#1 PREPARING TO BUY
Make Sure You’re Ready
- Decide if the timing is right
- Be prepared to make sacrifices
- Remember your home will require constant care
- Have your finances in order
- Manage your debt
- Consider your family’s future needs
Decide What You Want
- Carefully consider the options available
- Prioritize your lifestyle needs to find the best property fit
- Urban – big city living
- Suburban – modern neighbourhoods
- Small Town – close community living
- Rural – country living
- Learn and understand real estate terms
- Single-family Detached – free standing house; styles range from a single-story suburban bungalow to a three-story Victorian
- Semi-detached/Linked - two houses that share a common wall; usually less money than a fully detached home
- Town House - comprised of several homes with a common style and joined in a row
- Condo – you own 100% of the unit and have access to common facilities such as gym rooms, party rooms, and pools. Have to pay condo fees for the building's overall maintenance.
- Resale – an older home that may or may not have been renovated and upgraded
- New – a home being developed and built where you will be the first owner
Sell Your Current Home
- Usually people cannot afford to manage two homes and the associated mortgage payments at the same time
When Should You Sell?
- Seller's market – when there are many people looking for homes, but there are not many available on the market
- Buyer's market – when there are many homes for sale, but not many people are buying them
- The time of year can also affect how quickly you can sell and buy a property
- Winter sales tend to be slower, spring sales are tend to be quicker
If You Need To Sell Fast
Ask a REALTOR® for help establishing a price and for making your home look attractive without making you look desperate.
- Sometimes you can time your current home's sale with the future home's purchase
- Can make the sale of your home "conditional"
- Can try to extend the "closing period" to have more time to find your next home
- Smart to enlist a REALTOR® for professional services, just like you would hire a mechanic or dentist
#2 PLANNING YOUR FINANCES
Make Your Budget
- Know how much debt you already have
- Factor in the extra expenses (chart)
- Find out how much you can afford to borrow for a mortgage
- Determine how to responsibly manage and pay your living expenses
This is determined using two lending principals.
Gross Debt Service Ratio (GDSR) Calculation:
This lending principle simply states that your monthly housing cost should not exceed 32% of your gross monthly family income.
Total Debt Service Ratio (TDSR) Calculation:
This lending principle summarizes that your monthly housing cost and payments on all of your other debts (including loans, credit card and lease payments) should not exceed 40% of your gross monthly income.
Our “What You Can Afford” calculator will help you estimate your maximum affordable mortgage payment of principal and interest. Just enter your monthly income and expense amounts, and the calculator will do the rest.
Once you have used the “What You Can Afford” calculator to estimate your maximum monthly total, you can compare this number to the mortgage payments for specific loan amounts.
Simply enter the loan amount in our mortgage calculator and the monthly principal and interest will be figured out for you.
Shop For A Mortgage
- Investigating all of your options is a wise and vital step to securing the buying power to purchase your home.
Who Do You Talk To?
- Credit unions
- Mortgage brokers
- Other reputable lenders, etc.
Don’t Be Money Or Question-Shy! Reliable People That Can Answer Questions Include:
- Your realtor
- Mortgage brokers
- Financial advisors
Mortgage Terminology You Should Know:
- Mortgage term – the amount of time the bank has agreed to lend you the money; typically from six months to five years; at the end of the term, you can renegotiate
- Amortization - the length of time it will take to pay off the whole mortgage, often as long as 25 years. The longer your amortization, the lower your monthly payments, but the more you pay in interest over time.
- Interest rates – the cost of borrowing money
Using this mortgage calculator, check the difference between borrowing $100 000 at 6% and at 9% at the same amortization.
That interest rate not only affects how much you pay, it also affects how much you can borrow. So keep searching for the best rate!
What about the down payment?
You want as small a mortgage as possible, which means making the biggest down payment you can afford. However, remember to set money aside for all the fees associated with buying a home. Not to mention moving, repairs, renovations, new furniture...think and plan ahead.
The First-time Home Buyers’ Plan
If you're a first-time homebuyer with an RRSP, you can withdraw up to $25,000 without paying any income tax. If your spouse is also eligible, that's $50,000. Ask your REALTOR® how to take advantage of this plan.
Should you lock into an interest rate? For how long?
It's a tough question because nobody knows the future. What if you “lock in” for five years and the rate goes into a period of decline? You could be stuck paying more than the going rate for a long time. But if rates steadily climb over the next five years, locking in now would be a great move. Your REALTOR® can provide great advice and work out these scenarios for consideration.
What You Need To Apply For A Mortgage
- Letter of employment confirmation – include your position, your pay, and how many years you’ve worked with the company
- List of your assets – your car, stocks, bonds, GICs, etc.
- List of your liabilities – car payments, student loans, credit card debt, etc.
- Social insurance number
- Bank account number
- Your lawyer’s contact information
- Proposed property for purchase details
- Application fee – sometimes charged to process your mortgage application; ask to see if it can be waived
- Appraisal Fee – if the proposed home needs an appraisal, the cost is often passed on to you. Ask your lender if they will waive this fee as well.
- Mortgage broker’s fee – s/he may charge a fee that is payable on the closing date. Check into it to avoid surprises.
- Land survey fee – lenders may require a survey of your property, even if it's an existing one. Get your lawyer to take care of this.
- Home inspection fee – because this is one of your biggest financial investments, avoid surprises and protect yourself with a proper home inspection that looks for hazards and major problems
- Home insurance – your lender will require fire and extended coverage insurance because your home is the security deposit on the mortgage.
- Title insurance – not mandatory, but protects you from potential errors and/or fraud surrounding the land title. Ask your lawyer for details.
- Legal Fees – payment for your lawyer’s services and "disbursements" which are the costs involved in title searches, drawing up the title deed, and preparing your mortgage.
- Adjustments - the previous owner may have paid property tax or utilities in advance, and they want to be credited for those payments. Ask your REALTOR® and lawyer what might come up on the closing date.
- Maintenance and utility costs – when you buy a property, you are responsible for regular monthly payments in the form of property tax and utilities.
- Property transfer tax – the tax amount varies from province to province
- GST/HST and new homes – GST/HST does not apply to resale homes. However, new homes are subject to this tax. Consult your REALTOR® and/or lawyer for more information.
- Realtor commissions and/or fees – these are subject to GST/HST
#3 VIEWING HOMES
Find And Work With A Reliable REALTOR®.
These dedicated individuals work hard to ensure your property investment is a solid one. They're an invaluable resource for knowledge, contacts and advice that help turn buying a property into your future home.
REALTOR® relationships fall primarily under two categories - agency relationships and non-agency relationships.
Single Agency – in this relationship, the REALTOR® represents you exclusively.
This means the REALTOR®'s primary obligation is to act only in your best interest. Anything you tell your REALTOR® agent is strictly confidential. The REALTOR® also has an obligation to disclose to you any information he or she has that is related to the transaction.
Dual agency - refers to the situation where the REALTOR® represents both the buyer and the seller as agent at the same time.
Both parties are required to sign a dual agency contract setting out the obligations of the REALTOR® to both parties, and obtaining the agreement to this type of representation from all involved.
It is possible for a REALTOR® to work with you without being your agent. In this case, the REALTOR® can give you information, but cannot provide you with advice.
In this scenario, nothing you say to a "non-agent" is confidential, so be careful about what you confide. As a buyer you will likely want your REALTOR® to act as your agent.
Remember, the REALTOR® Code requires REALTORS® to disclose the nature of the relationship they have with you, and the duties and obligations associated with that relationship. Make sure you have this discussion with your REALTOR®.
Selecting A REALTOR®
- Ask family and friends for recommendations
- Visit open houses
- Check online – www.realtor.ca
- Check out “For sale” signs in your prospective neighbourhood
How REALTORS® Help You
- A resource to answer your questions
- Help determine your property “wish list”
- Assist with developing your budget
- Work out your price range
- Share market knowledge
- Help compare homes and neighbourhoods
- Set up appointments
- Walk you through potential homes
- Provide financing answers
- Explain mortgage options
- Negotiate on your behalf
- Draw up the legal paperwork
- And more!
Use the local real estate Board's MLS® System
With the MLS® System, preview properties with the help of a REALTOR® to ensure you're only shown homes that meet your needs and budget.
The MLS® System can give you exclusive access to property opportunities that are not available to the public.
Stick with your REALTOR®
Scattering your time and energy amongst multiple REALTORS® will work against finding your best home.
Most REALTORS® have equal access to the same property listings, so there's no real advantage to having multiple REALTORS®.
When given time, your REALTOR® can become an expert on your specific needs and tastes, ensuring you see properties that are of real interest to you.
Canada's money laundering reporting requirements
Your REALTOR® will advise you of FINTRACT’s reporting requirements, the federal agency responsible for administering Canada's Money Laundering and Terrorist Financing legislation and regulations.
By federal law, your REALTOR® is required to complete a client identification form, and must ask you as a buyer for verified ID such as a driver's license or passport. Find out more on the FINTRAC web site at http://www.fintrac-canafe.gc.ca
See what’s out there
Now it's time to see what's available. This step can be fun or exhausting. But with an expert REALTOR® helping, you'll be able to sift through to your dream home much more effectively.
Save time and plan your real estate outings
- Read the real estate ads in local papers
- Work with your REALTOR® to decide which neighbourhoods are favourable
- Take note of schools, shopping, and recreational areas
- Look for “not-great” areas such as industrial parks, railway tracks, and airports
- Visit during the day and night
- Take advantage of open houses
- Ask questions!
Welcome to the wonders of www.REALTOR.ca
REALTORS® have access to house-hunting tools called MLS® Systems, operated by real estate boards across Canada. You can view publicly available information about MLS® listings at www.REALTOR.ca.
Most listings have multiple photos, and some even have 360-degree views. With the interactive mapping feature, it’s fast and easy to zero in on your favourite available homes.
A REALTOR® can help you stay on track with what you can afford.
While visiting a potential home is thrilling, don't be distracted from your real goal, finding a home that meets all your needs and fits your budget.
Bring this House Hunting Checklist to homes you're serious about buying. Good luck and happy hunting!
#4 MAKING AN OFFER
Make An Offer
When you find the perfect property, it’s time to begin the process of making it yours. You have to make a successful offer, one that the seller will accept.
Prepare Your Offer
Your REALTOR® can prepare the offer for you. Here are some terms you'll see:
- Buyer – that’s you
- Seller – the present owners of the property
- Purchase price – the amount of money you propose to pay for the property
- Deposit - A cheque you write to the seller or the seller's broker. This is your way of saying 'my offer is serious'. The size of the deposit is up to you.
- Chattels and fixtures included – find out whether the property’s “extras” such as the washer, dryer, draperies, and light fixtures are included as part of the property sale. Don’t leave this to chance.
- Irrevocability of the offer – the length of time you give the seller to consider your offer; usually less than 48 hours.
- Completion date – the official day you take possession; can be 30-60 days after signing the final sale papers.
- Clauses particular to this agreement – conditions that must be met for the sale to proceed; ie: a thorough home inspection
Your REALTOR® can help ensure no details are overlooked in your offer.
Submitting The Offer
You’ve signed the paper work and your REALTOR® has submitted your offer to the seller. Two things can happen. The seller can either accept or reject your offer.
Rejected offers are common, and your REALTOR® can investigate why the offer was turned down.
The seller can also submit a counter-offer to you. This means they want to alter some part of your original offer – usually it’s the price and they will ask for a higher amount.
It’s now your turn to consider whether or not to accept the counter-offer.
Find A Reliable Home Inspector
When buying a home, scrutinize every last detail. Home inspections rarely cost more than a few hundred dollars, and can save you from unpleasant surprises and long-lasting regrets. Your REALTOR® can provide contact for reliable home inspection companies.
You may want to make a satisfactory home inspection part of your conditional purchase offer.
If the seller does not want to allow a home inspection, be very cautious about proceeding with your offer.
Work with a qualified home inspection professional. Ask for credentials or membership with a recognized professional organization.
Home Inspectors Typically Check:
- Plumbing and electrical systems
- The condition of the roof
- Visible insulation, walls, ceilings, floors, and windows
- The foundation’s integrity
- The presence of lead paint, asbestos, mould
- Out dated and dangerous electrical wiring
- Evidence of pests such as mice, squirrels, racoons, or termites
Be part of the inspection. You may join the inspector as s/he goes through the property. If problems are detected, you’ll see them firsthand and get some maintenance advice from a pro.
Get the inspection report in writing. The inspector will prepare and deliver a summarized review of the property’s condition.
New homes should be inspected, too. A new house does not equal perfect, and construction quality can vary greatly. In some provinces, repairs in new homes may be covered by a government or industry-sponsored warranty program. Bad news doesn't necessarily mean it will cost you.
#5 CLOSING THE PURCHASE
Add A Lawyer To Your Team.
Buying a home is a legal transaction. Therefore, it helps to have someone to translate the “legal lingo” and ensure your best interests are protected.
Finding A Lawyer
There are many experienced real estate lawyers available. Ask your REALTOR®, family, friends, and co-workers for recommendations. Be sure to find out how the potential lawyer structures his/her fees and ask for an estimate of the legal costs you can expect.
How Your Lawyer Can Help
Buying and selling property requires many legal steps to transfer ownership from one person to another. Your lawyer is working to ensure your legal property transfer is a smooth one and avoids pitfalls like fraud, government legislation, zoning issues, and unpaid taxes.
Don’t Be Scared Of Your Lawyer
S/he is your legal advisor so ask questions if you don’t understand something. Explaining legal jargon if a big part of their job
Close The Purchase Deal
It will be exciting when your offer is accepted. However, you still have to close the deal. Your REALTOR® and lawyer will do most of the closing work, but here's the checklist.
- Immediately take care of any agreement conditions that require action on your part. Your REALTOR® can fill out the documents stating that the conditions have been met.
- Ask your lawyer to begin the property’s title search. This could take a while, so allow lots of time.
- Arrange for your homeowner’s insurance to be effective on your closing date. Your insurance broker will give you a 'binder' letter certifying that you're covered. You can't get a mortgage without this letter
- Finalize your mortgage documents with your lender. Have your lawyer review them before you sign.
- Your lawyer will transfer essential utilities like hydro and water. However, you have to contact telephone and cable companies to connect their services to your name at the new property address.
- If you rent, give notice to your landlord or arrange to sublease your apartment.
- Begin planning your move. Shop around for moving supplies and services.
- Fill out a change of address card at the post office and send out your new address information. Contact the Ministry of Transport about updating your driver's license.
- Walk through your new home one more time with your REALTOR®.
- Meet with your lawyer to finalize and sign the closing documents. Your lawyer will tell you in advance what certified cheques you'll need to seal the deal.
Plan, prepare, and purge. Help make your moving day go smoothly by starting preparations and packing as soon as possible.
Your “closing date” is the day the property is officially transferred to you. However, it may not be wise to move in to the premises on this date. Schedule the actual move on a convenient day after the closing date. Professional movers and truck rental companies may give a discount for a mid-week or mid-month moves.
Go with an established, insured mover, so your items are protected and your possessions arrive safely and intact.
Start early and pack it yourself. Nobody will take the same care as you. Start early and work at it every day. Clearly label all your boxes by room so the movers know where you want them placed. Label anything that is fragile.
Do You Still Need It?
A new home is a chance to purge stuff you don’t need anymore. If you haven’t used it or worn it in the last year, you probably don’t need it. Have a garage sale or give those extra items to charity.
After The Move
Once the boxes are mostly unpacked, and you’ve settled into your new home, you may have the urge to start renovating and making changes. Don’t rush. Take time to get used to your surroundings and work out a budget for updates
Q1: What's The Difference Between A Real Estate Agent And A REALTOR®?
The terms "REALTOR," and "real estate agent" are not interchangeable. The term REALTOR is a registered certification that identities the quality of services rendered by licensed real estate agents who are members of The Canadian Real Estate Association (CREA). All real estate agents are not REALTORS, but all REALTOR members are real estate agents.
REALTOR members are committed to a strict code of ethics known as the REALTOR Code, and are the only ones who have the right to list your property on the MLS Systems of their local real estate boards. To correctly be referred to as a REALTOR, a real estate agent must be a member of CREA.
Q2: What Questions Should I Ask When Looking For A REALTOR?
Here are 10 smart questions to ask.
1. How long have you been in the business?
2. What is your average list-to-sales-price ratio?
3. How will your marketing plan meet my needs?
4. Will you provide references?
5. What separates you from your competition?
6. May I review documents that I will be asked to sign?
7. Can you help me find other professionals?
8. How much do you charge?
9. What if I'm unhappy with the service?
10. What haven't I asked you that I need to know?
Remember, your REALTOR should be willing to answer any questions you have. After all, that's why you hire the pros.
Q3: How Do I Figure Out What Mortgage I Can Afford?
Determining your mortgage amount is based on a simple calculation of loan amount, down payment, interest rate, and amortization period.
A rule when figuring your monthly housing cost is that it should not exceed 32% of your gross monthly family income or 40% of your gross monthly income. Visit our Mortgage Calculator, plug in a few numbers, and see what you end up with.
Q4: Why Should I Hire A REALTOR?
You're trusting a REALTOR with your most valuable possession, your home. REALTORS take this responsibility very seriously. Here's what we promise you.
Your realtor continually keeps pace with changing market requirements by taking courses to upgrade their real estate knowledge and provide clients with relevant advice.
A realtor must be registered under provincial laws that govern exactly how real estate can and cannot be traded. This ensures your realtor does everything by the book. These regulations are your legal guarantee of professional behavior.
Your realtor is an ethical business person who adheres to the extensive Code of Ethics of the Canadian Real Estate Association. Several provinces have additional codes governing real estate professionals. Your interests must always be put first.
Opportunity For Recourse
Should you have concerns about the professional behaviour of a realtor, provincial regulator and your local real estate board or association take these matters seriously and work quickly to resolve issues.
Your realtor has access to a local board’s MSL system. This system is the most powerful tool for buying and selling your home. Your realtor can provide you with exclusive features of the MLS system such as new property notifications.
Q5: What Should I Expect When I Enlist The Help Of A REALTOR To Sell My House?
- Help you get the best price for your home
- Remove the stress and confusion from the legal process
When you sign a "listing agreement" with your realtor, you are agreeing to the terms and conditions of the relationship with your Realtor.
Realtors know how to advertise to and attract potential buyers.
As an expert home promoter, s/he is connected to a network of agents and their buyers. Only your realtor can place ads for your home on the MLS system for others to see.
Realtors can increase the value of your home by pointing out areas you can quickly improve that will make it more attractive to buyers.
Realtors regularly study the housing market to stay current of what is happening and how to price your home for maximum return.
They keep track of the deals in progress and are great negotiators. When frustration sets in, Realtors are experts at smoothing things out.
Do I Really Need A Realtor To Sell My Home?
- Many people have tried to be independent when it came to selling their home, and eventually they turned to a realtor.
- The process is overwhelming, time-consuming, legally complex, and financially perilous.
- Realtors are experts. They know the market, they're prepared to advertise your home on a number of forums, they know how to navigate the legal process, and they have the time, since it is their full-time job after all.
People who try to sell their home without a realtor must be prepared. Otherwise, they could make costly mistakes like setting a price that is too low or too high.
When a price is too low, the seller loses money on the sale. When the price is too high, buyers will not be interested.
When an offer does come in, realtors are experts at negotiating and keeping the lines of communication clear and professional.
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