10 tips for first-time home buyers There’s nothing like owning your first home – getting to know your neighbours, choosing your décor, and creating a place that you can call your own. But being a first-time home buyer also means asking a lot of questions and making a lot of decisions
Here are ten tips from home buying professionals, as well as consumers, that will get you started on the path to home ownership.
1. Decide what type of home fits your lifestyle
According to Re/Max Realtor Amit Paul, it’s important for first-time buyers to take some time to think about what factors are most important to them.
“Make a list of what you ‘want’, ‘need’, and ‘don’t want’ in a home,” he says. “Rate your desired home attributes on a scale of 1 to 10 (10 being an absolute ‘must have’ and 1 being a ‘nice to have, but not a necessity’). This checklist will allow you to objectively assess different homes according to your needs and will save you invaluable time when you go out to see various building developments.”
2. Pick your neighbourhood
Paul also recommends checking out the neighbourhood and making yourself a ‘home value expert’.
“Investigate the areas and price ranges for the type of home you’re looking for. If you find yourself becoming interested in a particular neighbourhood, familiarize yourself with the local amenities, schools, property taxes, crime rates, and other neighhourhood features.
“Talk with different people in the area and visit at different times during the day. The characteristics of the area may change dramatically during different hours of the day.”
3. Use the resources available to you
“I tried to be as informed as possible,” says Donna Goddard, who recently bought her first home. “I went on the CMHC website and had them forward a bunch of information to me. One of their booklets basically takes you through from beginning to end and was a tremendous reference guide in terms of determining what stage I was at in the whole process, what would be coming up next, and what questions I should ask to make informed decisions.”
4. Know your credit history
Once you’ve decided on the type of home you want, it’s time to find out what you can afford. Knowing your credit history is an important first step.
“First-time buyers should access their personal credit bureau’s score, including their Fico(Beacon) score and then, with record in hand, ask a mortgage broker or bank representative to explain the many options open for a mortgage given their specific credit worthiness,” says Anthony Harte, a senior mortgage professional with Mortgage Alliance of Canada.
“Credit is very important,” agrees Jeff Hui, a mortgage consultant with Mercury Mortgages, “as the lenders use this to assess your loan repayment ability.”
Hui suggests running a credit check on yourself and verifying that the information is correct. Contact any creditors who haven’t updated your record in terms of cancelled cards or balances that have been paid off. Paying off high interest credit cards as soon as possible will help make it easier for mortgage approval.
5. Know how much you can afford
Buying a house essentially comes down to two key questions – how much down payment can you afford and what type of mortgage payments can you comfortably carry?
“The general rule for calculating how much of your household income should go to household expenses, including mortgage payments, is that household expenses shouldn’t exceed 32% of your gross income,” says Harte. “First-time buyers should talk to a mortgage professional about how much home they can afford and get pre-approved before they start looking.”
6. Be a pre-approved buyer
Becoming pre-approved is easy. Contact your mortgage professional to arrange a mortgage consultation and they’ll work with you to complete your mortgage application with a credit check prior to beginning your search for a home. Pre-approval means that you’ve actually been approved for the purchase by a lender, which gives you the edge in home purchase negotiating. The pre-approval guarantees you – up to a period of 120 days – that if the rate increases during that time, you’ll still get the original rate.
“A pre-approved mortgage puts incredible power in your hands,” says Hui. “You’ll know how much home you can afford and how much your payments will be, so you won’t waste time looking at homes that are out of your reach.”
Armed with this information, Goddard headed to her computer. “I went to the Multiple Listing Service (MLS) to see what was available in each of the desired areas in regards to pricing, size of property, land tax, etc. I spent many nights on the MLS so by the time I made contact with the real estate agent I was referred to, I managed to reduce the amount of time spent wandering in and out of homes that didn't really suit me.”
7. Assemble your team
So now you’ve decided where you want to live, determined how much you can afford, and been pre-approved for a mortgage. Since buying a home is a time-consuming, expensive and legally complex process, now is the time to seek out knowledgeable professionals.
The first person you’ll want on your team is a qualified mortgage broker who will guide you throughout the home buying process. Their job is to answer all of your mortgage questions, advise you of market and interest rate trends, research competitive information, create the right financial package to suit your needs, and prepare and approve your mortgage application.
A knowledgeable real estate agent should be your next pick.
“When you’re buying a home, the services of your real estate agent are priceless – and they’re yours at no charge, because a seller pays your agent’s commission,” says Paul. “Your real estate agent will research available properties that suit your needs and budget, arrange visits to properties you want to view, negotiate on your behalf with the seller and/or seller’s agent, present your offer and counter-offers, and advise you on your legal and financial responsibilities.”
You’ll need to hire a lawyer before you sign any documents relating to your home purchase. These documents are typically legally binding and you’re never required to sign them ‘as is’. So it’s in your best interest to have a legal professional review them first (your real estate agent can insert a clause into the contract making it contingent on obtaining the services of a real estate lawyer). The role of your lawyer is to represent your interests, explain any warranty provided on your home (if new), limit any risks to you by ensuring contracts are clearly and understandably written, review the certificate of location (property survey) to ensure no encroachments or easements exist, and research any restrictions on the property title. They’ll also arrange the property title transfer, manage and account for all disbursements, and arrange for title insurance, which protects you against challenges to the ownership of your home or from problems related to the title to your home
8. Take the time for a home inspection
If you make an offer based on the completion of a home inspection, you then need to arrange an inspection of the property. A good home inspector will perform a comprehensive visual inspection, examine the home’s foundation and roof, examine all the main mechanisms and systems in a house (such as heating, plumbing, electrical, ventilation, etc), and check the condition of the windows and doors. They should also identify areas that need replacement or repair, areas that have been repaired in the past, estimate the remaining life span of specific components in the home, and provide a written report of the inspection’s findings.
9. Uncover hidden costs
On top of the cost of your home, there are several other fees, charges, taxes and other sums to complete the purchase. These ‘closing costs’ add up and there’s no getting around them so make sure you get an itemized list (see sidebar) of your closing costs well in advance of your closing date. These can include deposit on the purchase price (at time of Agreement of Purchase & Sale), land transfer tax, appraisal fees, legal fees, and land survey or title insurance. Don’t forget to consider general expenses such as moving, upgrades, and home decorating costs as well.
10. Keep your cool
The home buying process is full of challenges and the best way to deal with them is to be prepared.
One thing that is happening quite often in today’s seller’s market is the ‘bidding war’. According to agent Amit Paul, if a bidding war happens, buyers must put in their best offer possible.
“They should predetermine what their bottom-line price is and write it down, so if they’re tempted to go over at least they're not doing it blindly.”
For first-time home buyer Donna Goddard, the biggest shock came when the perfect home turned out to be the exact opposite of what she had set out to find.
“When I did find my home it was almost the opposite of what I thought I wanted, but it was love at first sight. This house wasn't even in the area that I had chosen; I had just come across it on the MLS and then later that day, my agent sent me the same listing, saying ‘I know this isn’t in your choice area, but…’ Well to cut a long story short, I saw it, I liked it, and I put in an offer
immediately.”
http://www.canadianrealestatemagazine.ca/Mortgage_guide/25150/details.aspx
Friday, April 3, 2009
Tuesday, November 4, 2008
10-Step Program to Buying a Home
1. Get a pre-approval
In a hot real estate market, pre-approved home buyers get preferential treatment when negotiating home purchases. Why? Because pre-approved buyers are financially qualified to purchase the home and are considered more serious than buyers who are not. Nothing feels worse than finding the ideal home in the perfect area, and then not being able to get the financing to close the deal. A pre-approval will provide as a reality check prior to mapping out your life in a home that you cannot afford.
2. Meeting with your agents for a home buyer's consultation
Also a very important step in the process, this is when you and your agents prepare each other for exactly what to expect along the way.
The following points should be covered and fully understood during this meeting:
This is the fun part. It is important to limit the number of homes you're looking at in a day. If you look at too many homes, they begin to run together, and you can't remember one from another. It's a good idea to use a checklist form to help you track the properties you have seen. It is also helpful to actually begin to narrow down the properties after each visit. For example, if house #3 was better than house #2, immediately eliminate house #2.
Remember, communication with your agent is crucial. It's important to let your agent know which houses you like and why, as well as which houses you don't like and why. Sometimes it takes going out and looking one time before you and your agent really have a good grip on exactly what you're looking for. Call your agent, and have him/her do the research on any advertised properties that look interesting to you. That's what agents get paid for. If you should become interested in a for-sale-by- owner, ask your agent to contact the seller before you do, to see if he/she will cooperate (pay a commission) with a buyers' agent.
4. Select a home
Once you've narrowed your search down to one or two homes that you really like, your agent will do whatever research necessary to help you make your decision, but the decision will ultimately be yours. And surprisingly enough, it's going to be a pretty easy decision to make. Buyers are welcome to call the local chambers of commerce for any statistics in which they might be interested. Local zoning and planning offices are a good source for future road plans, etc. Once you've selected one home to focus on, your agents will do a comparative market analysis on that property. This involves determining "fair market value" by looking at what other buyers were willing to pay for properties similar to yours in the same neighborhood or area.
5. Making an offer & negotiation
When making an offer on a property, it is important to decide ahead of time how much you are willing to pay at what terms for the house. You already know what fair market value is. Now you have to decide what price you will offer; how much deposit you will offer; what personal property you wish to have convey (everything is negotiable); when you plan to close; and what inspections you plan to have conducted. When negotiating with any seller, it's best to remember not to take anything personally. Also, try to put yourself in the seller's shoes. Figure out what's not negotiable to you, and be willing to give a little on the things that are negotiable. A good agent should be able to give you tons of advice about how to structure your offer. Once your offer has been presented, the seller will either accept your offer outright, reject your offer outright, or counter your offer. The counter process can go back and forth many times. It's important for all parties to keep their cool and focus on the goal.
6. Get inspections & remove conditions
If, as part of your offer, you asked for time to be allowed to have inspections conducted on the property, you should have written what is called a conditional offer. Offers can be conditional upon financing, inspections, the receipt of acceptable condo estoppels certificates, the sale of property, and many other conditions. It is important that all deadlines be met and that all conditions are removed exactly the way the contract describes. Your agents are responsible for making sure this is done correctly.
7. Select a notary/lawyer
If you do not have an attorney already then your agent or mortgage broker can help you find one that specializes in real estate transactions at a very reasonable price.
8. Walk-through
Most sales agreements will give the buyer the right to one pre-closing inspection. This is your last chance to find any problems and have the seller correct them. Read the contract carefully, but most contracts read that all electrical systems, plumbing, appliances, heating, and air conditioning need to be in working order at the time of closing. These are the items you checking for at walk-through. You are also checking for any other items the seller previously agreed to fix or replace.
If anything is found to be defective or missing, you have several options: The seller can remedy the problem prior to closing; the seller can credit you the amount of money it would take to hire someone to remedy the problem; or the seller can promise to correct the problem and place into escrow with the attorney the amount of money you will need to pay someone else if the seller does not perform as promised. On new-home purchases, the process is a little different. The builder will generally do a walk-through with you approximately one to two weeks prior to closing, resulting in a "punch-out list." Hopefully, they will get everything on the punch-out list completed prior to settlement. If not, most new-home contracts allow the builder to complete whatever minor items have been noted in a "reasonable" period of time.
9. Closing on your home
This is the day you "sign your life away," as most clients say. Not really. You will be signing all of the mortgage documentation, which can seem never-ending. The lawyer conducting the settlement should be able to explain every document to you in a satisfactory manner. Do not ever feel intimidated. If you don't understand, don't sign. Your lawyer will help your understand everything. If you like, you can request blank copies of the documents you will be signing in advance so that you can carefully review them. You will have to present whatever down payment and closing-cost funds you were expected to pay. This check must be certified; personal cheques usually are not accepted.
10. Moving day
This is the last and probably the hardest step in the home-buying process. A little bit of planning and forethought, though, will make for a much smoother move. You will want to make arrangements with a moving company as soon as you can. Call at least two in order to get competitive quotes. They will usually ask to come to your home to get an idea of how much they will be moving and the distance they will need to travel. Be sure to change your address with the post office, your banks, and any creditors at least 30 days in advance. To avoid late payments, it's a good idea to actually call and verify receipt of the address change whenever possible. Call to order your utility hook-ups approximately 10 days prior to your move. Be aware that some utility companies will keep you on the phone for a long time.
In a hot real estate market, pre-approved home buyers get preferential treatment when negotiating home purchases. Why? Because pre-approved buyers are financially qualified to purchase the home and are considered more serious than buyers who are not. Nothing feels worse than finding the ideal home in the perfect area, and then not being able to get the financing to close the deal. A pre-approval will provide as a reality check prior to mapping out your life in a home that you cannot afford.
2. Meeting with your agents for a home buyer's consultation
Also a very important step in the process, this is when you and your agents prepare each other for exactly what to expect along the way.
The following points should be covered and fully understood during this meeting:
- Exactly what your needs are (number of bedrooms, baths, etc.), in which areas you're looking, what price range you are comfortable with, and what your time line is. It takes generally takes 30 to 45 days from purchase to closing.
- How often you are available to look and what you expect from your agent in terms of availability and communication (e-mail, phone updates either daily or weekly).
- Your agent should give you copies of all the paperwork you will be expected to sign throughout the process and briefly explain what each form is for.
- Your agent should explain buyer brokerage vs. seller's representation, and you should sign a buyer broker agreement.
This is the fun part. It is important to limit the number of homes you're looking at in a day. If you look at too many homes, they begin to run together, and you can't remember one from another. It's a good idea to use a checklist form to help you track the properties you have seen. It is also helpful to actually begin to narrow down the properties after each visit. For example, if house #3 was better than house #2, immediately eliminate house #2.
Remember, communication with your agent is crucial. It's important to let your agent know which houses you like and why, as well as which houses you don't like and why. Sometimes it takes going out and looking one time before you and your agent really have a good grip on exactly what you're looking for. Call your agent, and have him/her do the research on any advertised properties that look interesting to you. That's what agents get paid for. If you should become interested in a for-sale-by- owner, ask your agent to contact the seller before you do, to see if he/she will cooperate (pay a commission) with a buyers' agent.
4. Select a home
Once you've narrowed your search down to one or two homes that you really like, your agent will do whatever research necessary to help you make your decision, but the decision will ultimately be yours. And surprisingly enough, it's going to be a pretty easy decision to make. Buyers are welcome to call the local chambers of commerce for any statistics in which they might be interested. Local zoning and planning offices are a good source for future road plans, etc. Once you've selected one home to focus on, your agents will do a comparative market analysis on that property. This involves determining "fair market value" by looking at what other buyers were willing to pay for properties similar to yours in the same neighborhood or area.
5. Making an offer & negotiation
When making an offer on a property, it is important to decide ahead of time how much you are willing to pay at what terms for the house. You already know what fair market value is. Now you have to decide what price you will offer; how much deposit you will offer; what personal property you wish to have convey (everything is negotiable); when you plan to close; and what inspections you plan to have conducted. When negotiating with any seller, it's best to remember not to take anything personally. Also, try to put yourself in the seller's shoes. Figure out what's not negotiable to you, and be willing to give a little on the things that are negotiable. A good agent should be able to give you tons of advice about how to structure your offer. Once your offer has been presented, the seller will either accept your offer outright, reject your offer outright, or counter your offer. The counter process can go back and forth many times. It's important for all parties to keep their cool and focus on the goal.
6. Get inspections & remove conditions
If, as part of your offer, you asked for time to be allowed to have inspections conducted on the property, you should have written what is called a conditional offer. Offers can be conditional upon financing, inspections, the receipt of acceptable condo estoppels certificates, the sale of property, and many other conditions. It is important that all deadlines be met and that all conditions are removed exactly the way the contract describes. Your agents are responsible for making sure this is done correctly.
7. Select a notary/lawyer
If you do not have an attorney already then your agent or mortgage broker can help you find one that specializes in real estate transactions at a very reasonable price.
8. Walk-through
Most sales agreements will give the buyer the right to one pre-closing inspection. This is your last chance to find any problems and have the seller correct them. Read the contract carefully, but most contracts read that all electrical systems, plumbing, appliances, heating, and air conditioning need to be in working order at the time of closing. These are the items you checking for at walk-through. You are also checking for any other items the seller previously agreed to fix or replace.
If anything is found to be defective or missing, you have several options: The seller can remedy the problem prior to closing; the seller can credit you the amount of money it would take to hire someone to remedy the problem; or the seller can promise to correct the problem and place into escrow with the attorney the amount of money you will need to pay someone else if the seller does not perform as promised. On new-home purchases, the process is a little different. The builder will generally do a walk-through with you approximately one to two weeks prior to closing, resulting in a "punch-out list." Hopefully, they will get everything on the punch-out list completed prior to settlement. If not, most new-home contracts allow the builder to complete whatever minor items have been noted in a "reasonable" period of time.
9. Closing on your home
This is the day you "sign your life away," as most clients say. Not really. You will be signing all of the mortgage documentation, which can seem never-ending. The lawyer conducting the settlement should be able to explain every document to you in a satisfactory manner. Do not ever feel intimidated. If you don't understand, don't sign. Your lawyer will help your understand everything. If you like, you can request blank copies of the documents you will be signing in advance so that you can carefully review them. You will have to present whatever down payment and closing-cost funds you were expected to pay. This check must be certified; personal cheques usually are not accepted.
10. Moving day
This is the last and probably the hardest step in the home-buying process. A little bit of planning and forethought, though, will make for a much smoother move. You will want to make arrangements with a moving company as soon as you can. Call at least two in order to get competitive quotes. They will usually ask to come to your home to get an idea of how much they will be moving and the distance they will need to travel. Be sure to change your address with the post office, your banks, and any creditors at least 30 days in advance. To avoid late payments, it's a good idea to actually call and verify receipt of the address change whenever possible. Call to order your utility hook-ups approximately 10 days prior to your move. Be aware that some utility companies will keep you on the phone for a long time.
Subscribe to:
Posts (Atom)
