Tips For Home Buyers
Wednesday Nov 25th, 2020
1. Prepare to Buy
Home buying is an exciting but sometimes complex process. Learn all the ways a REALTOR® can help you succeed with the most important purchase of your life.
Make Sure You’re Ready
If you’re thinking of buying a home, you’ve come to the right place. Once you’ve decided you’re ready to buy, this can guide you through the process and I can help take care of the rest.
Are you ready? Be sure.
Few joys can match the pride of owning a home, but the responsibility can also come with sacrifices – from the financial commitment to the required care and maintenance. You’ll want to be sure both fit within your current or preferred lifestyle.
Is your bank account ready? Check it twice.
Buying a home is likely the most significant and largest purchase of your life. Do it right with my help and avoid regretting taking on more than you should. It’s ideal to have saved up some money and manage any debt.
Payment Calculator for Purhase: Mortgage Payment Calculator Canada | REALTOR.ca
Payment Calculator for Renewal or Refinance: Mortgage Payment Calculator Canada | REALTOR.ca
Is right now a good time to buy?
Markets go up, markets go down and even the most informed experts can’t accurately predict when a market will peak or bottom out. If you’re buying a home as a long-term investment (and for long-term enjoyment), you should be protected from short-term changes in the market. Instead, focus on picking a home that meets your and your family’s needs.
Where do You Want to Live?
Whether you’re new or native to a neighbourhood, I can help you navigate homes in the areas that best suit your needs and lifestyle. Take a minute to reflect on these popular housing options to help decide what fits you best.
Sure the prices are generally higher, but you can walk to a restaurant, maybe even to work. You’ll also have the widest range of housing options.
Newer schools, modern shopping centres, bigger yards, and bigger homes are just a few of the reasons many people flock to the suburbs.
Rural living isn’t for everyone but if owning a few (or many) acres of seclusion is your idea of heaven, be sure to expand your search beyond the city lights.
Smaller cities and towns
Smaller cities and towns in Canada are dotted with thousands of wonderful self-contained communities and, compared to the big city, you can save a bundle.
What Type of Home do You Want?
Whether you’re building a home from the ground up or giving new life to a home previously loved by others, I can help narrow down a type of home to meet your needs.
As the name implies, the home is freestanding and not attached to any homes next to it.
Semi-detached or linked
Two distinct houses (with separate owners and lots) that are built side-by-side and share a common wall.
A building on a single lot but that is zoned for two families (each with independent access).
Also known as terrace or row housing, they’re identified as homes featuring a common style and joined in a row. They usually share common walls on both sides. Town house can be freehold or condo type.
The home is not part of a condo corporation, meaning you own the unit – both the exterior and interior – in full. There are no condo monthly fees.
However, this means the owners are entirely responsible for the roof, windows, exterior walls, driveway, garage, landscaping and snow removal.
With a condo, you own 100% of your unit and a share of the common areas. Common areas include the necessary plumbing, electrical systems, hallways and elevators. They may also include amenities like a private gym or pool. On top of the mortgage and property taxes, condo owners also pay a monthly fee to operate and maintain the common areas.
►Tip: Are you getting out of a two bedroom apartment because you need more space for the family? Then your new home should have at least three bedrooms and probably a second bathroom. REALTORS® call these must-have features “needs.” Features you’d like to have are called “wants.” Your strategy should be to find a home within your price range that fulfills all or most of your “needs” and as many of your “wants” as possible. To help you with this, please use this dream_home_checklist.pdf (realtor.ca)
Sell Your Current Home
If you’re not planning to own two homes at the same time, you’ll need to sell the one you have now. So, do you buy or sell first? Many people are able to time their sale and purchase to happen on the same “closing date,” making their purchase offer “conditional” on the sale of their current home or by extending the “closing period” to give more time to find the perfect home. I can help you decide the best time to enter the market, analyze local market trends to set an agreeable and appropriate price and help promote your home to potential buyers.
When lots of people are looking for homes but there aren’t many for sale.
When there are many homes for sale but not enough people buying them.
This refers to the fact that winter sales tend to be slower in most markets while spring sales typically speed up.
2. Plan Your Finances
What Can You Afford?
Buying a home is a big deal; it’s probably the largest purchase you’ll ever make. Being prepared means also understanding that expenses go beyond purchase price.
To secure your new home, you’ll likely need to arrange for a mortgage but before you do, take a look at how much you can afford each month. Based on your income and expenses, this Mortgage Affordability Calculator | REALTOR.ca can help you estimate your maximum affordable mortgage payments.
Gross Debt Service Ratio (GDSR)
This lending principle simply states that your monthly housing costs should not exceed 32% of your gross (before taxes) monthly family income.
Total Debt Service Ratio (TDSR)
This lending principle summarizes that your monthly housing cost and payments on all other debts (like loans, credit cards and lease payments) should not exceed 40% of your gross monthly income.
Once you have used the affordability calculator to estimate your maximum monthly total, you can compare this number to the mortgage payments for specific loan amounts. Enter the loan amount in this Mortgage Payment Calculator Canada | REALTOR.ca and the monthly principal and interest will be calculated for you.
Arrange a Mortgage
Since you may not have hundreds of thousands of dollars at your immediate disposal, a mortgage is a loan that can help you cover the cost of buying a home.
Your choices are banks, credit unions and other lenders out there who would love your monthly mortgage payments. Talk to them and see what they can offer for you.
Call a mortgage broker
Mortgage brokers are another great resource. Their job is to find low lending rates and they usually don’t get paid unless you sign a mortgage through them – meaning they’re highly motivated to get you the best deal.
Often, you can take over the seller’s mortgage. This is a great option if the seller is locked into a lower interest rate than you can get right now. Your REALTOR® may have additional information.
Refers to how long the bank has agreed to lend you the money – typically from six months to five years. At the end of the term, you usually renegotiate a new term.
Amortization refers to the length of time it will take to pay off the whole mortgage, often as long as 25 years. The longer your amortization, the lower your monthly payments, but the more you pay in interest over time.
Interest is the cost of borrowing money, and the interest rate tells you exactly how much. Using our mortgage calculator, check out the difference between borrowing $100,000 at 6% versus 9% at the same amortization.
Keep in mind you can also choose between a fixed or variable rate. A fixed rate will remain unchanged for the entire term whereas a variable rate will fluctuate as rates increase or decrease throughout your term.
Refers to the initial up-front portion you pay against your home purchase. A larger down payment means a smaller mortgage (and less debt).
If you’re a first-time homebuyer with money in a Registered Retirement Savings Plan (RRSP), you can withdraw up to $25,000 without paying income tax through the Home Buyers’ Plan. If your spouse or partner is also eligible, that’s a possible $50,000 you can use towards your down payment.
Applying for a Mortgage
Extra Costs to Consider
Some mortgage lenders charge a fee to process your application. Be sure to ask whether it can be waived.
Your mortgage lender may need to have your new home appraised by a professional and they often pass the bill on to you. Sometimes your lender will waive this fee.
Mortgage broker’s fee
Your mortgage broker may charge a fee that’s payable on your closing date. Ask your broker to avoid any surprises.
Land survey fee
Lenders may require a survey of your property, even if it’s an existing survey. Get your lawyer on the case.
Home inspection fee
A home inspection is intended to help avoid surprises and protect yourself and your investment. It usually happens a little later in the process. Don’t worry; we devoted an entire step to it.
Mortgage lenders require you to carry fire and extended-coverage insurance because your home is the security deposit on the mortgage. Often you can have these payments added to your monthly mortgage payments. Shop around.
While not mandatory, it protects you from fraud and potential errors surrounding the title to your land. Ask your lawyer for details.
You’ll pay your lawyer for their invaluable time and “disbursements” which are the costs involved in title searches, drawing up the title deed and preparing your mortgage.
The previous owner may have paid property tax or utilities in advance and they will want to be credited for those payments. Ask your REALTOR® and lawyer what might come up on the closing date.
Maintenance and utility costs
Remember, you’ll now have more regular monthly payments in the form of property tax and utilities.
Property transfer tax
The amount of this tax varies from province to province.
GST/HST and new homes
GST/HST doesn’t apply to resale homes but they will to new homes. If you intend to live in your new home (instead of renting it out), there is some relief. Consult your REALTOR® and/or lawyer for more information.
REALTOR® commissions or fees
REALTOR® commissions or fees are subject to GST/HST. Usually paid by the Seller.
3. View Properties
Hire a REALTOR®
A REALTOR® can review your wants and needs to help you determine your price range, as well as answer questions about the markets you’re interested in and help you compare homes and neighbourhoods. Your REALTOR® can also provide access to exclusive listing information, preview properties to ensure you’re only shown homes that meet your needs and budget and make appointments and walk you through homes that interest you.
Typically, Seller pays the Buyer Agent's commission. There are listings where the Seller does not pay the Buyer Agent's commission, and the Buyer is responsible to pay the commission. Your REALTOR® will advise you if that is the case, before you sign a Purchasing Agreement.
Your REALTOR® will advise you of reporting requirements by FINTRAC, the federal agency responsible for administering Canada’s money laundering and terrorist financing legislation and regulations. Your REALTOR® is required by federal law to complete a client identification form and must ask you as a client (buyer) for verified ID such as a driver’s license or passport.
►Tip: Your REALTOR® will become an expert on your specific needs and wants. Scattering your time and energy amongst multiple REALTORS® will work against your goal of finding your dream home. Most REALTORS® have equal access to the same property listings so there’s no real advantage to having multiple REALTORS®.
See What’s Out There
Now’s the time to pound the pavement and see what’s available. This step can be either incredibly fun or incredibly exhausting. But with a REALTOR® by your side, you’ll be able to land on your dream home much more effectively.
1. Visit REALTOR.ca.
REALTORS® have access to incredible house-hunting tools called MLS® Systems, which are operated by real estate boards and associations across Canada. You can view publicly-available information about MLS® listings on REALTOR.ca. Browse listings that meet your criteria, view photos and virtual tours, share listings with family and friends, explore neighbourhood details and statistics and more. Your REALTOR® can start sending you listings that match your specific criteria right away.
2. Visit open houses.
Open houses are a great way to see inside the homes that interest you. Your REALTOR® can provide you with a list of upcoming Open Houses for that day. Let your REALTOR® know of homes you may be interested in. REALTOR® can share more details with you about this property.
3. Check out the area you are interested in.
Your REALTOR® can introduce you to neighbourhoods you’re already – or should be – considering based on your wants and needs. Make note of surrounding schools, shopping and recreational areas. Keep an eye out for not-so-great features like large industrial areas, railway tracks and airports. Visit during the day and at night.
►Tip: Walking through a potential home is a thrill but try not to lose your head. Don’t let a giant kitchen island or swanky hot tub distract you from your real goal: finding a home that meets all your needs and fits your budget. Arm yourself with this house hunting checklist and bring it with you to homes you’re serious about buying.
4. Make An Offer
Make an Offer
You’ve found the perfect home? Congratulations! Now, if you actually want to make it yours, you have to make a successful offer, one the seller will accept. I will prepare the offer for you. Here are some terms you’ll see:
The present home owners.
The most important number: what you’re willing to pay for the home. Let’s hope the seller goes for it.
A certified cheque or bank draft you address to the seller’s broker. This is your way of saying, “my offer is serious”. The recommended amount is 5% of the purchase price.
Chattels and fixtures
Be sure you know what is included with the house. If you’re expecting the seller to leave behind the appliances, draperies or light fixtures, be sure to include that in your offer. Don’t leave anything to chance.
Irrevocability of the offer
The length of time you give the seller to consider your offer. Usually less than 48 hours.
The glorious day you take possession.
Clauses particular to this agreement
Every transaction is unique and you may want to add conditions that are important to you, such as financing and a home inspection. The conditions should typically be fulfilled within five working days.
Submitting the offer
You’ve signed on the dotted line and I have provided your offer to the seller.
The seller accepted your offer
Fantastic, when do you move in?
The seller rejected your offer
It’s not common for an offer to be completely rejected. If it is, I will investigate why.
The seller “signed back” or “countered” your offer
The seller wants to alter some part of your offer (most likely the price). The seller will cross out the price on your offer and write a higher number, or delete or alter some conditions. Now it’s your turn to sign back with any additional changes or your acceptance of the counter offer. Good luck!
Finding a Home Inspector
When you’re buying a home, you’ll want to scrutinize every last detail. Hiring a professional to visually inspect your home for defects and overall condition – or, a home inspection – typically costs a few hundred dollars and can save you from unpleasant surprises and long-lasting regrets.
Many home buyers arrange a home inspection as a condition of their purchase. That way, should the inspector uncover any issues, you have the option to back out of or renegotiate the offer accordingly.
While I can help recommend home inspection companies to choose from, make sure your inspector is a member of a recognized professional organization. It helps provide some assurance they have the training and experience for the job. An inspection generally lasts a few hours and, when complete, you’ll get a written report summarizing the condition of your home.
What Does An Inspector Look For?
►Tip: A newly-built home does not mean it’s perfect. In fact, construction quality can vary greatly from builder to builder. It’s at your discretion whether or not to opt for an inspection. In some provinces, repairs and corrections in new homes may be covered by a government or industry-sponsored warranty program. Bad news doesn’t necessarily mean it will have to cost you.
5. Close the Purchase
Choose a Lawyer
Buying a home involves piles of legal documents. You need someone to translate the ”legalese” and ensure your best interests are protected.
Finding a Lawyer
There are many experienced real estate lawyers out there. Like choosing any other professional, ask your friends, family and co-workers for their recommendations. I can also give you the name(s) of experienced real estate lawyers in your area.
How will your lawyer help?
There are many legal steps to transferring ownership of land from one person to another. Even if pitfalls like fraud, government legislation, zoning issues or unpaid taxes don’t come up, your lawyer will help make the legal transfer of the home as smooth as possible. A typical transfer of title will require two weeks to complete.
►Tip: Be sure to ask your lawyer how they structure their fees and get an estimate of the costs you can expect. And remember, your lawyer is here to help you. Ask questions if you don’t understand anything. Explaining legal jargon in plain language is a big part of their job.
Close the purchase
Your offer has been accepted and you can’t wait to move in … don’t break out the bubbly just yet; you still have to close the deal. The lawyer and I will do most of the closing work, but here’s a checklist to follow:
Closing date and moving date aren’t synonymous.
On closing, it’s likely you won’t get the keys to your new home until late in the day so it might make more sense to schedule the actual move for a day or so after closing.
Whether you’re getting the help of friends and family to move or hiring a professional, nobody will take the same care you will. Start early and spread it out over many days. Label all your boxes by room (and especially if the boxes carry anything fragile) so the movers know where to put them and how to treat the boxes.
All moved in
The boxes are mostly unpacked and you’re settling in nicely. You will now feel a strange urge to begin making changes and improvements right away. Sure, that old carpet has to go and a bigger deck would be great for entertaining but slow down! Take the time to get a feel for your new home and, more importantly, your new budget. Take a deep breath and enjoy what you have: your new home.
►Tip: If you intend to move at the end of the month, contact a moving company or truck rental company well in advance. If you can move mid-week or mid-month, your moving company might cut you a deal.
►Bonus Tip: Moving into a new home is a chance to start fresh. Take the opportunity to purge by either hosting a garage sale or donating items you no longer use or need to charity.
Source: The Canadian Real Estate Association