First Time Home Buyer Guide 2014
Purchasing a home in Canada is a dream come true for most first time buyers. From finding finances to selecting the right neighbourhood, the decision to buy a home does not come easy. Systematic internet search, phone calls and inquiries are critical.
Make a decision
While buying a home can be a costly undertaking, it is among the biggest financial decisions you can ever make.
Answer some essential questions such as:
• Are you financially stable?
• Do you possess the essential financial management skills?
• Are you prepared to take up the costs involved with homeownership?
• Can you devote the time needed for home maintenance?
Be financially ready. Homes in Canada can be costly depending on the location you choose. Calculate how much money you are currently spending. This helps you determine whether you are financially ready. This involves computing your household expenses and monthly debt payments. Also, find out how much it will cost to maintain the home. To achieve this, plan beforehand for the different expenses involved in homeownership. Besides buying the home, additional expenses include property taxes, heating, renovation and maintenance.
You should keep your monthly expenses below 32 percent of your monthly gross income. Examples of housing costs include monthly mortgage payments, heating expenses and property taxes. The second rule spells out that your entire debt load for the month should not exceed 40 percent of your monthly gross income. Debt load comprises your debt payments and housing expenses. This can include lines of credit payments, credit card payments, leases or loans.
Evaluate the price of your home
Determine your maximum home price, after working out the requisite finances. This should depend on your household monthly gross income, mortgage interest rate and down payment.
Get a credit report copy
Obtain your credit report copy before applying for a mortgage. This shows how devotedly you have been paying your bills and debts in the past. Once you obtain the report, examine it to ensure that the information is accurate and complete. Get a pre-approval for your mortgage. Several realtors will ask whether you have been approved. Having a pre-approved mortgage amount helps you to think of a good price range. But it does not guarantee that you have been approved for the loan. During your first appointment with a lender, bring your personal documents. This may be job details including a letter confirming your salary or others detailing your sources of income.
-Evidence of your debts, loans and bank accounts
-Evidence of financial assets, amount and source of deposit and down payment
-Evidence of source of funds that cover the closing costs.
Know the mortgage options
Get several options from your lender to help you find the mortgage that best suits your needs. The most common include amortization period, payment schedule, interest rate type and "closed" or "open" mortgage.
Decide on your type of home
Once you have an idea of your finances, think clearly about the kind of home you wish to buy. Purchase a home that satisfies your current and future needs. To achieve this, consider some factors such as:
Determine the number of bedrooms and bathrooms you want. In addition, decide whether you want some home office space. Also, decide on the type of car parking facilities you may need.
• Special attributes
Decide on the kind of air conditioner you want. Further, consider whether you need a hobby or storage space, swimming pool and fireplace. Features that reduce environmental impact, improve indoor air quality and save energy should also be taken into consideration.
Depending on the kind of housing you want, you should have a clear idea of your current and possible future needs. Decide whether you need a home office or intend to have children. Ask yourself whether you should take a small home since your retirement age is closing in or have teenagers who will move away soon. Most importantly, determine if you want a home that can fit different life stages.
Flexhousing describes the ability of a home to adapt or adjust to several changing housing needs. This includes an increased number of occupants or furniture. It also includes the capacity to make future alterations without difficulty and with minimal expense. This ensures that your new home meets your evolving needs. It also allows you to arrange and rearrange space without the need for costly renovations and retrofits.
Choose a location
Decide whether you want to live in the countryside, town or city. In addition, take into consideration the home's proximity to various services and amenities. Your distance from friends and family, recreation facility and a safe walking area are also essential.
Make a home choice
Decide if you want a previously owned or new home. Or, build your own home. Some people prefer the flexibility and challenge that comes with it.
With this choice, you will get to make all decisions concerning the location, design, size, level of energy efficiency and quality of material.
The kinds of houses you might consider include:
- Single-family detached
- Row house
- Stacked townhouse
There are also two forms of ownership including freehold and condominium.
Freehold means that you own the house and land outright. There is no room co-managed or co-owned with possessors of other units. You can do whatever you want with that property though you must obey provincial and federal laws.
Condominium ownership means that you share the rights of ownership for the common building space. But you possess the unit you live in. Common space comprises areas such as recreation rooms and swimming pool.
Call a professional
Consult a team of experts for ideas on buying and owning a home. Examples of such professionals include:
- Mortgage broker or lenders
- Insurance broker
- Home inspector
- Land surveyor and contractor
Make a proposal to purchase
Once you select a home, give the seller an Offer to Purchase. This official document contains items such as:
• Names --Your name, the vendor's, and the official civic property address.
• Price -- what you are willing to pay
• Closing day -- the date you get possession of the house
• Deposited amount
• Request for the property's land survey
• Expiry date for the offer
• Home appliances and window coverings
• Other conditions -- these include an approved mortgage financing, property appraisal and home inspection report.
Get a mortgage
Visit your lender once your offer has been accepted. The lender will confirm your financial information. They will also put together what is required to finish the mortgage application. A land survey and a property appraisal will also be useful.
The lender will also inform you about the different kinds of payment schedules, amortization periods, interest rates and mortgage terms available. Amortization refers to the entire period it will take to pay up the mortgage.
Take legal homeownership
Closing day is where you eventually take legal possession of your home. Usually, the final signing happens at the notary or lawyer's office. During closing day, the lender gives the lawyer the mortgage money. On the other hand, you should give the lawyer the down payment, excluding the deposit and the remaining closing costs. The lawyer will afterwards pay the vendor and register the house in your name.
Remember your obligations
After buying your new home, make mortgage payments at the expected time. Come up with insurance, property taxes and mortgage payment plan. Also, make a plan for remittance of home operational costs, including:
• Repair and maintenance
• Security alarm system
• Gardening and snow removal
Remember to save for future emergencies such as major replacements or repairs, illnesses or job loss. Live within your calculated budget.