To me, one of the most rewarding experiences as a REALTOR is working with First Time Home Buyers. I have a great deal of experience in matching up the right person with the home that is right for them. Whether it takes a week or it takes a year I'm ready to help you work through the process of buying your first home.
Buying your first home can be an experience both exciting and scary all at the same time. It is one of the largest purchases you will make in your lifetime. There much to know and many decisions to make. I have put together this comprehensive First Time Home Buyers Section to try and help answer some of the many questions that you may have. Should you have any questions that have not been answered in this section, please feel free to call me anytime or drop me an email. I'm always just a phone call away!
FREQUENTLY ASKED QUESTIONS
Where do I start?
It is important to know how much money you can afford to spend on your new home. The first step you need to take is getting pre-qualified with a bank or lending institution. This can be as simple as a 20 minute conversation with a mortgage specialist. The specialist will use your personal data to shop around and find the best mortgage to suit your needs. Your specialist will give you a pre-qualified mortgage rate that is valid for a certain period of time.
What if the bank turns down my mortgage application?
There are alternate sources of financing that a mortgage broker may be able to find to get you financially approved. These alternate sources may come with a slightly higher mortgage interest rate than A lenders.
How much of a down payment will I need to buy a home?
Minimum down payment is usually 5% of the purchase price of the home. Some homebuyers may qualify for 0% down. This means that the buyer will finance the down payment as well as the balance of the purchase amount.
Are there any other costs that I need to know about?
Whenever you buy a house, there are a number of closing costs that are always involved. Included in these costs are legal fees, bank fees, tax and interest adjustments, survey certificate, land transfer tax, home and mortgage insurance. These additional costs can be estimated at approximately 1.5% of the purchase price of the home. If you have the money available, it doesn't hurt to have an "Emergency Fund" set aside for any unexpected costs or repairs that may come along.
If I use all of my capital to purchase a home, how can I pay for any repairs or expenses that I may want to do once I move in? There are a couple of options for repairs or expenses to a new home purchase. Clients may opt for a purchase plus improvements mortgage.
This means that if a client is purchasing a home and would like to make some improvements immediately, they may qualify to finance the improvements with the financing of the purchase with one mortgage. The best thing to do is id bring these concerns up with your mortgage specialist or REALTOR. They may have several options that are available to you.
Can I use my RRSPs toward the purchase of my house?
Under the Home Buyers' plan, first-time home buyers can withdraw up to $20,000 tax free from their RRSPs (or $40,000/couple) to finance a home purchase. These funds can be used for the down payment, closing costs or other expenses. Visit the Government of Canada website for further details.
Why do I need a REALTOR when buying a home?
In the past, agents were the only way the general public could access information on the real estate market. Because of the internet, today's buyers have access to a wealth of information and are much better informed than in the past. The role of the real estate agent has had to evolve. A REALTOR is able to register you so that you receive "auto-notification" of the market's newest listings. This means that you will receive information on these listings before they hit the public website. A real estate salesperson is much more than just a "sales person". They act on your behalf as your agent, providing you with advice, negotiating skills and guidance. They are market professionals. Realtors offer a full line of service and perform this service to buyers…at no cost. Why wouldn't you use a REALTOR?
How will I understand all the terms, definitions and clauses?
You may not be familiar with all the terms and clauses that are associated with buying a home. I will be more than happy to guide you through the home buying process, explaining everything along the way. In this package I have also included a glossary of real estate terms and definitions that I am sure you will find helpful.
Who are all the parties involved in a Real estate transaction?
Typically there are several parties involved in the Real estate transaction. the following list describes these parties and their function in the transaction;
-Your Mortgage Specialist and/or personal banking representative. He/She will help you set up and understand the specific details of the mortgage available to you. They will pre-qualify you giving you the freedom and negotiating power you need in writing an offer to purchase. Your banking representative will also be the one who approves your purchase should you include a "subject to financing" clause in your offer to purchase.
-Your REALTOR and the Brokerage he/she is associated with. Your REALTOR is the link that insures you have access to all available homes on the market. Your REALTOR has access to the "Multiple Listing Service" and will arrange all home viewings for you. He/she will explain the buying and selling process to you, as well as write up your offer to purchase and negotiate on your behalf. The REALTOR also insures that all other parties involved, receive copies of all pertinent information should your offer be accepted. The brokerage is whom your REALTOR is acting on behalf of. It is the broker that is responsible for the transaction and any deposits or money associated with the transaction.
-The Listing Agent. The agent who represents the owner of the home. He/she is responsible for marketing the home in question. When an offer is made and accepted on a home, the listing agent will be responsible for depositing your deposit cheque into his/her brokerage account within 24 hours of the accepted offer.
-Home Inspector and /or Structural Engineer. At the time you view a house and decide you want to write an offer on it, it is important to know what steps you will take in regard to understanding the condition of the house. Although neither an Inspector nor Engineer will give specific guarantees as to the structural integrity of a home, they do have extensive knowledge with respect to a home's construction and the general mechanics that are associated with residential dwellings. It will be your decision as to what steps will be taken to ensure your peace of mind and as to whether your offer to purchase will include these decisions as "subject to".
-Your Lawyer. He/She will handle the legal aspects of the sale such as zoning issues, building certificates, closing costs and adjustments. Typical legal fees for buying a homerun between $400 and $500 but may vary. This does not include disbursements and adjustments nor land transfer fees. Your Mortgage Representative, your REALTOR or your lawyer can explain these costs to you in more detail. If you are uncomfortable meeting with your lawyer I will gladly accompany you to your first visit as a silent supporter.
How will home ownership benefit me?
A home is a great financial asset. As your equity grows and the market value increases, so does your wealth. There is also a great deal of pride and self-satisfaction that goes with home ownership. Knowing that with each monthly payment made, you have something to show at the end of the day.
What steps will be taken to ensure that I know exactly what I'm buying?
Many steps are taken to insure your purchase is in fact the home you thought you were buying. The listing agent is responsible for everything that you read in the MLS listing and its accuracy. In most cases your bank and/or mortgage insurer will do an appraisal on the home before the contract is finalized. If you choose to have a home inspection or engineer's report, their findings will help instill peace of mind. Your lawyer will insure all legal aspects of the property are in good standing.
Once I buy a home, what responsibilities can I expect?
You can expect many responsibilities, all of them rewarding I can assure you. Your responsibilities will be to the mortgage lender, property tax department, utility companies and to your home itself with general upkeep. no one said home ownership was a walk in the park, but both short-term and long-term gains make it by far the most rewarding out of all the alternatives.
HOME BUYERS REAL ESTATE DICTIONARY
Amortization period: The actual number of years it will take to pay back your mortgage loan.
Anniversary: Many mortgage products allow you to make payments against the principal on the anniversary of the mortgage.
Appraisal: The process of determining the lending value of a property.
Assumability: Allows the buyer to take over the seller's mortgage on the property.
CMHC: Canada Mortgage and Housing Corporation, a Crown corporation that administers the National Housing Act for the federal government and encourages the improvement of housing and living conditions for Canadians. CMHC is one of two sources for high-ratio mortgage insurance.
Capped rate: An interest rate with a pre-determined ceiling, usually associated with a variable-rate mortgage.
Closed mortgage: Locks you into a specific payment schedule. A penalty usually applies if you repay the loan in full before the end of a closed term.
Closing costs: Costs in addition to the purchase price of a property and which are payable on the closing date. Examples include legal fees, land transfer taxes, and disbursements.
Closing date: The date on which the sale of a property becomes final and the buyer takes possession.
Conditional offer: An offer subject to conditions such as loan approval.
Condominium fee: A fee paid by the condo owner that is allocated to pay building expenses.
Conventional mortgage: A loan issued for up to 75% of the property's appraised value or purchase price, whichever is less.
Convertible mortgage: A mortgage that you can change from short-term to long-term.
Deed: A legal document, signed by both parties, that transfers ownership.
Default: Failure to abide by the terms of the mortgage; may result in legal action such as foreclosure.
Deposit: A sum paid to the seller and held by a third party upon the offer to purchase.
Down payment: The buyer's cash payment toward the property; the difference between the purchase price and the mortgage loan.
Easement: The right to use another's property for a specific purpose (e.g. a shared driveway).
Encroachment: A physical intrusion from one property to an adjoining property.
Equity: The difference between your home's value and the money you owe against it.
GEMI: GE Capital Mortgage Insurance Company of Canada, a private mortgage insurance company; one of two sources of high-ratio mortgage insurance.
Gross debt service ratio (GDS): The percentage of a borrower's monthly income to go to mortgage payments, utilities, taxes, and half of condo fees.
High-ratio mortgage: A mortgage that exceeds 75% of the home's appraised value. (These mortgages must be insured for payment.)
Home insurance: Insurance to cover both your home and its contents in the event of fire, theft, vandalism, etc. (also referred to as property insurance). This is different from mortgage life insurance, which pays the outstanding balance of your mortgage in full if you die.
Inspection: The process of having a qualified home inspector identify potential strengths and weaknesses in the property you are interested in so that you may have a good idea of its functional condition.
Interest adjustment: The amount of interest due between the date your mortgage starts and the date the first mortgage payment is calculated from. Avoid it by arranging to make your first mortgage payment exactly one payment period after your closing date.
Interest rate: The value charged by the lender for the use of the lender's money, expressed as a percentage.
Land transfer tax, deed tax, or property purchase tax: A fee paid to the municipal and/or provincial government for the transferring of property from seller to buyer.
Legal fees and disbursements: Some of the legal costs associated with the sale or purchase of a property. It's in your best interest to engage the services of a real estate lawyer (or a notary in Quebec).
Lien: A claim for money owed by a property owner to a supplier or contractor.
Listing agreement: A legal agreement between the listing broker and the seller describing the property for sale and stating the services to be provided and the terms of payment. A commission is generally payable to the broker upon closing.
Lump-sum payment: An extra payment that you make to reduce the amount of your mortgage. This is the same as pre-paying, which you cannot do if you have a closed mortgage.
Maturity date: The end of the term of the loan, at which time you can pay off the mortgage or renew it.
MLS®: Multiple Listing Service®, trademarks owned by the Canadian Real Estate Association. They are used in conjunction with a real estate database service, operated by local real estate boards, under which properties may be listed, purchased, or sold.
Mortgage: A loan that you take out in order to buy property. The collateral is the property itself.
Mortgage broker: A person or company offering mortgage products from several financial institutions.
Mortgage insurance: Applies to high-ratio mortgages. It protects the lender against loss if the borrower is unable to repay the mortgage.
Mortgage life insurance: Pays off the mortgage if the borrower dies so that his or her heirs do not assume the debt.
Mortgage rate: The percentage interest that you pay on top of the loan principal.
Mortgagee: The lender.
Mortgagor: The borrower.
Moving expenses: The cost of hiring packers, movers, or renting a van.
Offer to purchase: A legally binding agreement between you and the person who owns the house you want to buy. It includes the price you are offering, what you expect to be included with the house, and the financial conditions of sale (your financing arrangements, the closing date, etc.).
Open mortgage: Allows partial or full payment of the principal at any time, without penalty.
Portability: A mortgage option that enables borrowers to take their current mortgage with them to another property without penalty.
Pre-approved mortgage: Qualifies you for a mortgage amount before you start shopping.
Pre-approved mortgage certificate: A written agreement stating that you will get a mortgage for a set amount of money at a set interest rate.
Prepaid property tax and utility adjustments: The amount you will owe if the person selling you the home has prepaid any property taxes or utility bills.
Prepayments: Voluntary payments in addition to regular mortgage payments.
Principal: The amount borrowed or still owing on a mortgage loan.
Property survey: A legal description of your property and its location and dimensions (usually required by your mortgage lender).
Realtor: Trademark identifying real estate professionals in Canada who are members of the Canadian Real Estate Association, and as such, who subscribe to a high standard of professional service and to a strict code of ethics.
Refinancing: Increasing the amount of your current mortgage (at a new interest rate). The term of the new mortgage must be equal to or greater than the term remaining on your current mortgage.
Renewal: Renegotiation of a mortgage loan at the end of a term for a new term.
Sales taxes: Taxes applied to the purchase cost of a property. Some properties are exempt from sales tax and some are not. For instance, residential resale properties are usually GST exempt, while new properties require GST.
Service charges: Extra costs incurred when hooking up hydro, gas, phone, etc. to a new address.
Second mortgage: Additional financing, which usually has a shorter term and a higher interest rate than the first mortgage.
Survey: A document that shows the boundaries of the property and specifies encroachments, easements, and the placement of buildings on the property.
Term: The period for which the conditions of the mortgage apply and after which must be renegotiated.
Title: Legal ownership in a property.
Total debt service ratio (TDS): The percentage of the buyer or owner's gross annual income required to pay mortgage, utilities, insurance, debts, and all other payments.
Variable-rate mortgage: A mortgage with an interest rate that changes with the market.
Vendor take-back mortgage: When the seller provides some or all of the mortgage financing in order to sell the property.
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