First Time Buyer Guide
Thinking of buying a home? You know the one – the dream home that you can entertain your family and friends in. Or maybe it’s the house where you start a new family. Or maybe it’s a place for you and your significant other to start a beautiful life, together?
If you are a first time home buyer, the real estate market can be confusing. There is a lot of information out there to make you feel overwhelmed and it can be frustrating trying to figure out where to even begin. Keep in mind, there are also a few things to watch out for and a few things that you need to be informed about.
I have gathered some key details that any first time home buyer jumping into the market, should be aware of. These 10 easy steps will help you understand the process much better. Follow me on Twitter, @christopherata and we’ll work together to make one of your biggest life’s milestones a smooth experience.
Finding the Right Location and Type of Home
The first step involves taking your dreams and deciding the location, size, and type of home you want and need.
- Location - The very first and important thing that you need to establish as you look for a house is location. Even if you research more on real estate investment, you will learn that location plays an important part and it’s usually considered as the first priority. The reason behind it is that location is essential when determining the market value of the house, location also determine if you have good neighbours, and location also determine if you are living in a safe and peaceful area.
- Size of the House - You also need to take note on this, because you need to make sure that you and your family fits on the house. Even if the house have a lot of rooms but the common areas like the living room, dining room and other areas have small spaces then you would not enjoy your house. You obviously don’t want a family that does not do things together and just go straight to their rooms. You want a family that has a house which they you can all enjoy watching a television program a board game or just being simply being together on one common area like having all of you on the dinner table to enjoy each other's company.
- House Type - Another important thing that you need to determine as you look for a house is: what type of house are you looking for? And most importantly, what is your second choice? You should always have a back-up plan so you’ll never be disappointed. And finally, you need to research and choose from single family homes, condominiums, townhouses, and other types of homes. You need to know and understand the advantages of these houses as well the possible concerns and issues that you will face when you own a specific type of house.
Special Features - As you consider a house to buy after checking many properties, look carefully on the house and check for anyspecial features. Does it have double pane windows? Or does it have a big garage? How many bathrooms does the house have? These are some of the things that you need to check and be aware when you are finally considering a specific house to buy. Check also if you can improve the house and how much it costs.
Finding a Real Estate Agent
Buying a home is one of the largest financial investments you’ll be making, so it is important that you have a professional REALTOR® working for you. When you buy a home you will be entering into a legally binding contract, and a REALTOR® is professionally trained to create this contract for you, and ensure that your interests are protected. Look for someone who you will be comfortable working with, who will answer your questions and help you find a property that meets your specific requirements.
A good REALTOR® should represent your best interest when you're buying a home. It’s your REALTOR®’s job to make sure that you find a home at the lowest price possible. Finding the right REALTOR® includes more than just buying and selling, a good REALTOR® can take on many roles. At any given time they can be a therapist, tour guide, or negotiator. Obviously you can’t expect your REALTOR® to meet all of these needs but there are just a few basic requirements that every REALTOR® should meet.
A good agent will have a wealth of information concerning your area. They should be able to provide you with even the most trivial information like where the best restaurants are or where to find veterinary services. Your agent should know of local customs and history to help you learn about the place that you plan to call home.
It’s also very important at the beginning of the process that you evaluate what price range you can afford and determine the amount of financing you’ll require. Your REALTOR® can help you with this process by getting some basic information about your income, debts and credit history. Finding out how much of a loan you qualify for will also help in determining the type of property to look for. Some lenders will pre-qualify you and guarantee a rate and terms for a set period of time - a great idea to do when rates are on the rise.
The initial pre-qualification stage also allows you to discuss with your lender any goals or needs you may have regarding your mortgage. He or she can then explain your mortgage options and recommend the type that might be best suited to your particular requirements.
Remember, pre-qualification is not the same as pre-approval. Pre-qualification is an estimate of how much you can afford and the figure is not guaranteed. Pre-qualification is a good step to take in the home buying process because it can narrow down the homes you look at, but ultimately, it doesn’t take into consideration your entire financial picture. Pre-approval is a more thorough and official look at your finances, so don’t assume that because you pre-qualify for a certain amount, you will be pre-approved for the same figure.
Since it’s often weeks, and sometimes months, between getting pre-qualified and closing on your home, it’s a good idea to “lock in” your interest rate and points. A lock is a commitment by the lender that guarantees you a certain interest rate for a specific period of time. The most common amount of time for a lock is 30 days. However, locks come in 15 day increments and you can get a lock for 15, 30, 45 or 60 days. It is good to remember that the shorter the lock period, typically the lower the rate will be. The longer the lock period, the greater the risk to the lender that rates will change, and not necessarily in the lender’s favour. That’s why lenders usually charge more for a longer time period with a lock. Locking into rates and points means that your lender commits to giving you a specified interest rate for a specified period of time. If you don’t lock into rates and points, you risk your mortgage costing you more than it needs to, so be sure that you are clear about what you lock into and for how long.
This is where the fun begins! However, you might find that your initial optimism of finding the right place quickly fading if you don’t have access to all of the available information about the current market. Sometimes the property you are seeking is available but not actively advertised in the market, and it will take some investigation by your REALTOR® to find all available properties.
This is also the perfect time to let your REALTOR® know what exactly you are looking for in a home.
- Are planning on staying at this place for a while to raise a family?
- Is this purchase for investment purposes?
- Any specific fixtures and/or features you would like in the home?
These are the kind of questions you should be asking yourself before telling your agent to start the hunt. Knowing this would not only help your REALTOR® but it will also make this experience a much smoother process for you and your family.
Looking for your dream home can also be stressful and frustrating. You should ask the sellers any questions that you may have regarding the foundation and any problems with the house. Ask about anything that concerns you but remember that unless you put it in writing as part of your offer the answer is not legally binding upon the seller. If the seller completes a seller's property condition report then you should have it written into the offer that the seller's property condition report survives the closing of the purchase and sale. Go into all closets and look up at the sealing for fresh paint or brown spots, which is evidence of roof leaks. Flush toilets andturn on faucets which will reveal evidence of plumbing or septic tank issues.
Finally, there is one common issue that many future home owners do. DO NOT CALL every agent listed on each house you are interested in looking at. REALTORS® work on commission only. It is a waste of your time and theirs to come out to show you a house and then you sign with another agent. Yes, the agents are paid after closing, and the check given to their broker for their cut. Many people in the general public don't realize this. Would you want to work for nothing?
Selecting Your Home
Choosing the right property for you and your family should be your main focus of your first time house purchasing process. Emotions run high during this time, and your REALTOR® can offer you informed and objective information about the properties that you’re considering. Remember, your REALTOR® spends their day dealing with all aspects of property and their advice can be invaluable.
Before selecting the perfect home, make sure your REALTOR® has looked into all the information concerning zoning and bylaws. You wouldn’t want to purchase a home and one year later, you find out a huge skyscraper development is being built in front of your home blocking the view you paid premium money for. Also, if you decide to buy a condominium or townhome, make sure your agent finds out if it’s alright to renovate and/or rent out your unit. These are some things you should look into before making your final decision.
Another aspect you should take into consideration is if there are any schools around the neighbourhood. Let’s face it; one of the main reasons that most people purchase a home is to raise a family. You would not want to find a great place, but elementary schools are nowhere near the vicinity of your home.
Tips on Choosing your Home
- Find a home with rooms, that you spend a lot of time in, facing north. North-facing rooms get sun for the longest part of the day. They are also the easiest to shade from unwanted sun. In summer when the sun is high, the right size eaves will shade north-facing rooms, while in winter when the sun is lower, sunlight will come in under the eaves. In the long run, you save money on your hydro bill!
- After locating a prospective home, it is imperative to get the home inspected. This should be done in consultation with a certified home inspector who would provide a detailed report regarding the damages inside the home that need to be attended. This is one of the most important things I feel you should get done before purchasing a home. This can also save you a lot of money in the long run.
Finding a Lawyer/ Notary
It is very important to find a Lawyer or Notary Public to help in the closing and conveyance of the property. Having a professional lined up ahead of time will help in making the buying process as smooth as possible. Your REALTOR® can recommend several Lawyers or Notaries to use.
When purchasing a home or getting a new mortgage, you must have a professional do the legal transaction. The notary or lawyer will register the title in you name. They will register the mortgage on the title and make sure that the title is free to be transferred. Most banks will let you choose your own lawyer or notary public to process your real estate transaction.
Lawyer vs. Notary Public
Lawyers and notary publics can perform the same job. The only difference of the two is that a notary public can not advise in any legal matters.
Making an Offer & Negotiating the Deal
When making an offer, the worst thing you can do is simply go in and make an offer a few thousand less than what they are asking and expect to get a fair price. You still might, but if you do your homework you could find that you’re really not getting that great of a deal or you may miss an opportunity to negotiate even more of a discount. It isn’t an exact science, but the seller wants to get you to pay as much as possible and you want them to sell it for as little as possible. With the right information you can likely find a reasonable middle ground. This is why you should always do your research. Never be afraid or embarrassed to ask your REALTOR® anything. They are there for you to answer any concerns you have in regards to your purchase; this is exactly why they are there.
Once you have found the right home now is the time to make an Offer to Purchase. You will also want to provide a period of time for you to complete appropriate inspections and investigations of the property before you are bound to complete the purchase. I can not stress this more; make sure your REALTOR® puts everything you request in the contract. Always have it written on paper so that if anything goes wrong, you have records. The smallest thing can go a long way. You never want to get “burned” in the end.
Once you have negotiated an agreement it is time to complete the evaluation of the property. Depending on the area and property, this could include inspections for leaks, dry rot, asbestos, faulty structure, roof condition, oil tanks... just to name a few. Your REALTOR® can assist you in finding qualified responsible professionals to do most of these investigations and provide you with written reports. You will also want to see a preliminary report on the title of the property, which your REALTOR® should provide. The title indicates ownership of property and can be used to clear up a confusing status of past owners or rights of access. The title to most properties will have some limitations.
Major Points of Home Inspection
Here is a list of some of the major areas inspectors will cover:
- Foundation: With either a basement or a crawl space, is it simply damp or are there outright water problems? Are there any cracks in the walls or floor that might indicate structural problems?
- Construction: Does the house have good quality construction? Is the flashing properly installed to protect wood? Are there any rotting problems with the wood? Is the roof in good shape or will it need replacing soon?
- Plumbing: Has the plumbing been properly installed? Is it in good shape? Is there any evidence of leaks?
- Temperature Systems: Are the units in good shape? Will they need replacing soon? Are they rated for the amount of square footage they are heating?
- Electrical: Do there appear to be any electrical problems or code violations?
- Interior: Are the floors level? Do windows and doors function properly? Do the appliances in the kitchen function properly? Is there any evidence of leaks or mildew in the bathrooms?
The bottom line is, spend the $500. Don't skip the inspection and make sure the inspector you hire is experienced and certified to do the job. Believe me, the inspection is worth the money down the road.
Setting up Your Mortgage
If you have already pre-qualified with a lender for a mortgage the step will be fairly painless! Remember mortgage interest rates, fees and other terms vary widely and are often open for negotiation. Always first research what is available by calling several mortgage lenders or use the Internet. Your REALTOR® can help you find the appropriate lender.
If everything is clear from inspection and you have settled on a mortgage interest rate with your bank or lender, you're ready to sign what may seem like the largest stack of documents you've ever seen! This is when you’ll feel like a rock star, everyone asking for your signature! It is at the closing that the title to the property will be transferred to your name, your homeowners' insurance begins coverage of the property and you are officially committed to your mortgage. It is, unfortunately, also time for you to plunk down your cash for the down payment and closing costs. You should be able to get a copy of the settlement statement that includes the amount of cash you'll need at closing from your lender a day or two prior to the closing. Knowing these costs is important since you'll need to pay your down payment with a certified cheque.
You'll be signing lots of papers, including:
- The settlement statement
- The sales contract
- Title insurance
- Homeowners' insurance
- The title or deed to the property
- The down payment and closing costs
There may be additional documents to sign depending on the complexity of the deal, so be prepared and block out appropriate time for everything.
The last step is the “Closing” part of buying your dream home. “Closing” involves:
- Transfer of title – this is arranged by your lawyer and the seller's lawyer
- Transfer of money – this is deposited to your lawyer's trust account
- Verification of the offer-to-purchase
- Pre-possession walk-through of your new home
Again, your REALTOR® can guide you through this process and make sure everything flows together smoothly.
Congratulations! You are now officially a Home Owner!
Any questions or concerns, please do not hesitate to contact Chris Ata at 604.760.0207 or firstname.lastname@example.org.
*Please keep in mind, this is a mini review of what you will be expecting when purhasing a home. The information is deemed reliable but not guaranteed.*
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