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MQNEYCARE Understand mortgage plans before you buy that house By John Switzer, CA Getting a mortgage for a house purchase. is a fairly simple and hassle-free matter these days. But you owe it to yourself to unders- tand something about the mort- gage process before getting your- self into a purchase situation. More and more house buyers today are getting what's known as a "pre-approved" mortgage before they even start looking for a place. This way they know ex- actly how much mortgage they qualify for -- and therefore how much they can afford to pay for their new home. Which all makes a great deal of sense. The first thing to realize is that you're going to need a lawyer. So you may as well get one right-at the start. At this stage it's not go- ing to cost you anything. (That comes later). There are several reasons why you need a lawyer. First is that he or she will represent your inter- ests in the final closing of the deal. Also, the mortgage lender will insist. Before putting-up-any mortgage money, the lender nat- urally wants to know if there are any encumbrances (such as un- paid mortgages or other liens) against the property you propose to buy. A lawyer will provide the necessary report. This report (which ideally should show "clear title" to the property) basically assures the lender that he has first claim. The lender may also require you to get a survey of the pro- perty before making any commit- ment. Where at all possible, get this survey ffom the vendor. (You should make this condition in your offer). If you have to get the survey yourself, you'll find it's quite a costly document -- running to $500 or $600 or more. The next thing the lender will require is an appraisal of the pro- perty. The mortgage company generally arranges this itself -- charging the cost (about: $200) back to you. However, this is us- ually built into the overall fee structure and simply becomes part of your mortgage. So you don't have to pay up front. Although it's unlikely, you could be asked to provide your own appraisal, in which case you'll need the services of an ap- praiser. An appraisal is necessary to as- sure the lender that there's an adequate asset-to-loan ratio. Ty- pically, a lender will advance up to 75 per cent'of the appraised value (not the asking price) of the property. This is why it's so im- portant. Then there's the income qualifi- cation. Here the lender works ac- cording to a ratio -- generally about 30 per cent of your gross income. For example, if your to- tal gross income is, say $60,000, then you'd qualify for a mortgage that could be serviced with $18,000 a year, or $1,500 a month. Enough to handle a mort- gage of about $150,000. For CA's advice on TV -- see your Wealth, available on broad- cast channels in Ontario and on satellite across Canada, or see Money in the Bank, on your community cable channel. Money care is general finan- cial advice by Canada's char- tered accountants. 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