My First Time Homeowner blog series has so far covered initial research, mortgage prequalification and finding a property. After coming to a final decision on which property you plan to buy, things start to get real adult-y. This is the part where you head back to the bank and tell them the details about the property, namely the cost (obviously) and the down payment percentage, which would’ve been discussed and agreed to by the seller. As a reminder, your down payment can be as low as 5% of the property cost depending on the bank, but it’s common for them to vary between 10-20%.
The bank will in turn give you a list of documents to prepare for your application including a job letter (note that most banks require you to have been working in your current job for at least two years in order to be approved for a loan - although this may vary), address verification, identification documents, bank statements, etc. and a list of approved lawyers to choose from who will represent you in the sale. My next blog will cover this legal aspect of the mortgage and buying process.
You’ll also need an appraisal report for the property which will give a detailed description of the property and an estimate of its market value, which helps the bank to ensure that they don’t over-expose themselves when lending to you. Like the list of lawyers, the bank will also have a list of approved appraisers for you to choose from. This appraisal normally costs a few hundred dollars but it will end up being a very useful document for yourself as well when it comes to documenting your new asset (the property), estimating the future value in case you plan to sell it, or for personal insurance purposes.
Speaking of insurance, the bank will require you to have home insurance, and in the past most banks required life insurance, although this may not be mandatory for many banks these days. If you don’t already have either of these arranged then the bank can arrange it for you so that they are included in your monthly mortgage payments, however it may be possible to shop around for better deals. If you have kids and already have life insurance, you can opt to tie your life insurance to the mortgage to ensure that the home is paid off in full after you pass, which can put your kids in a better position for the future.
As every fellow Bahamian (and resident) would have realized at some point in their life here, customer service can sometimes leave much to be desired (see Blair, 1 OAK’s Customer Happiness Expert’s blog about this here). This is why I try to support businesses and organizations which make a clear effort to show that they value your business. When I was first inquiring with a few banks and lending institutions, I could tell that I wasn’t being taken seriously by most, so I had no issue taking my business elsewhere.
As a young person in particular, buying a property can already be a daunting process, so you’ll want to be doing business with people who encourage you and make you feel valued. Once I found that bank for me (which luckily happened to be my primary bank), I felt that I was in good hands and quickly became a CIBC stan after my first meeting - which getting to this stage in itself was a victory for me. To this day, I’m extremely grateful for and still work with my awesome Mortgage Specialist who gave me great advice along the way, was always easy to reach to answer my million questions and believed in me from the beginning. Different banks and their policies suit different people but whoever you decide to bank with, it will help you a lot to have a great working relationship with your main point of contact, so do be sure to check out a few.
At this meeting stage, along with confirming the interest rate and payback period, your mortgage specialist should also tell you the bank fees which would be taken out of your account when the sale closes. If you hadn’t noticed already, yes, there are a lot of “hidden” fees that you don’t necessarily anticipate when starting your buying journey. So far, we’ve got: the down payment, home and/or life insurance and the bank’s closing cost. This is why I mentioned in my last blog that it can be helpful to work with a real estate expert in your buying journey to outline everything that you need to know earlier in the process, so that you don’t find yourself caught out later on.
A good agent, mortgage specialist and lawyer can all be just as important for giving you a great buying experience as finding the right property itself. Get in touch with a real estate expert at 1 OAK to ensure that you’re getting the best help possible throughout your buying journey.