Doing anything for the first time can be scary especially when it's something as big as buying a house! But don't worry. I will provide you with all the information, advice, assistance and reassurance you need, every step of the way.
To help you feel prepared and informed, here are some of the steps involved in buying a house. If there's anything you're unsure about, please don't hesitate to call me. I'm prepared to do everything I can to make things proceed smoothly, quickly and effortlessly.
Choosing a Realtor
Choosing the right realtor can help ensure you get the right house at the right price. Here's a checklist of questions to ask potential realtors before deciding to work with one.
Qualifications
Ask to see a personal brochure or resume. Look for experience in your area, in your price range, and letters of reference.
Full-time realtor
Ask if this is their full-time career and whether they're committed to it in the long term.
Track record
How many properties have they sold in the last 3 months? How do they rank among peers? How many current listings do they have? What has their ranking been over the last 5 years? Where does their company rank in sales and market share?
Strategy
Ask how they'll approach your home search. Simply rely on MLS listings? Or do they have other sources of homes to show you? Are they willing to change their strategy to adapt to market conditions, or are they inflexible?
Length of time for search
How long do they think it'll take? What's the average length of time in your area and in the current market?
Price negotiation
What's the current selling price versus asking price in your area and in the current market? Is their personal sell vs. ask price better or worse than average?
Support staff
Ask whether they have support people to assist in the process. This also gives you an additional contact when you need it.
Viewing appointments
Do they prefer to pre-book viewing excursions or are they flexible enough to show you listings as they become available? |
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Finding and Purchasing the Right Home
When you're about to make one of the largest purchases of your life, be sure to shop around.
Consider such things as transportation, distance to work, and proximity to schools, daycare, recreational facilities, shopping, healthcare, and so on. If the listing realtor claims "10 minutes to downtown," find out if that's during rush-hour in a minivan or at 3:00 a.m. in a Porsche Boxster!
Next, find a real estate agent whose attitude and availability inspire your trust. Start by seeing who's most active in your neighbourhood. An agent who makes regular sales calls and keeps you informed of listings and sales in your area probably pursues business aggressively.
Set up appointments with a few agents from different companies and assess their presentations. Are they prepared? Have they done some homework in advance? Do they have any special affiliations or packaged discount programs with other corporations that can save you money on your mortgage, on moving costs or on purchases for your new home? Work with someone you relate to, with whom you have some chemistry, and who offers excellent service and value. Be sure to ask if the realtor is acting for a vendor or for you. |
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Making House Hunting Fun
There's no shortage of information available to help you make an informed purchase decision. Lenders, as well as CMHC, the Canadian Bankers' Association, the Ontario Real Estate Association and the Home Builders' Association all have brochures (even videos) to make house-hunting stress-free and fun.
To take the guesswork out of shopping for a home, take advantage of all the professional resources available to guide you through the many choices available when purchasing your first home. |
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Affordability and Financing
Thoroughly review your current income and expenses. How much will your new mortgage add to your monthly expenses? Before you embark on your housing search, get a pre-approved mortgage, especially if you're a first time buyer. A pre-approved mortgage lets you know how much money you qualify for, so you can shop in comfort.
Lenders determine affordability by looking at your Gross Debt Service ratio (GDS) and your Total Debt Service ratio (TDS). The GDS ratio is based on what you can afford to pay each month; it includes mortgage payments, taxes and heating. Maximum GDS ratio is 32%. The TDS ratio includes everything covered under GDS plus all your other financing obligations. Maximum TDS ratio is 37% (40% if it's CMHC).
A Mortgage Specialist from Dominion Lending Centre can help you do a complete analysis based on net income and projected budgets to determine what you can afford.
This pre-qualifying stage is also the time to find out about the differences between conventional mortgages and high-ratio insured mortgages. Ask about assistance for first-time homebuyers such as the 5% down payment allowed under the "First Home Loan Insurance Program" sponsored by CMHC and the federal government's "RRSP Homebuyer's Plan", which lets you use funds from your RRSP to purchase a home.
A Dominion Lending Centre Specialist will also go over closing costs with you, like land transfer taxes, legal fees and other disbursements. A good rule of thumb is to budget about 3% of the purchase price for closing costs. And don't forget: if you buy a new home from a builder, you'll pay 7% GST on the total purchase price.
Before you're pre-qualified, your Mortgage Specialist will run a credit bureau report on you and ask for written confirmation of income and how much you plan to put down on your purchase.
Once you're pre-qualified, the interest rate is guaranteed for 60 to 90 days from the time of your application. If rates drop, you'll get the lower rate; if they rise, you're covered. And just because you pre-qualified by a certain financial institution, you're by no means committed to that lender. We'll shop the market to get you the best possible deal! |
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Selecting the Right Mortgage
Your basic choices in selecting a mortgage include:
Conventional vs. high-ratio mortgages
A conventional mortgage equals no more than 75% of the appraised value or purchase price of the property, whichever is less. A high-ratio mortgage is usually for more than 75% of the appraised value or purchase price. It's often referred to as an NHA mortgage because it is granted under the provisions of the National Housing Act and must, by law, be insured through CMHC for which the borrower pays the insurance premium as well as application, legal and property appraisal fees.
Closed vs. open mortgages
Closed mortgages usually offer lower interest rates than open mortgages of the same term, but open mortgages let you pay off as much as you want, any time, without penalty.
Short term vs. long term
The term you select is important, too. Short term mortgages are appropriate if you believe interest rates will be lower at renewal time. Long term mortgages are suitable if you feel current rates are reasonable and you want the security of budgeting for the future. This is especially important for first time homebuyers.
Fixed rate vs. variable rate
You can choose a fixed or variable interest rate. A fixed rate mortgage allows you to budget precisely for whatever term you select—from one to as many as 25 years. A variable rate mortgage fluctuates with the market.
Specialty mortgages that creatively combine the best of all worlds. |
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Applying For Your Mortgage - A Checklist
When you apply for a mortgage, you will need:
A copy of the accepted Offer To Purchase and the land survey
A salary letter from your employer (self-employed buyers need financial statements for the past three years as well as personal income tax returns)
Confirmation that your down payment came from your own resources (e.g. bank statements or a gift letter)
A list of all your assets and debts along with account numbers
A copy of the Real Estate Listing if buying an existing home
Condominium financial statements, if applicable
If you are buying a home to be constructed, bring a picture of the property, a copy of the building plans and specifications, the land survey, plus your agreement with the builder.
Your Mortgage Specialist can help you determine how much you can afford, obtain a pre-qualified approval, and select the mortgage that's right for you. This allows you to act quickly when you find the home you want. After your real estate agent draws up an Offer To Purchase between you and the vendor-an agreement that sets the final price and all the conditions of sale-contact your Mortgage Specialist. Your deal is almost complete! |
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Before You Sign the Offer
Select a lawyer as you'd select a real estate agent: seek competitive fees, excellent service, knowledge, approachability—in other words, value.
Involve your lawyer before you sign the Offer, which becomes a legal Agreement of Purchase and Sale once you and the seller sign it. Have your lawyer read the document carefully and review it with you. Once it's signed and accepted, your lawyer will order a series of searches from various municipal offices to ensure that the vendors haven't been sued, that they've paid all of their property taxes and water, electric and gas bills, and that there'll be no outstanding mortgages or liens on the property once you become the owner.
Your lawyer will also draft a series of closing documents and review the closing documents drafted by the vendor's lawyer.
Your lender and lawyer will co-ordinate and draft the appropriate documents. Your lawyer will notify the property tax offices as well as the utility offices that you will be the new owner as of the closing day.
A few days before closing, you'll visit your lawyer's office to sign the closing documents. Bring a certified cheque for the balance of the closing funds, because the lawyer pays the relevant parties on your behalf (land transfer to the government, balance owing to the vendor, etc.). Part of that amount covers the lawyer's fee and disbursement costs. The lawyer obtains the mortgage funds directly from the institution that's funding your mortgage. |
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On Closing Day
On closing day, your lawyer will meet a representative from the vendor's law firm at the land registry office. There, your cheque will be exchanged for the keys to your home and the two sides will trade closing documents. Your legal representative will then register the new deed and mortgage, so anyone doing a search will see that you're the new owner. Finally, you pick up the keys and YOU'RE IN!
After closing, your lawyer will send you a reporting letter and copies of all the documents you signed including the deed, the mortgage and the survey, and a summary of the flow of funds. |
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Mortgage Life Insurance
Seriously consider mortgage life insurance. The cost is low and can be incorporated into your mortgage payments. In the event of death, terminal illness, or permanent disability, your balance will be paid in full (the maximum varies among financial institutions). Quotes are available with each approved mortgage. |
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Prepayment Privileges
Financial institutions vary in their prepayment privileges, which let you pay down your mortgage faster. Our best advice: research your options! Also be aware that the longer the amortization period (the time it takes to pay off a mortgage), the more interest you'll end up paying. Amortization periods range from five to 25 years.
Weekly or biweekly instead of monthly payments could shave as much as eight years and $38,000 off a $100,000 mortgage, depending on current interest rates.
Another option to consider is portability. If you decide to sell your home and buy another, you should be able to take your mortgage with you or transfer it to the buyer of your home without penalty. This can be a major advantage if your mortgage rate is below current market rates. |
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