8 Considerations For The First Time Home Buyer
1. Create yourself a Budget and stick to it, so you can keep your finances on track. Planning a budget will help you identify uneconomical expenditures and help you achieve your financial goals. Having a budget can also decrease your stress levels, prepare you for unexpected costs and help you plan for your future of home ownership.
Some of the things you should consider in a budget are all your sources of income, mortgage payment, all loans, condo fees, utilities, cable, internet, phone bills, credit card debts, entertainment expenses, clothing, food, transportation expenses, Insurance (auto, house, life), personal grooming, pet care, donations, child care and an emergency fund which can assist in those unexpected costs like an exterior leak, plumbing issues or just those unforeseen repairs and maintenance issues that could arise.
2. Before you start looking at homes, meet with your Mortgage Broker so they can assist you in figuring out how much home you can afford, get you pre-approved for a mortgage loan and give you the information you need for planning and preparing to save for your down payment. It can be very disappointing to find your dream home only to find out you don’t qualify.
During your qualification period and before you purchase a home, avoid making any big purchases like a new car or buying furniture as these expenses will have to be factored into your debt servicing ratios and could seriously jeopardize your loan approval.
3. Part of your budget plan is to know and consider the additional costs before the purchase of your home. Legal fees, mortgage insurance premiums, life and disability Insurance, Fire Insurance, house insurance, strata fees, appraisal, home inspection, property survey, moving costs, appliances, home maintenance equipment, purchase deposit, down payment, GST if it’s a new construction, property tax, and possibly property transfer taxes. The amount of this property transfer tax will depend on your province and the amount of your home purchase price.
4. Your realtor should be someone you can trust, who understands your needs and will take the time to educate you through the home buying process and the current real estate market conditions in your chosen area.
Your realtor will provide a variety of services to make the complexity of purchasing a home seamless. For example, they will arrange appointments of potential homes, assist in the Contract Of Purchase And Sale agreements, obtain and review the strata minutes, negotiate the home offer on your behalf, inform you of facilities and public services that are available in your neighborhood and current future zoning regulations. Simply, they will streamline the biggest investment purchase that you will ever make.
5. Have your home or strata property inspected. This is one of the most important steps to consider when buying a home, to make sure your home is a sound investment and a safe place to live. If significant defects are revealed by a home inspection, you can back out of your offer, free of penalty, within a certain time frame. Condominium buyers will tend to focus on the Form B certificate that will identify any major issues and costs by the condominium corporation.
6. If there is anything unclear to you while you are preparing the Contract Of Purchase And Sale have the Purchase And Sale Agreement reviewed by your real estate attorney before signing this legal document.
7. Subject Clauses on your Offer To Purchase is highly recommended, especially for first time home buyers. For example a
- subject to a satisfactory home inspection
- subject to arranging your mortgage financing
It is of great significance to know that “subject clauses” do not “elude” you to avoid your legal responsibilities in the contract and you must make every attempt to fulfill the conditions that you have set. During this time, it is the seller’s discretion to continue to accept other offers even after the seller has accepted your offer with subjects.
8. On Closing Day, all parties will sign the papers at the lawyer’s office, officially sealing the deal. This is the day that ownership of the property will be transferred to you. On this day it is your job to provide your mortgage broker with your lawyer’s information, as they will be the ones to forward a copy of the Purchase And Sale Agreement to your lawyer as well as inform your lender of your lawyer’s information.
Proof of insurance will need to be obtained, so arrange your Home Insurance before closing and bring the policy with you to your appointment, have your certified cheque or bank draft with closing balance payable to the lawyer’s firm’s trust account, a VOID cheque or a pre-authorized payment form and bring two pieces of valid identification with you like a valid driver’s license or passport. The second piece of identification can be your social insurance card, birth certificate or credit card from a major bank.
Closing funds will be arranged by your lawyer to the seller’s lawyer, the transfer and mortgage will be registered and you will be given the keys to your new home! Finally you take possession.
There are many aspects to consider with your mortgage and home purchase so it would be wise to contact your trusted Dominion Lending Centres Mortgage Professional who can navigate you through the home buying process and give you the resources you need for a successful first home! Give us a call today so we can help you through these steps of home ownership!
Thank you to my DLC colleague Josee Picco for this post.