First Time Buyers Week : Part 4
January 22, 2025 | Posted by: Sherry Corbitt
Let’s talk money: Down payment and Closing costs
The minimum down payment needed is 5%, but you will also need to have enough money aside for closing costs. The closing costs are typically 1.5% of the purchase price and include your lawyer’s fee (approximately $1500) and Land Transfer Tax.
For land transfer tax calculation, here is a link to a quick calculator: www.landtransfertax.com. You may be eligible for a tax break if you are a first-time buyer so ask your lawyer to confirm!
For your down payment of 5%, we will need to prove that the money didn’t magically appear in your account.
Here is typically what lenders need to prove.
1) 3 months bank statements to show the funds accumulating in your account.
2) If the money comes from an investment like an RSP or Tax-Free Savings Account (TFSA), then need 90 days history on those statements and prove that those accounts are in your name.
3) Sometimes, the down payment is a gift from a family member. We need them to sign a gift letter and transfer the deposit into your account.
4) Cash from under your mattress? Unfortunately, cash is rarely considered, so get those funds in your account asap, and hopefully, we can show where it came from i.e., you sold your motorcycle and have a bill of sale.
Other costs that you may encounter when buying a home
- Appraisal fee to prove to the bank that the home's value is there and that you didn’t overpay with your offer. Approximately $350.
- Home Inspection to make sure that you have a professional go over the health of your home. Approximately $350-400.
- Movers all depend on how much you have to move and if you have friends with pickup trucks! Most moves can be made between $1000-$2000, but there are many factors to consider like travel distance, amount of items, and if you need interim storage.
Tomorrow’s blog will be a free e-book that has some budget worksheets in it!
A house is made of walls and beams; a home is made of love and dreams.
Sherry Corbitt, Mortgage Agent and Certified Divorce Financial Analyst
Mortgage Intelligence FSCO # 10428
