ROADMAP - To buy a Home
Hire a realtor – The Benefits
- The first step to buy a house is to find and hire the right realtor. Hiring a realtor will multiple benefits in your home-buying process.
- Finding the right realtor ensures that you will find your dream home by facilitating a smooth transaction between the buyer and seller. Your realtor will assist you with completing the necessary documents for buying a new home, providing a seamless transition and establishing an orderly process in your home-buying experience.
- A realtor will find a home that fits your ideal neighborhood that you can afford, considering factors such as schools, amenities, safety and, essentially - a place that you will be proud to call home.
- A realtor will help to provide you with connections with other professionals in the field, such as mortgage agents, inspectors, real estate lawyers and more.
- A realtor will negotiate on your behalf, advocating for prices that are within your budget.
- Any questions you have about your new potential home and the process that goes along with buying a new home can be answered by your realtor.
Establish Your Budget
An important step when considering buying a home is to assess your finances to determine affordability. This would include assessing your yearly/ monthly income, expenses, and credit profile. Discuss your mortgage affordability with your bank and calculate your finances using a Mortgage Affordability Calculator - a tool provided by your bank. This tool will help you to determine your budget, which will narrow down your choices for properties. You will be able to gage realistic goals for the short and long term with this step.
Prepare Your Down payment
Preparing your down payment will determine your financial readiness for buying a home. A down payment is the money you will provide upfront, without any financial assistance from a mortgage. You will need to save for 5% of the price of the home. For example, if the home you would like to purchase is $400, 000, you will need to save at least $20, 000.
Mortgage Preapproval
A pre-approval can be completed by a lender (bank and credit union), or with a mortgage broker. A lender will use the Gross Debt Service ratio, as well as you Total Debt Service to measure if you are qualified for a mortgage. A rule of thumb to consider – your Total Debt Service should not exceed 40%, compared to the Gross Debt Service. Getting a pre-approval is essential to provide a realistic expectation of your home budget by assessing your financial readiness. Consider getting a pre-approval before looking at property options, as it will lay out which property is practical and achievable. Lenders will check your credit report, therefore, ensure to order a credit report that will show your record concerning your past financial information and your credit history. Your credit history will determine if you are a reliable candidate for a loan.
A mortgage is a loan that is used buy real estate. Your mortgage amount is dependent on your initial down payment, which affects your interest rate and the amortization period. The amortization period is the length of time it will take to pay your loan back. There are possible penalties to pay for with a mortgage. For example, extenuating life circumstances may affect your ability to pay off your mortgage. Consequently, your lender will provide these penalties in your mortgage contract beforehand.
Variable Rate Mortgage
A variable rate mortgage undergoes changes within the mortgage period - based on the previous rate conditions agreed upon and the fluctuation with current rates.
Fixed Rate Mortgage
A fixed rate mortgage is an agreed interest rate that does not fluctuate throughout the mortgage term. The payments will remain the same and the current rates to not influence the rate you will need to pay.
Conventional Mortgage
A conventional mortgage is completed when the home-buyer is able to provide a down-payment of 20% or higher.
Closed Mortgage
A closed mortgage concerns a mortgage that is not renegotiated – you will not be able to pay off your mortgage in advance with this option.
Open Mortgage
An open mortgage may be paid off in advance, you will gain more flexibility with payments as you will not be charged for any prepayment charges.
Finding Your Home
Consider which area you want to live - do you have any specific preferences? Think about if you would like to be an area with schools close by, if you need to be in close proximity to public transportation and/ or if you prefer urban or rural regions. Research listings in the area you would like your property and discuss your options with your realtor.
Types of Homes
Decide the type of home you would like to purchase - a detached home, semi-detached, or duplex are some options to consider. The following shows the definitions for each type of home:
Detached Home: A single standing building that is not attached to another home.
Semi-detached Home: Two homes attached together, sharing a wall.
Duplex: Multiple units attached together, for example, a townhouse or condominium.
Place an Offer On Your Dream House
Congratulations, you have found your dream home! The next step involves formally placing an offer on the home. Your offer may be conditional after discussing other factors found through a home inspection. Once the seller has accepted your offer, you will need your down-payment ready to place on the place on the house to secure the agreement. Ensure that you have the right government-issued identification documents ready for this process.
Complete a Home Inspection
A home inspection is a crucial step to indicate any problem areas in your new home that could bring potential complications in the future. Completing a home inspection can help you save money and avoid repairing issues in the house - bring up any issues you find to the seller and come up with a deal together to fix any of the issues that arise during the home inspection.
Closing
Closing your home is the last step in the home-buying process. This step involves added fees, such as land transfer tax, legal costs, moving costs, and more. Create room in your budget for the closing costs, as they are additional to the cost of your new home. The land transfer tax will need to be paid at once, and it is dependent on the location and price of your property. The legal costs can include other taxes, bills, lawyer fees for reviewing documents, registering a title and execution certificates.
MLS®, Multiple Listing Service®, and the associated logos are all registered certification marks owned by CREA and are used to identify real estate services provided by brokers and salespersons who are members of CREA.