1. Ready to buy your new home? Presented by Nikki Kwiatkowski & Bret Wolfer

2. 1.Are you ready? 2.The 5 C’s of Credit 3.House Buying Process 4.Pre-Approval 5.The Down Payment 6.Principal & Interest Payments 7.Your Real Estate Agent 8.Property Tax Adjustments 9.Protecting your Family, Credit Rating and Home 10.Additional Considerations: Cost & Time Frames 11.Q & A Agenda Ready to buy your new home?

3. Are you ready? Exciting decision Ownership and building equity vs. Paying rent Saving for a down payment Calculate how much your home will cost each month and practice living on that budget now

4. The 5 C’s of Credit Character Credit Capacity Capital Collateral

5. Know your member Credit history Job and residence stability Attitude toward borrowing and repaying the debt Character

6. Repayment history Existing obligations and proposed loads Account and loan history with your financial institution Credit repayment history Credit Bureaus Credit

7. Credit Bureau Report No Score 0 Very Bad 400 Bad 500 OK 600 Beacon minimum for lending 650 Very Good 700 Excellent 800

8. Ability to Repay the Debt: Gross Debt Service – Max 32% Total Debt Service – Max 40% Proof of Income – 2 years of income and employment history to be recorded and verified in the form of: Recent pay stub Letter of employment Income tax returns or financial statements Capacity Can you afford the payment?

9. Net Worth: Assets – liabilities Types of assets Value of individual assets Down Payment: Amount of the down payment you are putting into the project or purchase Capital

10. The security pledged to the lender to support the loan Your signature Co-signer Serial numbered assets Real property Cash, bonds or certificate of value Shares in publicly traded company Collateral

11. House Buying Process Pre-Approval Down payment Qualifying payments Payment calculators

12. Calculate the maximum house price you can afford based on: Your current credit rating Available income/ability to make the payment Your down payment Pre-Approval

13. Purchase price – down payment/purchase price = LTV % $300,000 - $15,000 = $258,000/300,000 = 95% LTV Loan to Value Ratio (LTV)

14. Owner Occupied Residential Mortgage Conventional Mortgage First Charge based on the lesser of the purchase price (if applicable) or the “established value” as defined** Up to 80% of the first $750,000 and 50% of any balance 300 Months Maximum Amortization

15. Owner Occupied Residential Mortgage High Ratio Mortgage First Charge based on the purchase price (if applicable) or the member stated value Up to 95% based on the Insurer’s program in place at the time of borrowing 300 Months Maximum Amortization

16. The Down Payment Can be a gift (immediate family member) Proceeds of the sale of another property From savings (RRSP, account, TFSA)

17. Conventional Mortgage House $325,000.00Purchase Price x 80%Maximum financing = $260,000.00Maximum mortgage Down Payment = $65,000.00 Down Payment Calculation

18. High Ratio Mortgage House $325,000.00 Purchase Price x 95% Maximum financing = $308,750.00 Maximum mortgage Down Payment= $16,250.00 Can be a gift from an immediate family member Financing $308,750.00 Mortgage (above) $8,490.63 Mortgage Insurance: ($308,750.00 x 2.75%) $317,240.63 Total Financed Down Payment Calculation

19. Include: Principal and Interest Property Taxes Condo Fees (50% of monthly fees) Budget for: Life Insurance Disability Insurance Property Tax Adjustment Qualifying Payments

20. Quick Calculation - Conventional Example: $260,000 mortgage at 3.25% on 5-year term with a 25-year amortization Principal & Interest Payment $1,264.04/month Property Taxes (approx $2,400/y)$200.00/month Utilities$200.00/month Total Housing costs$1,664.04/month Principal and Interest

21. Monthly Income Example $7,000.00/month (single or combined income) Gross Debt Service (housing) – Maximum 30% $7,000 x 30% = $2,100/month max Housing Payment: $1,664.04 / $7,000 = 23.77% Total Debt Service (all debt payments) – Maximum 40% $7,000 x 40% = $2,800/month max All other debt (including credit cards, car loans, etc) = $570 Housing Payment = $1,664.04 Total = $2,234.04/month / $7,000 = 31.9% Result: The members in this scenario can afford the monthly payments Can you afford the payment?

22. Quick Calculation – High Ratio Example: $395,000.00 mortgage at 3.25% on 5-year term with a 25-year amortization Principal & Interest Payment$1,920.36/month Property Taxes ( approx $2400/year)$200.000/month Utilities$200.00/month Total Housing costs$2,320.36/month Principal and Interest

23. Monthly Income Example $7,000.00/month (single or combined income) Gross Debt Service (housing) – Maximum 30% $7,000 x 30% = $2,100/month max Housing Payment: $2,320.36 / $7,000 = 33.15% Total Debt Service (all debt payments) – Maximum 40% $7,000 x 38% = $2,800/month max. All other debt (including credit cards, car loans, etc) = $570 Housing Payment = $2,320.36 Total = $2,890.36/month / $7,000 = 41.3% Can you afford the payment?

24. Flexible payment options 20% lump sum each year based on your original mortgage 20% increase each year in payments Profit Sharing Program The Servus Advantage

25. Offer to Purchase View potential homes Make an offer to purchase your dream home Negotiations

26. Negotiate the purchase price of the home Legal contract Deposit is offered Condition of Sales Financing date Possession date The Offer to Purchase

27. Your Lawyer Your lawyer Property Tax Adjustments

28. Prepares Transfer of Title Documents for Land Titles registration Prepares and registers mortgage documents for registration at Land Titles Ensures that all previous liens on title are removed and you have a clean title Calculates property tax adjustments and other fees and ensures they are paid Your Lawyer

29. Property Tax Adjustments Property Taxes (e.g.: $2,400) are calculated for the year and paid annually: JANMARCHJUNE SEPTEMBERDECEMBER Possession March 30 Due June 30 Example #1 You take possession of your new home at the end of March. Taxes are due annually in June The seller owes you tax money for January, February and March ($600) You have to pay the full amount ($2,400) in June You need to save $1,800 in 3 months to pay the full amount on June 30 or you can add the amount to your mortgage and pay $266.67/month In January of the next year, you can start paying your property tax to your municipality directly each month or you can add it on to your mortgage

30. Property Tax Adjustments Property Taxes (e.g.: $2,400) are calculated for the year and paid annually: JANMARCHJUNE SEPTEMBERDECEMBER Due June 30 Possession Sept 30 Example #2 You take possession at the end of September Taxes are due annually in June and were paid by the seller You owe the seller for October, November and December taxes ($600) You have to provide the $600 to your lawyer in September In January of the next year, you can start paying your property tax each month to your municipality directly or you can add it on to your mortgage

31. Protection Protect your family Protect your credit rating Protect your home

32. Life Insurance Pays off your mortgage if you pass away Premiums on a $260,000 mortgage for a 27-year old non-smoker in good health = approx. $25/month Peace of mind Protecting Your Family

33. Disability Insurance Covers your mortgage payment if you suffer an illness or injury A $1,578.47 monthly mortgage payment for a 27-year old non-smoker in good health = $43/month Protecting Your Credit Rating

34. 1.888.732.1494 Servus.ca/homeinsurance

35. The Additional Costs Fair estimate = 1.5% of house price Remember: Legal Fees Appraisal cost House inspection Moving expenses Utility hookups And, your Property Tax Adjustment

36. This is an exciting time, so remember to have fun! Tips to Remember

37. Questions? Thank you! Nikki Kwiatkowski – Branch Manager, West Lethbridge Bret Wolfer – Branch Manager, Scenic Drive