Buying a House - Tips
- Is Homeownership for You?
- Are You Financially Prepared?
- How Much Will It Cost?
- What Should You Buy?
- Which Professionals Can Help?
- The Final Process - The Buying Process
- Repair and Maintenance Tips
Is Homeownerhsip for You?
Buying a property is one of the biggest financial decisions you'll ever make, therefore it is prudent to make sure that you understand all the details. Some things to consider are: what is your financial situation? Do you have money to put down as a down payment? What about monthly mortgage payments? There are also property taxes, utility expenses, and repairs and renovations. One of the wonderful advantages to owning your own home is that real estate values always appreciate with time.
Are You Financially Prepared?
To understand how much you can afford, you have to understand how much you already spend. Calculate how much money you make per month and subtract any loans, leases, credit cards, student loans, or any other type of regular financial obligations. When considering getting a mortgage, understand that your monthly housing costs should not be more than 32% of your gross household monthly income. These housing costs include monthly mortgage principal and interest, taxes and heating expenses. Also to consider is that your entire monthly debt should not be more than 40% of your gross monthly income ( this includes all other loans as mentioned above). For further details visit: CMHC
How Much Will It Cost?
In preparation to purchase a home, it's important to understand the upfront costs. These costs include:
- Down Payment: The remaining balance of the property subtracting the mortgage loan, and the initial deposit. This amount is typically the money that you have saved up to decrease the overall amount borrowed from a lender.
- Deposit: This money is paid when you make an offer to purchase. Be prepared to come up with 5% of the purchase price. This amount is then subtracted from the remaining balance of the property.
- Mortgage Loan Insurance: If you can't afford to put down 20% of the purchase price as a down payment, you will most likely have to pay for mortgage loan insurance. The insurance premium will depend on property value and percentage of value to loan.
- Lender Appraisal Fee: Your mortgage lender may request to appraise the property at your expense. The cost is usually between $250 and $350 ( however sometimes when asked the fee can be waved).
- Home Inspection: It is usually a good idea to have a home inspector determine the condition of the property, and relay any areas of concern. Home inspections are typically around the $500 mark however can be less or more demanding on which home inspector you hire and also the complexity of the inspection.
- Land Registration Fees: Upon closing there is a provincial charge based upon a percentage of the property's purchase price. Review with your lawyer to determine what this fee will be.
- Property Insurance: All mortgage lenders require that the property be insured. This insurance covers the cost of replacing your home and its contents. Property insurance must be in place on closing day.
- Legal Fees and Disbursements: Your lawyer's fees are due upon closing of the property. For further information, contact your lawyer.
- Title Insurance: This insurance is highly recommended to ensure that the property's title is free and clear on date of possession. If insurance is purchased, and a latent issue with the title arises after the closing date, the buyer is protected from paying any additional costs to remedy the problem.
What Should You Buy?
When considering what property to buy, you must determine your current and future needs. Some things to think about: size considerations ( number of bedrooms, home office, number of bathrooms, etc), facility needs such as air-conditioning, storage, backyard space etc. Also to consider is location: Would you prefer to live in the city or suburbs? Do you want to live close to work? Are there any good schools for children? Does the neighborhood have a good reputation?
Which Professionals Can Help?
When buying a property, it is adviseable to use a qualified real estate salesperson, one who knows the entire process, and can help you buy a home at fair market value. Also, it is important to speak to a lender or mortgage broker in order to prequalify yourself before placing an offer to purchase. It is also important to find a lawyer who will ensure the property your are considering to purchase is free of building or statutory liens, or charges or work orders associated with it. A lawyer also provides an extra level of protection so that you are legally protected and represented when you are making a transaction this large. If you choose to have the home inspected, contact a knowledgeable and professional inspector that will give his/her detailed opinion of the property.
The Final Process - The Buying Process
The final process in purchasing a home is the actual preparing and signing of the offer to purchase. Included in this offer will be: full legal names of all parties, what chattels will be included, the deposit amount, the date you would like to take possession, any conditions (such as mortgage approval, having an inspection done, etc.), the date and time that the offer is valid to, and any other requests you the buyer desire. At this point the offer is signed and submitted to the selling party. If all conditions, purchase price, and amendments are approved, the property is either sold firm, or sold conditionally (pending resolution to the conditions placed in the agreement).
Repair and Maintenance Tips
With all the excitement of purchasing a home, it is good to know a few things about your new property. Some of the following details can be explained to you if you hired a home inspector to walk you through the property before hand: knowing the location of the main shutoff valve for water and natural gas. Knowing where the emergency switch for the furnace or burner is. Locating the hot water heater and thermostat, and main electrical switch and fuse box. For a detailed list (by month) of what things to watch out for, vist CMHC's Maintenance Tips
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