The first step in buying a home is to ensure you are financially ready.
Be aware a 5%-20% down payment is required to secure a mortgage. You will need to save a significant nest egg before starting your home buying journey.
Also, before going to a mortgage lender (bank or mortgage broker) you should know your Gross Debt Service Ratio and Total Debt Service Ratio. These numbers represent the maximum amount you should spend on a mortgage. GDS states no more than 32% of your gross annual income should go towards principal payments, interest, property taxes, and heating costs. TDS states no more than 40% of your gross annual income should go towards all debt payments (GDS + credit cards and loans).
Once you know the maximum you should spend, it is time to see a mortgage lender about how much you can spend. They will determine what you are able to borrow and provide you with a pre-approval letter. Some documents you will need: Proof of employment, proof of other income, proof of down payment and bank information.
With your pre-approval letter in hand, you are armed with realistic expectations and ready to start the search for your new home.
Another wise area for cost-research is finding who you will you be using for legal representation. A Lawyer or a Notary? Find out what their fees are and what the other costs are associated, for example Property Transfer Tax and Title Transfer costs.
2. The Search
Before calling your Realtor, you need to create a comprehensive want and need list. How many bedrooms do you need? Is a garage important to you? What do you need now and what can you add or renovate later?
Once you have a clear vision of your wants and needs, contact your Realtor and communicate all relevant information about your finances and wish list. The more information your Realtor has, the better chance they have of finding you a home you will fall in love with. Make sure you ask what the current climate of the market is for home buyers, so you are aware of what scenarios or obstacles you might experience.
Now the real fun begins! It is time to look at homes.Start by looking online to get an idea of where your financing and wish list can take you. Then your Realtor can assess any properties that peak your interest and provide you with listings from the MLS that match your specific needs. Next you will choose some properties to view in person. While viewing homes it is important to be open minded and objective. The wrong paint colour does not make it the wrong house and the current furniture that you hate will not be there when you move in. Do not get discouraged! It may take some time, but you will get “that feeling” when the right home comes along. Have fun with the process and you are bound to love where you live.
3. Making the Offer
This is “THE ONE!”
Your Realtor will work with you to secure the best price and negotiate the most favourable terms. Trust that your Realtor is doing the best they can to get you into your dream home.
Once your offer is submitted to the seller and their agent they can do one of three things: they can accept the offer, counter the offer, or reject the offer. Be ready for some back and forth and be prepared that it may be necessary to compromise.
This stage can be a little nerve racking. Lucky for you, you have a Realtor who is on your side and ready to work hard to get you what you want.
4. The Offer is Accepted
The home is ours!
Hold on a second and take a breath. I know this is exciting, but there is still work to be done!
Every purchase contract should include conditions to protect both the buyer and the seller. These conditions could include items such as a home inspection, confirmation of financing, or a surveyor’s certificate. It is up to the Buyer to do their Due Diligence in investigating their property, so they are satisfied with their investment choice. Your Realtor can help guide you, but ultimately it is up to you to gather the information from reliable sources firsthand. Once all the conditions are met, you will sign a removal of conditions form. A Deposit is now due which goes towards the purchase price and usually held by your Agent’s brokerage in Trust. It is common deposit is due up to 48 hours after Subject removal, but it also can be due upon acceptance of an offer.
5. Closing and Possession
Congratulations! Now it is time for your lawyer to draft the necessary paperwork required to transfer ownership of the property. Once this is done, the home is yours! You did it! Time to love where you live.