Embarking on your very first real estate purchase? Being a prepared home buyer will help you make informed decisions during the buying process, and can give you a competitive edge when engaging in bidding wars with other buyers.<\/p>\n
Regardless of the state of the market, doing your homework beforehand will help you understand what you\u2019re going into. Before jumping into the market for a new home, you should have the following resources ready :<\/p>\n
Your Real Estate Agent<\/strong><\/p>\n A common myth is that first time home buyers have to pay for their real estate agent. Most of the time, real estate agent fees are not included in first time homebuyer closing costs. It\u2019s the seller who pays the buyer\u2019s real estate agent\u2019s commission (which is usually a 2 \u2013 5% of the selling price).<\/p>\n An agent acts as a buyer\u2019s representative, helping you negotiate your offer terms, research the market value in a certain area, as well as potential properties in area(s) of interest. It\u2019s important to have an agent who understands your desired area inside and out. Knowing (and understanding) the market price is crucial \u2013 it will help you avoid overpaying for a home in a heated bidding war.<\/p>\n Your Real Estate Lawyer<\/strong><\/p>\n Real estate lawyer services usually average around $1200 \u2013 $1700, depending on the circumstances. Lawyers will help you facilitate the real estate transaction \u2013 they act as the middle person between the buyer(s) and seller(s). They have other crucial responsibilities, including, but not limited to:<\/p>\n Ensuring that all of the terms and conditions are met If you\u2019re buying a pre-construction home, you\u2019ll need to have a lawyer to review the Purchase & Sales Agreement (PSA) forms. It\u2019s recommended this be done right after the PSA forms have been signed.<\/p>\n Your Mortgage Pre-Approval<\/strong><\/p>\n Obtaining a mortgage pre-approval will help you understand your limits. Most buyers understand that establishing a budget is key \u2013 but it can be very tempting to fall in love with, and make an offer on, homes outside your budget range. A mortgage pre-approval establishes just how much of a mortgage a lender is willing to give you, and effectively puts a ceiling on your budget. And, if the temptation to financially stretch yourself is getting too great, your real estate agent should be able to help \u2013 after all, it\u2019s their job to find you the right deals within your budget range.<\/p>\n From my home buying experience, I did a calculation of the estimated monthly budget prior to purchasing the property. Keep in mind that the mortgage amount the bank approves you for is not always the amount you can afford \u2013 it may not take other expenses into consideration (i.e. day care and medical expenses). To help tackle affordability situations like these, I recommend amortizing your mortgage over 30 years (an option available to purchasers who pay more than 20 per cent down) for two reasons: lower monthly payments, and higher pre-approval amount. Make sure there is an option to make lump sum payments, to help pay down the mortgage sooner.<\/p>\n Your Down Payment<\/strong><\/p>\n Here\u2019s where it can get slightly tricky for those entering the real estate market for the first time. Should you opt for the minimum 5 per cent down payment, or save up for a 20 per cent down payment? This is where your mortgage specialist will be able to run through the numbers \u2013 and compare the different financial scenarios.<\/p>\n If you\u2019re opting for a down payment of less than 20 per cent, consider that you\u2019ll need to pay CMHC insurance fees, which is relatively costly. Ratehub has a CMHC insurance calculator. The insurance portion can be financed into the mortgage, however the 8 per cent PST on the CMHC insurance must be paid upfront, adding on to your closing costs.<\/p>\n Because of this, I recommend having as much down payment you can afford to decrease\/eliminate your CMHC insurance costs. Having a down payment of at least 20 per cent does not require CMHC insurance, and the mortgage can be amortized over 30 years (the maximum amortization for CMHC mortgages is 25 years).<\/p>\n Individual Checklist<\/strong><\/p>\n There are many factors that go into home buying \u2013 no two buyers are the same. Everyone has different preferences in terms of location, municipality, house size, and type of home. Prepare a checklist beforehand to help you determine what you\u2019re looking for. This checklist can include items such as:<\/p>\n Location (i.e. proximity to GO a station) Creating your checklist will give you a better understanding of what you\u2019re looking for. It\u2019s typical to face trade offs (i.e. finding a home in the right location, without the desired interior finishes). In situations like these, I highly recommend to have location as a priority item on your checklist. Other items (i.e. interior finishes) can always be updated after closing.<\/p>\n The Bottom Line<\/strong>
\nPreparing title insurance and registering the property under the buyer\u2019s name
\nPreparing a statement of adjustment
\nReviewing inspection documents
\nMaking applicable tax payment(s)<\/p>\n
\nFinishes (i.e. granite countertops, hardwood floor)
\nSchool rankings
\nResale vs. pre construction<\/p>\n
\nHave a budget, know what you\u2019re looking for, and be prepared to make tradeoffs. It\u2019s highly likely to not have everything on the checklist. Keep your budget in mind while shopping for a house. Take advantage of the resources available to you \u2013 and do your research before buying into a specific area.<\/p>\n