Deciding to Buy

The process of buying a home begins by determining a price range that matches well with your financial situation. As a homeowner, you will need to budget not only for your mortgage payments, but also for the ongoing costs of living in and maintaining your new home. Try to be realistic and honest with yourself about a price that will allow you to live comfortably without struggling to maintain financial stability.

Once you have decided on your price range, you can start your search by exploring neighbourhoods and areas where you would like to live, and look within these for your ideal property.

Start to think about the features you would like your home to have. Do you want a fenced yard, garage, fireplace, perhaps an extra bathroom or spare bedrooms? Build a list of these features and narrow it down to what will best suit your lifestyle and price range. This will help to determine what kind of property you are looking for. A single-family detached home is attractive to many people because it typically provides more living space and property. On the other hand, a condominium may be a more appropriate choice for you, with its emphasis on maintenance-free living. It may be that you want to start from scratch and build the house of your dreams, or find an old gem to polish and restore.

With these things in mind, a picture of what you are looking for will begin to appear in your mind, and you can begin the search for your new home.

Considering the Costs

The biggest cost of buying a home is, of course, the cost of the home itself. A quick way to calculate how much you can afford is to use the gross debt-service formula (GDS). Most financial institutions will require that the Principal, Interest and Taxes (PIT) on your mortgage loan not exceed 30 per cent of your gross annual income. Increasingly, financial institutions will factor energy costs into the PIT formula, moving the rule of thumb GDS from 30 to 32 per cent.

You can work it out in reverse: multiply the monthly payment on principal, interest and taxes (include any condominium maintenance fees) by 40. So if your monthly payment for these items is $1,000, you'll need a gross annual income of at least $40,000. You can discuss your mortgage limit and different types of mortgages with either myself or your financial advisor before you begin the search for a home.

Purchasing a home involves one-time costs and monthly expenses. The largest one-time cost will be your down payment. It usually represents between 5-25% of the total price of the property.
Sometimes you may have to reimburse the seller for any unused portion of any prepaid property taxes or utility bills. As well, you must also cover the costs of any legal fees, and, if applicable, any REALTOR fees. Be prepared to furnish proof to your lender that you have obtained insurance for your new home.

On or before closing day, your lawyer and the seller's lawyer will arrange to transfer title of the property from the seller to you. The full amount of the mortgage will be transferred to your lawyer's trust account, and then to the seller, and your lawyer will bill you all additional expenses such as land transfer taxes or outstanding legal fees.

Getting Pre-Approved

When you are pre-approved for a mortgage, it means a lender has looked closely at both your credit report and your income and determined that you qualify for a mortgage. The lender will tell you the maximum amount of loan it will make, which loan programs you qualify for, and will discuss the interest rates it will offer for different types of mortgages.

If you are considering buying a home with less than 25% down payment - your mortgage application is required by law to be insured by the Canadian Mortgage and Housing Corporation or Genworth Financial Canada. Mortgage insurance makes it possible for you to purchase a home using a lower down payment. Since it protects lenders and investors against loss if the mortgage loan is not repaid, it allows the lender to approve your mortgage with as little as a 5% down payment.

Once you're pre-approved you can go shopping for a home with confidence about your buying power. To a Seller, a pre-approval identifies you as a serious buyer. Being a pre-approved buyer may also give you some leverage when negotiating for price with the Seller. It may also make your offer more appealing over competing offers from other buyers who are not pre-approved.


Choosing a Home

Working with a REALTOR when you are ready to begin your property search offers several advantages. First and foremost, a REALTOR has access to MLS features like the HotSheet - an up to the minute report which contains information about properties moving on and off the market, and changes to these properties like reductions in price.

REALTORS are constantly networking and talking with associates in their field, gathering intimate knowledge of the market in your area, and gaining up to date information about potential sellers and upcoming bank foreclosures. Another part of a REALTOR's job is to be knowledgable about changes to by-laws and city planning that can greatly affect your decision to buy.

As your REALTOR, we will enter your search criteria into the MLS system, and generate a report of potential properties for you to view. We will also keep your criteria on file and notify you as soon as a property that you might like comes up on the market.

We will work with you to find your ideal property and help to ensure that your interests are protected from start to finish during your Real Estate transaction.


Making an Offer

Once you find the home you want, you're ready to put in an offer. An offer specifies how much you're willing to pay, when your offer expires, and a closing date for the transaction. You may also wish to impose certain conditions on the offer.

Some common conditions include:

Obtaining a Mortgage (include the amount, interest rates and any other figures you feel important)

Selling your current home (the seller may continue to look for a buyer, but will give you the right of first refusal)

The seller providing a current survey, or a "real property report," showing the location of the house on the property owned by the seller and that there are no encroachments

The seller having title to the property (your lawyer will check this out when he or she conducts a title search to see if there are any liens on the property, easements, rights of way or height restrictions)

If there is a septic system, the seller should have a health inspection certificate, stating the system meets local standards

If you have any doubts about the home's safety and construction, you may wish to make the purchase conditional on an inspection by a qualified Home Inspector

Any inclusions - basically, what stays and what goes

You will need to present a deposit along with your offer. An appropriate deposit will show your good faith to the seller. The seller's agent is bound by law to bring all offers to the seller's attention.

After your offer is accepted and all the conditions are met, the offer becomes binding on both sides. If you walk away from the deal at that point, you may lose your deposit and you may also be sued for damages, so make sure you understand and agree with all of the terms of the offer before signing the final draft.

Closing the Deal

On closing day, your bank will transfer the amount of your mortgage to your lawyer. At this time, you will need to provide your lawyer with the balance of the purchase price along with the closing fees. Your lawyer will then pay the seller, register the property in your name, and provide you with a deed and the keys to your new house. This is when you take legal possession and finally get to call your new house your HOME!