First Time Home Buyer's Guide
Benefits of Home Ownership?
Pride of Home Ownership
Pride of home ownership is the number one reason why Canadians desire their own home. There is no landlord looking over your shoulder. You are able to make home improvements knowing that any appreciation that results, will be to your benefit. Home ownership gives you and your family a sense of stability and security. It's making an investment in your future.
Appreciation
In Canada, especially in years past, homes have the potential to appreciate considerably and in doing so can add substantially to owners net worth. Unlike stocks and bonds, you get to live in your real estate investment. Also, in Canada your principal residence is exempt from capital gains taxes.
Mortgage Reduction Builds Equity
Each month, part of your monthly payment is applied to the principal balance of your home loan, which builds your equity. You can borrow against a home's equity for a variety of reasons such as home improvement, sending your kids to university or college, or starting a new business. Why pay-off your landlord’s property when you can own your own?
Homeowners accumulate wealth for the future while enjoying the benefits of a shelter that they have can use, improve and sell. Their home is a safe haven for investment.
Are You Ready to Buy a Home?
First – do you have the financial resources? You should have five percent of the purchase price of a home for the down payment, but ideally even more. Are there other priorities in your life e.g. starting a new business, which require your savings? If not, buying a home should be on your radar.
Second – do you expect to stay in your new home for some time? Moving can be expensive and you will want to build some equity before having to relocate. Your job and home life should be stable.
What Can You Afford?
If you haven't already gone through the mortgage pre-qualification process, you will need to meet with a lender or mortgage broker. They will establish how much of a mortgage you will qualify for. Mortgage rates vary considerably and it is paramount that you shop around for the best rate, terms and options.
Our Mortgage Calculator will help you determine what monthly mortgage payment and the maximum mortgage you can manage. Note: if you are buying a condo, the amount of your monthly assessment has a direct impact on how much you can afford to spend on your mortgage.
First time homebuyers may want to take advantage of the federal government’s Home Buyers’ Plan. Under this plan, you may use up to $25,000 of your RRSP towards the purchase of a home. The money is tax-free as long as you pay it back in the next 15 years. Ask your Falk Jiwa Realtor for details.
Questions To Ask When Assessing Home Features
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Do you want air conditioning, storage or hobby space, a fireplace, a swimming pool? Do you have family members with special needs?
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Do you plan to have children? Downtown or suburbs? Proximity to recreation or work.
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Do you need a substantial backyard? Pets?
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Is there adequate storage space?
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Will any remodeling be required to make the home move-in ready for you?
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What service providers (cable, Internet, telephone, Satelite) are available in the area, and is the house completely wired for each? Can you hear me now – how good is the cell phone reception?
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How much are the yearly property taxes?
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How much do utilities run each month? Does the house use gas or electric for the furnace, water heater, and appliances?
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How old are the major appliances, and which are included with the house?
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Have there been any major repairs to the house, and if so, when were they completed? For example, how old is the roof? Has water ever damaged the basement or foundation?
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Ever had problems with insects, such as termites and spiders, or rodents?
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Older homes need to be carefully examined - Windows may need caulking or new sashes, bathroom tiles may need grouting, home may need rewiring (planning on a hot tub or sauna?), a new hot water heater, or a new furnace.
Location, Location, Location
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How far will you be commuting and what is the traffic like? Factor in cost of fuel.
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Where will your children attend school and how will they commute?
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Are there recreational facilities and parks close by?
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Are you close to family and friends?
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Is safety or high crime an issue?
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Is the property close to an obstacle or negative influence? (i.e. an apartment building, shopping centre, school, radio tower, power lines, LRT or railroad track, highway, airport or commercial project).
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Access to schools, work, recreation, shopping centres, public transportation, cultural attractions, libraries, churches and hospitals
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Adjacent undeveloped land - what is proposed for this or other green space?
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Heavy traffic can be noise nuisance and hazard for children
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Distance from the unit to amenities, parking, walkways, roads, public transit
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Does the neighborhood reflect positively on the value of the condo and your lifestyle choice?
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Does this neighborhood, for any reason, have a poor reputation?
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Is the future economic climate for the area good? Are businesses moving in? Is there government investment?
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Are people moving in or out of the neighborhood? What is their age, income level, family size?
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Are there plans for this neighborhood that you may be unaware of (i.e. a future highway, a commercial development or a new housing development) that will provide competition on resale?
Noise and Privacy
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Proximity to highways, driveways, parking lots, playgrounds, trains
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Proximity to elevators, garbage disposal, fire exits, heating and air conditioners
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How well is the building soundproofed
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Visit at different times/weekends to check noise levels and activity
Before Writing an Offer
Home Purchase Expenses
There are many costs that homebuyers incur, especially upon purchasing your first home. Some of the expenses related to buying a home are one-time costs, while others are continuing costs.
Your largest outlay is the down payment. As a first time buyer, this would likely represent only 5 - 10% of the purchase price. Be prepared to pay for additional costs, such as:
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Legal Fees & Disbursements
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GST and PST (if applicable)
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Land Transfer Tax
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Property taxes and adjustments (reimbursed to the vendor)
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Interest on interim financing, if any
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Utility Payments
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Strata or Condominium Fees
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Estoppel certificate fee
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Survey Fee
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Home Inspection Fee
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Water quality and quantity certificate
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Appraisal Fee
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Mortgage broker's fee (if applicable)
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Mortgage Loan Insurance Premium (if less than 20% down)
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Mortgage Loan Insurance Application Fee (if less than 20% down)
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Moving Expenses
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Renovations and repairs
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Furniture, paint, carpeting, window coverings, etc.
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Service and Utility Hook-up Fees
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Property/Condominium Insurance
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Mortgage Application Fee
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Deed and/or Mortgage Registration Fee
Additionally, once you have purchased your home, you will incur regular expenses on a monthly, quarterly or yearly basis. Some of these costs include:
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Mortgage Payment
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Water and/or Sewer Payments
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Electricity and Gas Services
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Cable, Telephone and Internet Services
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Property Taxes
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Strata or Condo Fees
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Repair/Maintenance Expenses
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Homeowner's Insurance
How to Make an Offer
When you have found a home you are interested in buying, your Falk Jiwa Realtor will walk you through the process of drafting an offer to purchase. Your Realtor will communicate the offer to the seller or the seller's real estate agent for you. Some properties are in demand and you will not be the only interested party making an offer. Your Falk Jiwa Realtor will assist you in generating an offer that is reasonable and protects your interests using specified terms and conditions.
An offer can be drafted with or without conditions; an offer without conditions is known as a firm offer and one with conditions is known as a conditional offer. A conditional offer represents the party with the placement of certain conditions on the purchase. Some of these conditions could be "subject to financing approval", "subject to the strata council allowing pets", "subject to the buyer's house selling", "subject to an approved home inspection", among many others.
The seller may accept your initial offer, reject your offer or present a counter-offer. The counter-offer may differ from your original offer in respect to price, conditions, the closing date or any other items. Offers can be countered back and forth between the parties until one of you accepts or rejects, ending the negotiations.
There are many components of an offer that you should be aware of and understand. Your Realtor will answer your questions and explain the entire process to you so that you are comfortable with the steps involved.
Terms
An offer includes certain "terms", which specify the total price offered and how the financing will be arranged, such as if you will arrange your own with a financial institution or mortgage broker or if you wish to take over the seller's mortgage (assumability).
Inclusions and Exclusions
These are specifications within the offer that detail the items to be included or excluded from the purchase of the property. Typical inclusions are appliances, window coverings, fixtures and decorative pieces.
Deposit
A deposit is provided from the buyer to the seller as a token of the buyer's assurance and intention to buy the property involved. The deposit is applied against the purchase price of the home once the sale has closed. We can assist you in proposing a certain and appropriate amount for the deposit.
Conditions
Items that are usually put in place to protect a party's interests upon selling or buying the property and refer to things that must occur or be in place before the sale closes.
Closing Date
This is usually the date that the legal ownership of the property transfers from the seller to the buyer and, unless otherwise noted, when the funds for the purchase are concluded.
Possession Date
When the buyer takes possession as specified in contract oif purchase sale.
Purchase Price
This is the amount that the buyer is offering to pay for the property. The price is usually dependent on market conditions and may differ from the seller's current asking price.
Legal Needs
Purchasing a home involves a lot of paperwork, most of which are contractual documents that will legally bind you to the numerous terms and conditions. For this reason it is important to have a good lawyer or notary public acting for you. Someone to protect your rights and interests.
Finding a Lawyer
If you don't have a lawyer, you can look for a referral from friends, family or business acquaintances. Look for someone with real estate experience and discuss their fee scales. Your Falk Jiwa Realtor can help you locate a reliable professional, whom you feel comfortable working with.
Lawyer's Function
You will need a lawyer to process your purchase and ensure the terms are met:
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the correct property is purchased
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transfered title to your name
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ensureed title is free and clear of prior owners encumbrances
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your mortgage is registered properly on title
The legal process varies from province to province within Canada. Specifically, you will need to consult with your chosen legal professional and he/she will explain the process and the steps that need to be completed before you get the keys to your new home.
Your lawyer will prepare a "Statement of Adjustments" outlining all the financial aspects of your sale.
Legal Fees and Disbursements
The difference between legal fees and disbursements is analogous to the parts and labour you pay when fixing your car. Falk Jiwa Group can help you locate a reliable professional, whom you feel comfortable working with.
Home Inspection
A home inspection is an objective visual examination of a home's structure and systems.
Why get a home inspection?
There are a number of reasons why Falk Jiwa Group recommend a home inspection including:
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To ensure you are not surprised by major defects
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So you can be advised about the various elements of the home including - heating and cooling systems, structure, electrical and plumbing
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To learn about how the mechanical systems work and need to be maintained
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Most homeowners are not expert in the numerous components of house construction
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A third party can be objective as there is no emotional attachment
Who should you hire?
Home inspectors are often referred by family or friends. Your Falk Jiwa agent can also provide you with a list of inspectors. Look for one that is trained and certified by a national organization such as Canadian Association of Home Inspectors (CAHI) or National Institute of Building Inspectors (NIBI) and who has errors and omissions insurance. Do not hire someone who will do any suggested work due to the conflict of interest.
When should you call?
Order the inspection after your offer has been accepted. The contact will stipulate the length of time you have to complete the inspection.
What is involved?
The home inspection will determine the structural and mechanical soundness of the home. Your home inspector can identify existing and potential problem areas, suggest possible solutions and provide estimates for the cost of the work required. You will receive a report outlining the inspection findings. You should accompany the home inspector during the inspection or arrange to meet them at the home so they can walk you through the report. If as a result of the inspection, you have further concerns, have a specialist in that area conduct a more extensive examination.
What does it cost?
Costs vary depending on a number of factors including:
Size and location of the home, features, age, and services required. Additional services may include radon, septic and well testing. Your Falk Jiwa agent can assist you in obtaining a quote from a potential inspector before you enlist his/her services.
Mortgage Information
Mortgage lending is a highly competitive field. Information on mortgage rates, which can change daily, is available in local newspapers, through mortgage brokers, from individual lenders and of course through conventional financial institutions. When you are shopping for a loan, interest rates tell just part of the story. You will also need to study the various fees lenders charge and many mortgages today are almost custom-tailored to individual needs with many options available.
Ask your Agent
Your Falk Jiwa real estate professional can recommend lenders to check with prior to beginning any serious house hunting so you will know exactly what you can afford.