“Guide to Buying a Home” has been prepared by Royal lepage Real Estate Professionals to offer you practical information about the buying process. It outlines steps that you and your Real Estate professional will follow during your search for the ideal home.
Determine What You Can Afford
Purchasing a home involves one-time costs and monthly expenses. The largest one-time cost is the down payment. It usually represents between 5-25% of the total price of the property. In addition to the actual purchase price, there are a number of other expenses that you might be expected to pay for.
Obtain A Pre-Approved Mortgage
Having a pre-approved mortgage will give you confidence of knowing exactly what you can spend on a home before you start looking. You will also be protected against interest rate increases while you look for your new home.
Your Mortgage Specialist will answer your questions and help you determine which financing terms and options are right for you. Your Mortgage Specialist and Real Estate Professional work as a team to help you find the right home and select the best financing.
Finalizing Your Mortgage
Once you’ve found the home you want to purchase, there are some documents you’ll probably be asked for in order to finalize your financing. They will include:
- A copy of the real estate listing of the property. If the home is still to be built, the mortgage lender will need to see the architect’s or builder’s plans and details on lot size and location.
- A copy of the offer to purchase or the building contract, if this document has been prepared.
- Documents to confirm employment, income and source of pre- approval.
If you have a Pre-Approved Mortgage, it’s a simple matter of finalizing a few details which your Mortgage Specialist will explain to you.
Price: Depending on local market conditions, your opinion of value or the price you offer may be different from the seller’s asking price.
Deposit: The deposit shows your good faith and will be applied against the purchase of the home when the sale closes. Your Real Estate Professional can advise you on a appropriate amount.
Terms: Includes the total price offered and the financing details. You may arrange your own financing or ask to assume the seller’s mortgage, especially if it has an attractive interest rate.
Conditions: These might include “subject to home inspection”, “subject to you obtaining financing” or “subject to you selling your property”.
Inclusions and Exclusions: These might include appliances and certain fixtures or decorative items, such as window coverings or mirrors.
Closing or Possession Date: Generally, the day the title of the property is legally transferred and the transaction of funds finalized unless otherwise specified (except in Manitoba and Quebec). Note: In B.C. the Possession Date is legally 1 to 3 days after the closing.
How to Make An Offer
When it comes time to make an offer, your Real Estate Professional can provide current market information and will assist you in drafting your offer.
Your Real Estate Professional will communicate your offer, sometimes known as an Offer To Purchase, to the seller, or the seller’s representative, on your behalf. Sometimes there may be more than one offer on a property coming in at the same time. Your Real Estate Professional can guide you through this process.
The offer can be Firm or Conditional. A Firm Offer To Purchase is usually preferable to the seller, because it means that you are prepared to purchase the home without any condition. If the offer is accepted, the home is yours. A Conditional Offer To Purchase means that you have placed one or more conditions on the purchase, such as “subject to home inspection”, “subject to financing” or “subject to sale of buyer’s existing home.” The home is not sold until all the conditions have been met. In the province of Quebec, this is referred to as a “Promise To Purchase.”
Acceptance of the Offer
Your Offer To Purchase will be presented as soon as possible. The seller may accept the offer, reject it, or submit a counter-offer. The counter-offer may be in reference to the price, the closing date, or any number of variables. The offers can go back and forth until both parties have agreed or one of you ends the negotiations.
Hire a Legal Professional
A legal professional is there to represent your interests and to process the legal documentation required. Your Real Estate Professional can provide you with the names of legal professionals who specialize in real estate. The legal process differs from province to province. Your Real Estate Professional or legal professional will advise you on the steps to be taken before the keys to your new home are presented to you.
Have the Home Inspected (Optional)
Having the property inspected by a qualified home inspector will give you the added confidence that you’ve made the right decision (costs vary). When the procedure is complete, you may wish to ask for a full written report plus estimated costs for any necessary repairs.
Book the Movers: You can choose to have your movers pack everything, or just the breakables, or you can pack yourself. It is a good idea to obtain estimates from several different companies.
If You Own Your Present Home: Arrange to have your gas, water, and electric meters read on the day you leave and have the bills forwarded to your new address.
*Have the oil tank read and filled before your sale closes, and provide a receipt to your legal professional if required. If the water heater or furnace is rented, arrange for a transfer of the rental agreement to the purchaser. Disconnect your telephone, cable TV, and water softener.
If you Rent Your Present Home: Give the necessary written notice to your landlord and make arrangements for the return of any money you have on deposit.
At Your “New” Home: Make arrangements for the gas and electric utilities, water softener, telephone, and cable TV to be connected on the day the sale closes.
General: Get the “Change of Address” cards from the post office and send out well before moving day. Have the post office forward your mail to your new address. Cancel any contracted services and pre-authorized cheques. Inform gardening, dry cleaning, garbage pickup, newspapers, magazines, and other home services. Arrange for services at your new address. Cancel or transfer social, athletic, civic, religious, or business affiliations, and memberships. Arrange for transfer of medical, dental, prescription, and optical records. Change the address on your driver’s license(s) effective the day of the move. Collect all items out for cleaning, repair, or storage, e.g. Dry cleaning. Make special arrangements for the moving of perishables, such as plants. Make special arrangements for the moving of your pets. Safely dispose of all flammable liquids as it is illegal for movers to carry them.
Amortization period: The actual number of years it will take to pay back your mortgage loan.
Appraised value: An estimate of the value of the property. Conducted for the purpose of mortgage lending by a certified appraiser. This appraisal is not to be confused with a building inspection, or comparative market analysis.
Assumability: Allows the buyer to take over the seller’s mortgage on the property.
Closed mortgage: A mortgage that 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.
Condominium: The owner has title to a single unit, as well as a share in the common elements such as elevators or surrounding land.
Condominium fee: A common payment among owners which is allocated to pay expenses.
Conventional mortgage: A mortgage loan issued for up to 80% of the property’s appraised value or purchase price, whichever is less.
Down payment: The buyer’s cash payment toward the property. The difference between the purchase price and the amount of the mortgage loan.
Equity: The difference between the home’s selling value and the debts against it.
High-ratio mortgage: A mortgage that exceeds 80% of the home’s appraised value. These mortgages must be insured for payment.
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.
Maturity date: The end of the term, at which time you can pay off the mortgage or renew it.
Mortgagee: The person or financial institution that lends the money.
Mortgagor: The borrower.
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.
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 before you start shopping. You know exactly how much you can spend.
Prepayment privileges: Voluntary payments in addition to regular mortgage payments.
Principal: The amount borrowed or still owing on a mortgage loan. Interest is paid on the principal amount.
Refinancing: Paying off the existing mortgage and arranging a new one or re- negotiating the terms and conditions of an existing mortgage.
Term: The length of time the interest rate is fixed. It also indicates when the principal balance becomes due and payable to the lender.
Title: Legal ownership in a property.
Variable-rate mortgage: A mortgage with fixed payments, but fluctuates with interest rates. The changing interest rate determines how much of the payment goes towards the principal.
Vendor take-back mortgage: When the seller provides some or all of the mortgage financing in order to sell their property.