Tips for Home Buyers
Know how much you can afford
Get pre-approved for your mortgage before you start house hunting. This is going to give you more negotiating power when it comes down to making an offer. Why fall in love with a home only to find out that it is just outside your price range or some forgotten credit issue has come back to haunt you? When you make an offer on a home as a pre-approved buyer, your offer will often hold more weight with the seller and increase your odds of getting your offer accepted.
Create a realistic budget not based on overtime, bonuses, windfalls or raises. How much after tax money does your family bring in each month. Deduct all of your current expenses (car payments, loans, groceries). Your mortgage payment is only one of a list of new monthly expenses owning a home will entail. Factor in home insurance, property taxes, heating, water, electricity and condo fees (if applicable). To find out the costs, ask your real estate agent about the property taxes and condo fees. Ask the seller what the average monthly heating, water and electricity costs are (and assume more) and call up your insurance company to get a quote. Will you need to pay additional costs for commuting from your new home (increased gas consumption, public transportation expenses and toll charges)? Factor all of these new expenses into your budget. Do you still have enough money left over at the end of the month after groceries, child care costs, pension or retirement contributions, insurance premiums, television, internet and phone service?
Our Mortgage Calculator can give you a rough idea how much you would qualify for and your monthly payments. You can use CMHC Monthly Homeowner Budget template on page 11 of CMHC’s home buyer checklist to help build your monthly budget.2
Finding the right home
Choose the neighbourhood where you want to live. Do you want to be closer to work to minimize time and money wasted commuting or is space and a lower price more important to you? Do you drive or do you need to be close to public transportation? Is it close to what is important to you (accessible shopping, place of worship or family)? How does the school your children will be going to rank in the province? Will it be in your childs best interest to live in this neighbourhood?
Consider which features are important to you. Is it square footage, the number of bedrooms or bathrooms, move in ready or a fixer upper, a house with a back yard or a condo for ease of maintenance, property price, amenities or ease of commuting. The closer you move to the center of the city, generally the more you will sacrafice in space. Start by creating a list of what is very important for you and your family to have in a home.
Take A Home Buyer Checklist with you. Once you visit several homes, you may forget some of the benefits and drawbacks of each home.3
Is the home fairly valued?
From region to region similar homes can range drastically in price. If you’ve decided on a particular neighbourhood there are a couple of ways in which to determine what the home is fairly valued at. Your real estate agent should provide you with comparables. These comparables should be based on homes that have sold in the last 6 months, in your neighbourhood and with similar features (detached versus semi detached, square footage, number of bedrooms and bathrooms, lot size, and condition). Homes are never identical so some value must be added or deducted when comparing properties. An appraiser will do just that. Compare properties sold recently in your neighbourhood and factor in the feature differents accordingly. One thing to keep in mind is appraisers are generally conservative. They will always price a home a little less then what homes will actually sell for. You only want to compare sold homes and not the prices of homes listed for sale. Sellers will some times list a home well over market value either in an effort to make a profit or due to unrealistic valuations.
Zoocasa has a great tool called Zoopraisal that can give you a rough property value for the style, age and area your home is located in. It is an automated too and more for a ballpark figure. I would highly recommend using a real estate agent and an appraiser for more accurate valuation.4
Making Sure The Home Is Sound
Paint colours, furniture and basic landscapping can all change a home’s appearance at a reasonable cost. Strucutural issues, roofs, foundation problems and furnaces can be much more costly. Always get a home inspection as a condition of your offer. A qualified home inspector can provide the state of these items and how many years of life each would still have remaining before needing to be replaced. Will the home require repairs require new applicances right away? Knowing as much about the home before waiving your conditions can allow you to re-negotiate with the seller. Your offer can be re-submitted to ensure the seller is responsible to make the repairs prior to closing or provide a point of leverage on negotiating the price lower.
iVerify can give you additional details your home inspector can not. They can provide a report on the insurance claim history of the home, municipal building permits and if the home was a known former grow-op or meth lab.5
Closing costs to be expected
Make sure you set aside enough money for closing costs. Total closing costs can range from between 1%-3.5% of the sale price. Here are some of things you can expect. Land transfer tax ranges from between 1%-2% of the purchase price. Since Toronto has its own land transfer tax, if the home is in Toronto, the cost will be between 2%-3% of the purchase price. If you are a first time home buyer, you will qualify for credits on your land transfer tax. Legal fees can range from $800-$2500. Property tax adjustments for taxes pre-paid by the seller can range from several hundred dollars to several thousand. Brand new homes are subject to GST/HST but offer a rebate. How much GST/HST you pay will depend on the price of the home. For more information see HST/GST new home rebate. Moving expenses can range from $800-$3000 depending on the move. Title transfer costs approximately $200. Other expenses (if required) can include an appraisal and condominium status certificate. Buying a home is not cheap but being able to plan for these expenses ahead of time will make the process far less stressful.
Genworth MyHomePlanner.ca is a reminder feature that populates your calendar with standard and customized home buying tasks leading up to closing day.6
Assemble The Right Team
Find a real estate agent who is active in the real estate market and very familiar with the neighbourhood. If you can find a realtor who fits the criteria and is a referral from a trusted source, even better.
Get a mortgage pre-approval. Knowing exactly how much you can afford will give you confidence when it comes to looking at homes and empower you when it comes time to negotiating with the seller.
ALWAYS GET A HOME INSPECTION. Your realtor should be able to refer you to a qualified home inspector.
Real estate lawyer. Call around to different real estate lawyers in your area. Their prices can range so it is a great idea to get a quote on their fees upfront to complete a home purchase. Your real estate team should be highly qualified professionals. They are there to support, protect, educate and ensure your home purchase is a success.
Do you have 5 minutes? They you have enough time to get a mortgage pre approval right now from CanadaMortgageSuperstore.com. Apply now..