Home buying can be a daunting and complex process. But with a REALTOR® at your side, it doesn't have to be. Remember, a REALTOR® works for you and is there to look after your best interests. So take a few minutes and learn how a REALTOR® can help you find what you're looking for.
1. Make sure you're ready to buy
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 youve ever faced. You should ideally have saved up some money for a down payment and are managing any debts like student loans or credit cards. In a couple steps you can determine how much you can afford.
Is right now a good time to buy?
Markets go up, markets go down and even the smartest experts can't accurately predict when a market will peak or bottom out. If you're buying a home as a long-term investment (and for long-term enjoyment), you should be protected from short-term changes in the market. 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.
2. Decide what you want to buy
Nowadays, there are many different types of homes to choose from. And there are pros and cons to each. Take a minute to reflect on your lifestyle and based on that, decide what best fits you. To help, we've broken down the most popular housing options here.
First, decide where you want to live
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
Canada is dotted with thousands of 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 yourself with the terminology, here's a quick overview:
- Single-family detached:
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 building zoned for two families.
- Town house:
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
- 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 privileges and 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.
- Ahh... that new house smell
If you're having a new home built from the bottom up, carefully examine the property, the blueprints and visit other homes built by the same company. Have your REALTOR® and/or 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. To help you with this, we've supplied you with your very own Dream Home Checklist. Download it here
3. Sell your current home
Not very many people can hold onto two homes at the same time, so you'll probably need to sell the one you have now. Be sure to check my incredibly helpful Selling section.
4. 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.
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. Some of them include downpayment, legal feesm title insurance inspection fees, property transfer, taxes, mortgage, utilities, maintenance, insurance, property taxes
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. So determine how much a bank will lend you
Head over to the next step where you'll find helpful tips on arranging your mortgage. But 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.
Gross Debt Service Ratio (GDSR) calculation:
This lending principle simply states that your monthly housing cost should not exceed 32% of your gross monthly family income.
Total Debt Service Ratio (TDSR) calculation:
This lending principle summarizes 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.
Our What You Can Afford calculator will help you easily estimate your maximum affordable mortgage payment of principal and interest. Just enter your monthly income and expense amounts, and the calculator will do the rest.
Once you have used the What You Can Afford calculator to estimate your maximum monthly total, you can compare this number to the mortgage payments for specific loan amounts. Simply enter the loan amount in our mortgage calculator and the monthly principal and interest will be figured out for you.
5. Arrange a mortgage
Money makes the world go round, and a mortgage gives you the power to buy a home. This isn't the most fun step in buying a home, but it's vital.
Who do you talk to?
There are hundreds of banks, credit unions and other lenders out there who would love your monthly mortgage payments. So talk to everybody and don't be money-shy! Talk to your banker, other banks and people you know. REALTORS® can be very knowledgeable about mortgages and have lots of good advice.
Call a mortgage broker
Mortgage brokers are another great resource. They find low rates for a living, and they usually don't get paid unless you sign a mortgage through them, so they're highly motivated to get you the best deal.
Your best mortgage might be the seller's mortgage
Often, you can take over or 'assume' the seller's mortgage. This is a great idea if the seller is locked into a lower interest rate than you can get right now. Your REALTOR® may have additional information.
Mortgage terminologyMortgage term:
Refers to how long the bank has agreed to lend you the money - typically from six months to five years. At the end of the term, you usually renegotiate a new term.
The length of time it will take to pay off the whole mortgage, often as long as 25 years. The longer your amortization, the lower your monthly payments, but the more you pay in interest over time.
Interest is the cost of borrowing money, and the interest rate tells you exactly how much. Using this mortgage calculator, check the difference between borrowing $100 000 at 6% and at 9% at the same amortization. Surprising, no?
That interest rate not only affects how much you pay, it also affects how much you can borrow. So keep searching for the best rate!
How big a down payment?
You want as small a mortgage as possible, which means making the biggest down payment possible. Just remember to set money aside for all the fees associated with buying a home. Not to mention moving, repairs, renovations, new furniture... think ahead.
The Home Buyers' Plan A little sweet relief
If you're a first-time homebuyer with money in an RRSP, you can withdraw up to $25,000 without paying any income tax. If your spouse is also eligible, that's $50,000. Ask your REALTOR® how to best take advantage of this plan.
Lock into an interest rate? For how long?
It's a tough question. What if you 'lock in' for five years and the rate goes into a period of decline? That could mean you're stuck paying more than you had to for a long time. But if rates were to steadily climb over the next five years, locking in for five years now would be a great move. Your REALTOR® may have a lot of good advice.
What you need to apply for a mortgage
- Letter of employment confirmation
(include your position, your pay and how many years you've been with the company)
- List your assets
(your car, stocks, bonds, GICs, etc)
List your liabilities
(car payments, student loans, credit card debt, etc)
Social Insurance Number
Your chequing account number
Your lawyer's contact information
Information about the house you want to buy
Don't forget these extra costs
- Application fee:
Some mortgage lenders charge a fee to process your application. But ask to see if you can get it waived.
- Appraisal fee:
Your mortgage lender may need to have your new home appraised by a professional, and they often pass the bill on to you. Sometimes your lender will also waive this fee.
- Mortgage broker's fee:
Your mortgage broker may charge a fee that's payable on your closing date. Ask your broker to avoid surprises.
Land survey fee:
Lenders may require a survey of your property, even if it's an existing survey. Get your lawyer on the case.
- Home inspection fee:
A home inspection is so important, we devoted an entire step to it. Avoid surprises and protect yourself... this is money well spent.
- Home Insurance:
Mortgage lenders require you to carry fire and extended-coverage insurance because your home is the security deposit on the mortgage. Often you can have these payments added to your monthly mortgage payments. Shop around.
- Title insurance:
It's not mandatory, but protects you from all sorts of fraud and potential errors surrounding the title to your land. Ask your lawyer for details.
You'll pay your lawyer for their invaluable time and "disbursements" which are the costs involved in title searches, drawing up the title deed, and preparing your mortgage.
The previous owner may have paid property tax or utilities in advance, and they want to be credited for those payments. Ask your REALTOR® and lawyer what might come up on the closing date.
- Maintenance and utility costs:
Remember, you'll now have more regular monthly payments in the form of property tax and utilities.
- Property Transfer Tax:
The amount of this tax varies from province to province.
- The GST/HST and new homes:
Resale homes don't involve GST/HST, but new homes do. If you intend to live in your new home (instead of renting it out) there is some relief. Consult your REALTOR® and/or lawyer for more information.
- REALTOR® Commissions or fees?
REALTOR® commissions or fees are subject to GST/HST.
6. Find a REALTOR® who is right for you
REALTORS® aren't just people who help find you a home. They're an invaluable resource for knowledge, contacts and advice that help turn buying a piece of property into a home. Here we explain what you can expect when you enlist the help of a REALTOR®.
There are a number of different kinds of relationships that you can develop with your REALTOR®. However, they all fall primarily under two categories - agency relationships and non-agency relationships.
- Single Agency
An agency relationship is one where the REALTOR® represents you exclusively. In that respect, the REALTOR®'s primary obligation is to you, and they are required to act only in your best interests. Anything you tell your REALTOR® agent is strictly confidential, and the REALTOR® has an obligation to disclose to you any information he or she has that is related to the transaction.
- Dual Agency
Dual agency refers to the situation where the REALTOR® represents both the buyer and the seller as agent at the same time. In this case, both parties are required to sign a dual agency contract setting out the obligations of the REALTOR® to both parties, and obtaining the consent of the parties to this type of representation.
It is possible for a REALTOR® to work with you without being your agent. In this case, the REALTOR® can give you information, but cannot provide you with advice. There is a big difference between these two concepts. Nothing you say to a "non-agent" is confidential, so you have to be careful what you confide. As a buyer you will likely want your REALTOR® to act as your agent, but that decision is up to you.
Remember, the REALTOR® Code requires REALTORS® to disclose the nature of the relationship they have with you, and the duties and obligations associated with that relationship. Make sure you have this discussion with your REALTOR®.
Selecting a REALTOR®
There are lots of ways to find a REALTOR®. As you drive through prospective neighbourhoods, jot down the names and numbers of REALTORS® on the For Sale signs. Open Houses are a great way to meet face-to-face. Maybe friends or family members have a REALTOR® they love. If you are browsing properties on REALTOR.ca, you can also contact a REALTOR® directly through that web site. Interview two or three and pick the one you think will be your best "business" partner.
How REALTORS® can help buyers like you
- Review your list of wants and needs to help you determine your price range.
- Answer questions about the markets you're interested in and help you compare homes and neighbourhoods.
- Use the local real estate Board's MLS® System. Your REALTOR® can give you access to exclusive features of an MLS® System that the public is not privy to.
- Preview properties to ensure you're only shown homes that meet your needs and budget.
- Make appointments and walk you through potential homes, answering all your questions.
- Give up-to-the-minute information on financing and explain your mortgage options.
- Negotiate with the seller, smooth out any potential conflicts and draw up a legally binding contract.
Stick with your REALTOR®
Your REALTOR® can become an expert on your specific needs and tastes. Scattering your time and energy amongst multiple REALTORS® will work against your goal of finding your best home. And because most REALTORS® have equal access to the same property listings, there's no real advantage to having multiple REALTORS®.
Canada's money laundering reporting requirements
No matter which REALTOR® you select, he or she will advise you of reporting requirements by FINTRAC, the federal agency responsible for administering Canada's Money Laundering and Terrorist Financing legislation and regulations. Your REALTOR® is required by federal law to complete a client identification form, and must ask you as a client (buyer) for verified ID such as a driver's license or passport. You can find out more on the FINTRAC web site athttp://www.fintrac-canafe.gc.ca.
7. See what's out there
Now's the time to pound the pavement and see what's available. This step can be either incredibly fun or incredibly exhausting. But with an expert REALTOR® at your side, you'll be able to sift through to your dream home much more effectively.
Read and see all about it
- Start reading real estate ads in local papers.
- Visit the areas you're considering to get a feel for them.
- Make note of surrounding schools, shopping and recreational areas.
- Keep an eye out for not-so-great things like large industrial areas, railway tracks and airports.
- Visit during the day and at night.
Open Houses, come on in
'Open Houses' are a great way to see inside the homes of your potential neighborhood. If a REALTOR® is hosting the open house, he or she probably knows the local market inside and out, and will be happy to answer your questions don't be afraid to ask!
Welcome to the wonders of www.REALTOR.ca
REALTORS® have access to incredible house-hunting tools called MLS® Systems, which are operated by real estate Boards across Canada. You can view publicly available information about MLS® listings at www.REALTOR.ca. Your REALTOR® can start sending you listings of potential homes right away. Most listings will have multiple photos, and some even have moving 360-degree views! And with the interactive mapping feature, you'll be amazed how fast and easy it is to zero in on your favourite few homes.
Stay objective when visiting potential homes
Walking through a potential home is a thrill, but try not to lose your head. Don't let a giant kitchen island or swanky hot tub distract you from your real goal, finding a home that meets all your needs and fits your budget.
Arm yourself with this House Hunting Checklist and bring it with you to homes you're serious about buying. Good luck and happy hunting!
8. Make an offer
You've found a home? Congratulations! Now, if you actually want to make it yours, you have to make a successful offer, one that the seller will accept.
Preparing the offer
REALTORS® can prepare the offer for you. Here are some terms you'll see in the offer.
The present owners.
- Purchase Price:
The most important number. Let's hope the seller goes for it!.
A cheque you write to the seller or the seller's broker. This is your way of saying 'my offer is serious'. The size of the deposit is up to you.
- Chattels included and fixtures:
Be sure you know what is included with the housethe washer and dryer, the microwave, draperies, light fixtures. Don't leave anything to 'chance'.
- Irrevocability of the offer:
The length of time you give the seller to consider your offer. Usually less than 48 hours.
- Completion date:
The glorious day you take possession! Often 30 or 60 days after signing.
- Clauses particular to this agreement:
Every transaction is unique, and you may want to add conditions that are important to you, such as a proper home inspection.
- Your REALTOR® can help ensure no details are overlooked in your offer.
Submitting the offer
You've signed on the dotted line and your REALTOR® has provided your offer to the seller.
- The seller can accept your offer
Fantastic, when do you move in?
- The seller can reject your offer
It's not common for an offer to be completely rejected. If it was, your REALTOR® can investigate why and see if there was some misunderstanding.
- The seller can 'sign back' or counter your offer
The seller wants to alter some part of your offer most likely the price. The seller will cross out the price on your offer and write a higher number, or delete or alter some conditions. Now it's your turn to sign back with any additional changes or your acceptance of the counter offer. Good luck!
9. Find a home inspector
When you're buying a home, you'll want to scrutinize every last detail. Home inspections rarely cost more than a few hundred dollars, and can save you from unpleasant surprises. Your REALTOR® can help recommend several home inspection companies to choose from.
- Make a conditional offer based upon a satisfactory home inspection
This is an increasingly standard condition on any resale home. If the seller doesn't want you closely examining the home before you take possession, you have to wonder why.
- Go with a qualified professional
Make sure your inspector is a member of a recognized professional organization. It helps provide some assurance they have the training and experience for the job.
- What will they check during the inspection?
Lots of stuff. Plumbing and electrical systems, the roof, visible insulation, walls, ceilings, floors, windows and the integrity of the foundation. They also check for lead paint, asbestos, mould, outdated and dangerous wiring, and evidence of pests like mice or termites.
- Join the inspection
Get up close and familiar with your new home. If any problems are detected, youll see them firsthand, and learn some maintenance tips from a pro.
- You'll get it in writing
Their report will summarize the condition of your home. If there's anything that needs work, the home inspector will provide an estimated cost for the repairs.
- Home inspection for a new home?
New does not equal perfect, and construction quality can vary greatly from builder to builder. In some provinces, repairs and corrections in new homes may be covered by a government or industry-sponsored warranty program. Bad news doesn't necessarily mean it will have to cost you.
10. Add a lawyer to your team
Buying a home involves piles of legal documents. You need someone to translate the 'legalese' and ensure your best interests are protected.
Finding a lawyer
There are lots of experienced real estate lawyers out there. Ask your friends or co-workers. REALTORS® will happily give you the names of several lawyers experienced in real estate. Be sure you ask your lawyer how they structure their fees, and get an estimate of the other legal costs you can expect.
How your lawyer will help
There are many, many legal steps to transferring ownership of land from one person to another. Even if pitfalls like fraud, government legislation, zoning issues or unpaid taxes don't come up, your lawyer will more than earn their pay by making the legal transfer of the home a smooth one.
Don't be scared of your lawyer
He or she is here to help you. Ask questions if you don't understand anything. Explaining legal jargon in plain language is a big part of their job.
11. Close the purchase
Your offer has been accepted and you can't wait to move in. But don't break out the bubbly just yet. You have to close the deal. Your REALTOR® and lawyer will do most of the closing work, but here's your checklist.
- Immediately begin satisfying any conditions of the agreement that require action on your part. Your REALTOR® can fill out the documents stating that the conditions have been satisfied.
- Have your lawyer begin searching title to the property. This can take a while, so make sure you allow ample time.
- Well before closing, get your homeowner's insurance to be effective on your closing date. Your insurance broker will give you a 'binder' letter certifying that you're covered. You can't get a mortgage without this letter!
- Contact your lender and have them finalize your mortgage documents. Have your lawyer review them before you sign.
- Your lawyer will transfer essential utilities like hydro and water, but you'll have to make sure telephone and cable companies switch their services to your name.
- If you rent, give notice to your landlord or sublease your apartment.
- Begin planning your big move! Where are those cardboard boxes?
- Send out your change of address information and fill out a card at the post office. Contact the Ministry of Transport about changing your driver's licenses.
- Walk through your new home one more time with your REALTOR®.
- A day or two before closing, you'll meet with your lawyer to sign the closing documents. Your lawyer will tell you in advance what certified cheques you'll need to seal the deal.
12. Move in
Moving day will come sooner than you think, so get planning now
'Closing date' may or may not mean moving date
It may or may not be practical to move in on the closing date. You may not get the keys to your new home until late in the day. So you may want to try and schedule the actual move for a day or so after closing. If you intend to move at the end of the month, contact a moving company or truck rental company now before theyre all booked. If you can move mid-week or mid-month, a moving company might cut you a deal.
Go with a reputable moving company
We've all heard moving horror stories. Go with an established, insured mover, so your items are protected.
Pack it yourself, and pack early
Nobody will take the same care you will. Start early and spread it out over many days. Label all your boxes by room so the movers know where to put them, and label anything that's fragile.
Do you really need to take that with you?
A new home is a new lease on life, and a chance to liberate yourself from stuff you simply don't need. If you haven't used it or worn it in the last year, you probably don't need it. Have a garage sale, or give it to charity.
Once you move in
The boxes are mostly unpacked and you're settling in nicely. You will now feel a strange urge to begin making changes and improvements right away. That old carpet has to go, a bigger deck would be great for entertaining... slow down! Take time to get a feel for your new home, and more importantly, your new budget. Take a deep breath and enjoy what you have, your new home.
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