Buying a home is complicated business. A qualified and experienced REALTOR® is invaluable in the process. But you also have an obligation to contribute to that process. You can start by asking yourself the following questions;
How much can I afford?
Consider your combined household income. Remember, commission and part-time income are treated differently. You'll have to talk to your mortgage lender about how much you can borrow based on your income, expenses and assets.
Consider your family's lifestyle. Consider how much money you can devote each month to mortgage payments and housing costs without effecting the quality of that lifestyle.
- Down payment
- Mortgage payments
- Monthly services (hydro, heating, maintenance)
- Yearly services (taxes, insurance, repairs and renovations)
What type of home do I want?
- Townhouse or condo
- Single family, semi-detached, multi-family
Where do I want to live?
Consider your family's needs.
- Municipality, area, and neighbourhood
- Distance to work
- Distance to school
- Distance to community and commercial services
What's the maximum age I want the house to be?
- New home
- Modern home
- Older home with renovation possibilities
- Heritage home
What size home do I want?
Consider how many people will be living in the home now and in the future.
- Square footage
- Lot size
- Number of bedrooms
- Number of bathrooms
- Allowance for an addition, in-law suite, or garage
What extra features do I want?
- Finished or unfinished basement
- Deck or patio
- Type of heating and insulation
- Family room or den
- Laundry room or pantry
- Central air conditioning
- Central vacuum
- Hardwood floors or carpets
- Appliances included
What kind of homes are available on the market?
Do I want to live in a brand new home?
New homes are usually sold by the building contractor or developer. So you're not dealing with an owner currently living in the house. A new house might also be one of many in a larger development. With a new home, there are a number of factors to consider.
- Value of "newness"
- Value of a warranty offered by the Seller
- Value of low, early-years maintenance
- Advantages and disadvantage of living in a new community
- Location of a new development to community and commercial services
Do I want to live in a resale home?
- Value of no warranty offered by the seller
- Value of living in an established neighbourhoods
- Value of living close to established community and commercial services
- Value of mature trees and gardens
- Advantages and disadvantages of age (heritage charm verses potential repair, maintenance, and renovation)
- Future costs due to normal exposure to weather and settling
What should I look for when I tour a house?
When you attend an open house or visit a house with your REALTOR®, there are a number of things you should look for. It is my recommendation to always hire a certified inspector before purchasing a property. They will give you feedback on;
- Type of wiring; type of electrical panel (fuses or circuit breakers); the type and placement of outlets
- Type of heating
- Condition of the roof
- Condition of the foundation
- Condition of the plumbing
When you are touring homes be very conscious of the neighbourhood, the neighbours' properties, what is behind trees (a highway?), the smells and noise of the neighbourhood. Once you find a home you like drive the neighbourhood at other times and days to get a feel if it is a good fit for you and your family.
What do I need to know when I make an offer to buy?
In the offer, you will state how much you're willing to pay, suggest a closing date, propose conditions, and insert the offer's expiry date. Your offer will include terms regarding a deposit.
The conditions you attach to the offer will vary. The seller may come back with counter-conditions. You and your REALTOR® will have to negotiate conditions based on your comfort level and criteria. There are a number of common conditions.
- You won't buy unless you get a suitable mortgage. Include the amount you hope to secure and at what acceptable interest rate.
- You won't buy unless you sell your current home. The seller of the home you hope to buy may continue to look for other buyers, but you retain the right of first refusal.
- You won't buy unless you are happy with the findings of a current site survey. It shows the location of the house on the property and will identify if there are any encroachments or easements or right of ways that you should investigate further.
- You won't buy unless you are satisfied with the findings in a title search document of the property. Your lawyer will also conduct a title search to learn if there are any liens, easements, rights-of-ways, or other restrictions.
- You won't buy unless the septic system has been inspected and you are satisfied with the results.
- You won't buy unless the house is inspected and you are satisfied with the results.
Once your conditions have been satisfied, the agreement binds both the seller and you the buyer. If you then walk away from the transaction, you may lose your deposit and may also be sued for damages.
How can I get a mortgage?
Before you start serious house-hunting, you should work with your mortgage lender to determine how much you can afford. They will have a definite set of rules and criteria to follow before approving your mortgage.
How can I figure out how much mortgage I can handle?
Use the gross debt-service formula (GDS): principal, interest, and taxes (PIT) and energy costs (and condominium maintenance costs) on your mortgage loan should not exceed 32% of your gross income.
What types of mortgages are available?
- Pre-approved mortgages are granted in advance on a mortgage for a specified amount with a guaranteed interest rate.
- Conventional mortgages are granted with the property as security, normally with a 20% down payment. If you don't have the 20% down payment, you will need mortgage insurance to qualify for a mortgage.
- Vendor take-back mortgages are granted when the seller underwrites part of the purchase as a loan to be repaid by you as the buyer. These are often used as second mortgages to bridge any gaps or to make the property more attractive to the buyer.
- Open mortgages are granted with the option that you can make extra payments on the principal, reducing your borrowing costs. Because of this flexibility, interest rates for open mortgages are a little higher.
- Closed mortgages are granted on the condition that you must wait until the term has expired to pay your own mortgage. Because of this inflexibility, interest rates on closed mortgages are generally lower.
- Partially open mortgages are granted with some of the features of both open and closed mortgages.
- Variable mortgages will fluctuate with the prime rate. They can be a fixed monthly payment or a floating one based on what the prime lending rate is doing. Visit the Bank of Canada to see what prime rate is.
What types of payment methods are available?
- Monthly payments
- Bi-weekly monthly payments
- Weekly payments
- Accelerated payments which allow you to make extra contributions
- Shortened amortization period which raises payments but shortens the mortgage term
What extra expenses can I expect to encounter?
These costs vary. There are a number of common extra expenses:
- Land transfer tax
- Mortgage broker's fee
- Appraisal fee
- Surveying costs
- Mortgage Insurance premiums
- Mortgage rate adjustment
- Reimbursement to seller of any unused portion of prepaid property taxes or utility bills
- Legal fees
- REALTOR® fees
Typical One Time Closing Costs
Home inspection Fee:
|Mortgage Appraisal Fee:|
|Mortgage Processing Fee:|
|Loan Insurance Fee:
(See Mortgage Specialist)
|Property Purchase Tax|
|Added Tax for Foreign Buyers and luxury homes|
|Miscellaneous Closing Adjustments:
(Property tax adjustment)
(Maintenance fee adjustment)
|Total Estimated One-time Closing Costs:|
Typical Monthly Costs
|Monthly Property Taxes:|
Estimated Electricity and Gas:
Security Monitoring System:
|Total Estimated Monthly Costs:|
The above costs should be verified before purchasing your property.
What do I need to know when I complete the deal?
Before the house formally changes hands, there are a few things to do.
- Transfer of title - arranged by yours and the seller's legal representative
- Transfer of money - deposited to your legal representative's trust account
- Possession walk-through of your new home
Hand-over of keys