So you've decided to purchase your first home. Congratulations!
But, how do you make your dreams a reality? Follow these simple First Time Buyer tips and you'll be well on your way to owning your first home.
Make a wish list
Here are some questions you should ask yourself:
- What part of town do you want to live in?
- What price range would you consider? Not less than ?, not more than ?
- How much renovation are you willing to do?
- How many bedrooms & bathrooms must you have?
- What features do you want your home to have?
Click here for a complete itemized list of questions. You can complete this online and simply print when you're done.
Get pre-qualified
Know your price range before you start looking at homes.
Getting pre-qualified for a home loan is a quick and easy way to help determine how much you can actually afford to spend on buying a home. It is an essential step in the home buying process. Have a friend, relative, co-worker or your Real Estate agent provide you with a referral for a lender or mortgage broker.
From the seller's perspective - If you had two offers on the table, one from a fully prequalified buyer and an other who did not take it upon him/herself to get prequalified -- which offer would your devote the most attention? Even if the non-prequalified buyer's offer was more than the other, would you take a chance on the buyer that perhaps he/she may not get qualified?
The downpayment
Typically, a minimum downpayment of 20% of the purchase price is required to qualify for a loan without having to pay the Mortgage Loan Insurance premium.
But, what happens if you don't have nearly enough money saved up for a downpayment? And, what is a Mortgage Loan Insurance premium? Not to worry! There are many different options available for you to help you get the amount of money you need to put down on a home.
You can purchase a home with as little as 5% down with mortgage loan insurance. This insurance protects the lender and most Canadian lending institutions require it. Here's how it works: If the borrower fails to pay (defaults) on the mortgage, the lender is paid back by the insurer. The cost of the insurance is in the form of a premium that can be paid in one lump sum or it can be added to your mortgage and included in your payments.
How can you get more funds? Did you know, as a first time home buyer you are entitled to withdraw funds from your RRSP's up to a maximum of $20,000. You are not taxed on your withdrawal if the money is for the purposes of purchasing your first home. Please visit the Canada Revenue Agency website for more details as some conditions do apply. Another option is to receive a non-repayable gift from an immediate relative. Give your relatives a call... you never know!
Pre-approval process
How does a pre-approval differ from a pre-qualification?
With a pre-qualify, the mortgage professional reviews your finances, credit report and income and then, based on their experience, estimates an approximate amount of a mortgage that you should be able to qualify for.
With a pre-approval, you actually apply for a mortgage with an address "to be determined later" and the application is submitted to a lender and an approval is issued subject to the home qualifying.
A pre-approval can: Save time by looking at the right homes, Spend more time examining the right homes, Gain confidence & avoid disillusionment, Increase bargaining & negotiating power, and Enjoy a faster closing period!
Find the right Real Estate Agent
How can you find a good real estate agent? The best agent for you doesn't have to work at the largest brokerage, close the most transactions or make the most money. What you want is an experienced professional who will listen to you, conduct him/herself in an ethical manner and knows your market.
Here are a list of ways to find the agent that suits you best:
- Referrals - Search online for agent listings - Search online for agents who work in the area you are buying/selling - Attend open houses - Track neighborhood signs - Print advertising - Recommendations from other professionals
Make an offer
So you decided on the home your want to purchase. The next step is to have your Real Estate agent or lawyer prepare and present an Offer to Purchase or an Agreement of Purchase and Sale form. The form will typically include such things as:
- Your legal name, the name of the vendor and the legal civic address of the property.
- The purchase price offered.
- The chattels that will be included in the purchase price (e.g.: window coverings, appliances or a satellite dish). Whatever items in or around the home that you think are included in the sale should be specifically stated in your offer.
- The amount of deposit.
- The closing day (date you take possession of the home) - usually 30 to 60 days from the date of agreement. It can also be 90 days or longer.
- Request for a current land survey of the property.
- Date when the offer becomes null and void.
- Any other conditions that go with the offer, including property inspection and approval of mortgage financing.
Once the offer is submitted to the Seller, the fun (and scary) part begins. The seller has 3 options at this point - to Accept, Reject, or Counter the offer.
If the vendor accepts, congrats! You are one step closer to owning your home, subject to the fulfillment of any conditions in the offer.
If they reject, the offer is over and usually that means it's time to start looking at other homes.
When the seller counter's your offer, this means that they want to negotiate and they will usually send the offer back to you with a reduced price from their original asking price, but more than your offer. They can also negotiate other terms like closing dates, conditions, chattels, etc. The offer can go back and forth until one party either accepts or rejects the last offer on the table.
Find the right Lawyer
Just like finding the right Real Estate Agent, look to referrals from family, friends, co-workers or better yet - your Real Estate agent. Realtors always have a list of contacts they can refer you to. Be it contractors, designers, electricians, moving companies & especially lawyers to name a few.
Closing the deal
On closing day, this is the day you take legal possession and finally get to call your new house your own. But don't forget, the homebuying process isn't quite over yet. There are just a few things that need to be done on your closing day.
1. Your lender will provide the mortgage money to your lawyer.
2. You must provide the balance of the purchase price to your lawyer along with other closing costs*
3. Your lawyer pays the vendor, registers the home in your name, provides you with a deed and the keys to your new home.
Closing cost are costs in addition to the purchase price of the home, such as legal fees, transfer fees and disbursements, that are payable on closing day. They can range from 1.5% to 4% of a home's selling price.
WITH THESE TIPS, YOU SHOULD BE WELL ON YOUR WAY TO MAKING AN INFORMED DECISION ON THE PURCHASE OF YOUR HOME!
