker’s contact information. We also had to confirm some information, like our martial status, whether or not we were first-time homebuyers and if it would be our primary residence; this is so they can calculate your land transfer tax (and land transfer tax rebate, if you’re a first-time homebuyer like we both were).
Your real estate lawyer’s job is to coordinate the financial transaction and draw up a statement of adjustments and trust ledger statement outlining exactly what’s happening. So they’ll draw up these statements that include some information about your mortgage, your initial deposit, your down payment, how much of that needs to go to the seller, and then how much your land transfer tax (LTT), title insurance, legal fees and disbursements are. Like I said at the beginning, I’d suggest people look for a lawyer who will include title insurance, legal fees and disbursements in their quote, so you know how much to budget for! On closing day, you need to bring one big cheque for the outstanding balance of your down payment (which = down payment – deposit) plus any adjustments and legal fees.
Cait: What happened on/after closing day?
KL: You get the keys that day, so the house is yours! During those few weeks before, where we were busy sending over all those documents, going to meetings about home insurance and life insurance, etc. we were also trying to coordinate our move. So we had to buy boxes and tape, pack and figure out which day we wanted to make the official move. We were lucky in that our closing date was October 6th and we didn’t need to be out of our rental unit until the end of the month, so we weren’t in a huge rush. But we still wanted to get in there, of course! To do that, though, we had to do things like arrange for gas, hydro and water to be setup in our names, schedule a cable and internet hook-up, change our address at a million places (banks, drivers’ licenses, subscriptions, etc.). I included all of this + more in our ultimate moving checklist. I hope some people find it helpful!
Thanks again, KL!
Next week, in our final interview, KL is going to share some of what she’s learned after her first month of homeownership.