Home Buyer's Guide
So, you have decided to buy a home. If you are a first time Buyer, the task may seem a bit overwhelming since, for most of us, it is the most costly purchase we will ever make and we worry about overextending ourselves financially. But help is at hand to guide you gently and successfully through the process. After your first experience, you will usually find your subsequent house purchases much less stressful since you will have a better idea what to expect.
Here are some guides that anyone interested in purchasing a home could use.
Establishing how much you can afford.
This is probably the most important step in choosing your first home. The price of home you can afford is based on the mortgage loan for which you qualify together with how much you have saved for your downpayment. (more)
How much do you need as a downpayment?
The maximum mortgage loan is usually 95% (although there are some "no down payment" options available under restricted conditions). So the minimum amount of equity required from the borrower's own funds is 5%. If you contribute less than 25% of the value of the property the mortgage is considered a high ratio mortgage. The federal interest act requires that high ratio mortgage loans be insured to the lender and the borrower pays this mortgage insurance premium. The premiums for this insurance range from 1.25% of the loan amount when your initial investment is 20%, to 3.75% when your initial investment is only 5%. These insurance costs are usually added to the mortgage principal. (more)
What is a "Home Buyers Plan"?
First time Buyers can withdraw up to $20,000 per individual or $40,000 per couple, from their RRSP's without penalty, to be used towards the purchase of their first home. (more)
Is a deposit the same as a downpayment?
When you submit an Offer, you are usually required to include a "valuable consideration" or deposit to demonstrate your serious intent or goodwill in buying the property. The deposit is not the same thing as a down payment although when an agreement is reached and the transaction is completed, the deposit will be credited in full toward the purchase price. (more)
What other expenses are involved in buying a home?
In addition to your downpayment, you will need cash for other costs involved in buying a home. These costs fall into two categories: administrative and incidental. We usually refer to these as "closing costs" and they vary with each property. Generally it is recommended that first time buyers budget about 2.5% of the purchase price for these additional costs. The administrative costs include taxes including Land Transfer Tax, prepaid property taxes, legal fees, insurance, various certificates and fees that the government, financial or other institutions require in order to facilitate the purchase and are therefore unavoidable. Incidental costs would include: home inspection or other expert fees, survey or title insurance, moving expenses, utility hook ups, and so on.
You will need a lawyer to complete the home purchase. Your lawyer will do a land title search, process the mortgage, and handle the other legal necessities including adjustments and closing costs.
Ask everyone involved - your realtor, your mortgage consultant, your lawyer - to explain each cost you are likely to incur. No need for surprises on the day you sign the title and mortgage documents, you'll be excited enough as it is. (more)
How do I know I can get a mortgage?
For purchasers, another key member of the real estate team is the insurance broker. Creditors and mortgage lenders, almost without exception, require insurance on the home you buy before any purchase can be finalized. Start by approaching the same broker you use for other insurance policies — often, you are able to negotiate a better rate. But still shop around and ensure you get the coverage you need for what you want. (more)
What about a home inspection?
If you are a buyer, you can avoid a lot of expensive surprises by bringing in a home inspector as a condition of your offer to purchase. The older the home you plan to purchase — even if it has been substantially upgraded — the more potential there is for problems. Being aware of any structural defects can help you decide whether you want to buy the property at all, or for the price you are considering. (more)
These are just a few of the many questions first time buyers often ask as we begin the home buying journey. Let me put my skills and 28 years experience to work for you and you will find that the whole process can be a lot easier and more enjoyable than you think.
