If you’re thinking of buying a home, you’ve come to the right place. This web site can turn you into a house-hunting master. But before we jump right in, you have to make sure three things are ready. You, your bank account and the real estate market.
Are you ready? Be sure.
Few joys can match the pride of owning the roof over your head, but you will have to make some sacrifices. There’s the obvious financial responsibility, but your home will also require constant care. That’s what real pride of ownership is all about.
Is your bank account ready? Check it twice.
Your first home will be the biggest financial obligation you’ve ever faced. You should already be an experienced saver and good at managing debt like student loans or credit cards. Ideally, you’ve also saved up some money for a nice down payment. Talk to your financial institution about the Home Buyers Plan too. Our Next Step will give you a crystal clear picture about how much you can afford.
Is now a good time to buy? Here’s the hottest market tip you’ll ever get.
Markets go up, markets go down and even the smartest experts can’t accurately predict when a market will peak or bottom out. The good news is if you’re buying a home as a long-term investment (and for long-term enjoyment), you’re protected from short-term changes in the market. Over time, real estate has almost always increased in value.
All you have to do is pick a home that meets the needs of you and your family. Then you’ll enjoy living in your investment as it grows in value. A home is one of the best financial decisions you can make and it’s tough to live in a stock portfolio!
Decide What You Want to Buy
Ahh, the big city. Sure the prices are generally higher, but you can walk to a restaurant, maybe even to work. You’ll also have the widest range of housing options.
Newer schools, newer shopping centres, bigger yards, bigger homes, no wonder so many people love the suburbs.
Smaller Cities and Towns
There are many wonderful self-contained communities and compared to the big city, you can save a bundle.
If you like the idea of owning land how about a few acres all to yourself? Seclusion is not for everybody, but for some, it’s heaven.
Next, decide what type of home you want
By now, you probably have a good idea of what type of home is right for you. To familiarize you with the terminology, here’s a quick overview.
As the name implies, the home is not attached to the home next door. Styles range from a single-story suburban bungalow, to a three-story Victorian.
Semi-detached or linked
Two houses that share a common wall. Usually less money than a fully detached home.
A two-family home.
Also known as terrace or row housing. Several homes with a common style and joined in a row. They usually share walls on both sides.
The Condo Alternative
Some people can’t wait to start gardening on Sunday morning. If you are not one of those people, it’s just an elevator ride away. Condos also make a great first home purchase because they’re often thousands of dollars less than a detached home.
How Condos are owned
You’ll own 100% of your unit and a share of the common areas. Common areas include the necessary plumbing, electrical systems, hallways and elevators. They may also include lots of fun stuff like a private gym or party room.
Condo fees - Membership has its privileges and it costs
On top of your mortgage and property taxes, condo owners also pay a monthly fee to operate and maintain the common areas. Be sure to look into condo fees and how well they’re managed, before signing anything.
New or Resale?
Resale - Previously loved
Nothing can match the charm and character of an older home. As a bonus, the previous owner may have made improvements and upgrades and you get them with the house, usually for less than the cost of putting them in yourself. However, some may have a little too much ‘character’ like a leaky roof. Know what you’re getting into. You should always work with a knowledgeable REALTOR® and as we cover in Step 10 never buy a resale home without a Home Inspection.
Ah, that new house smell
You will be the very first person to live in your new home. In fact, your new home may be so new, that it’s not even built yet. Before you commit to anything, carefully examine the property, the blueprints and visit other homes built by the same company. Have your REALTOR® and lawyer review everything before you sign. While your home is being built, stay on top of the process and remember, you have a legal right to make a full inspection of the house before you accept it as complete.
You know what you want, but let's talk needs
Are you getting out of a two-bedroom apartment because it’s too small? Then your new home should have at least three bedrooms and probably a second bathroom. REALTORS® call these must-have features needs. Features you’d like to have are called wants. Your strategy should be to find a home within your price range that fulfills all or most of your needs and as many of your wants as possible.
Figure Out How Much You Can Afford
Before you start looking for your dream home, let’s find out how big you can dream. Knowing your true budget is the first and most important step in buying a home. Why? A home is a big purchase. It’s probably the most expensive thing you'll ever buy and there are lots of expenses you might not even know about. Everybody’s total costs are different, but it’s almost guaranteed you won’t have that much money saved up. Hopefully you have enough for a nice down payment, but for the rest…
- Yes, you need a mortgage
- How much will a bank will lend you?
The first step in determining how much a bank will lend you is to understand how much you can afford each month. This is determined using two lending principals.
The first lending principle is that your monthly housing cost should not exceed 32% of your gross monthly family income. This principle is known as the Gross Debt Service (GDS) ratio calculation.
The second lending principle used, the Total Debt Service (TDS) ratio calculation, is that your monthly housing cost and payments on all of your other debts (including loans, credit card and lease payments) should not exceed 40% of your gross monthly income.