If you are like me, wasting hard earned money is exactly what we try to avoid. Whether you are renting a room or an entire house- you are basically saying good bye to that bundle of cash you hand over to your landlord each month. I know saving a down payment is tough- however knowledge is key & it is important to know the process. Here is a quick overview of the home buying process:
Step One - Know Your Finances
- Set a budget, know your monthly net income vs. expenses & debt repayment
- If you have a spouse you want to buy with they need to follow suit
- Don't over spend or spend all that you make - your budget must balance
- Create a category for groceries, transportation, housing, utilities, entertainment, hygiene, banking fees, insurance, etc.
- If you have debt, cut out the non-essential expenses like entertainment, eating out, etc and focus on paying your debt DOWN
- Debt is expensive - before you start putting money aside it is best to get rid of as much debt as possible
- Have lots of credit card debt? Get a line of credit with a lower interest rate to pay them off to save you hundreds of dollars in interest
- Don't use more than 30% of your available credit. For example, if your credit card limit is $1,000 don't carry a balance of over $300
- ALWAYS pay your bills on time
- Did you know you can use your RRSP'S to purchase your first home?
- Did you know theres a First Time Home Buyer's Tax credit in the year you purchase a home?
- Did you know many lenders accept gifted down payment from immediate family members?
- Did you know if you have good credit and can qualify.... you may be able to finance your down payment?
Step Two - Get Professional Financial Advice
- Find a mortgage broker or bank who is experienced with first time home buyers (I can gladly recommend one)
- Make an appointment with your bank or a mortgage broker
- Take all your information with you... such as income verification (pay stubs, t4a's, notice of assessments, etc), payments, job letter, etc.
- Sit down with them and explain your current situation, goals (when you want to buy,etc.)
- They will give you the costs & expenses of buying a new home (home inspection, legal fees, down payment, etc.)
- Discuss interest rates, mortgage terms, etc.
*Even if you can't qualify today - they can tell you what you need to do in order to qualify.
Step Three - Contact A Real Estate Professional
- Once you have met your financial goals & have been pre-approved by a lender, contact a Real Estate agent whom was referred to you by the mortgage broker or a trusted friend, or search one on the internet
- Meet with them to see if you would like to work with them
- Sign a buyer contract
- Tell them your budget, what type of property you need, and time frame of when you would like to move
- & start shopping!
Step Four - The property
There's so much more to buying a house than people think... This is why it is best to use a trust worthy Realtor...
- Have your Realtor prove to you that you are paying fair market value - ask for comparables that have sold recently - nothing worse than over paying for a property.
- Deposits - You must put a refundable deposit of $1,000-10,000 depending on the property (this deposit will be held by the listing brokerage & will be applied to your down payment owing)
- Negotiations - not only do you negotiate price however, other negotiations can include when you move in, terms, condition dates, legal documents, inclusions etc.
- Due diligence - I recommend doing a property inspections, reviewing condo documents if it's a condo, sewer line inspections if the house is in a mature area, well & water testing on acreages, & much more! Make sure your Realtor is giving you advice to protect your interests - this is a big purchase!!
- Removing conditions - after getting an accepted offer, you must bring the purchase contract to your lender for them to approve the property. Even if you have been pre-approved this condition is very important to have. Once the lender approves the transaction you may now remove your financing condition. Other conditions include, property inspection, condo documents review, etc. Once all conditions are satisfied - the property will be finally sold!
- Conveyancing - After all conditions are removed, all documents are conveyed to the lawyers. This is when you must decide what lawyer will be acting on your behalf to close this deal. Make sure you are in town 10 days prior to when possession date is. You must be physically present to final sign mortgage documents with the lawyer. This is also when your total down payment & other fees will be due in full.
- Possession date - This is the day you have been waiting for! You have officially purchased your very first home! Congrats & happy moving!
- After Possession support - If you have any questions or concerns about your property - you should contact you Realtor for help.
After this process is over - you can now sit back and watch your home build equity!
No more paying down your landlord's mortgage... you should be quite proud when this day happens :)
Thank you for reading my blog,