The Guide For First-Time Home Buyers

It’s not easy buying a home, especially if it’s your first-time round. In this article, we will look at some essential things to keep in mind before you end up signing on the dotted line.

  1. Decide What You Want:
  • Ask yourself in what kind of neighborhood do you want to live in? Ask yourself about your daily commute, and if yes, will you be using the public transit? Do you want things like educational institutes, parks, etc. around where you stay?
  • What kind of home do you prefer? A single-family detached home? A single-family semi-detached home? Duplexes? Row Houses or Townhouses? Condominiums?
  • What kind of ownership would you prefer?
  • There’s freehold, which means that you own the land and the house are responsible for everything inside and outside of your house.
  • There’s condominium ownership, which means that you own the unit, and share the ownership of the common spaces and are responsible as a member of the association formed the condominium for the upkeep of the building by paying maintenance.

There’s co-operatives ownership, which means that instead of owning your unit, you own shares in the building, along with other residents, cooperatives residents also pay for the upkeep of the common places by paying maintenance towards the co-op board.

Realtor:

  • Get a good, reputed realtor or a realtor firm on whom you can rely on and trust, navigating the purchase of a home without a realtor is painful and cumbersome.
  • A good realtor will help you breeze through the entire process of selecting and getting you a home of your choice, along with the paperwork that comes with.
  • Your realtor can also help you in comparing homes which fall in your budget and give you experienced opinions on localities and neighborhoods.
  • A realtor can also help with knowing and helping you understand if you are eligible for any incentive programs from the government.  for purchasing a home.
  • Realtors can also connect you to other qualified professionals that you may need during the purchase of your house including real estate lawyers, home inspectors, and appraisers.
  • Realtors can also help you with planning the closing cost of the home and other related expense towards your purchase.
  • Not only that, realtors can negotiate the price, contractual terms such as possession date, furniture and electrical appliances which need to be changed, replaced or repaired for you and help you assess your mortgage options and see what fits your needs.

  • Calculating Mortgage & Credit Rating:
  • One can check their annual income and budget to determine a mortgage which they can afford, there are many Mortgage Affordability Calculators available online, where one can do this.
  • A credit rating is a rating, one gets as an individual which shows whether or not you have had any issues with your debt, loans, mortgages in the past. Make sure before you get involved in purchasing a house, you get a copy of your credit report, just to make sure it doesn’t contain any mistakes or errors because lending companies will check your credit rating before approving your mortgage.
  • Before looking at a home to buy, one might consider looking at getting pre-approved for a mortgage which gives you, as the buyer, a more realistic expectation as to what you can afford. You can get pre-approved from a bank, credit union or you could let your realtor fix it up for you by working with a mortgage broker, who acts as the middleman between you and the lender.
  • Lenders calculate mortgages in two ways, Gross Debt Services (GDS) ratio, Total Debt Service (TDS) ratio.

* GDS ratio is the percentage of your gross monthly income which is used for mortgage payments, taxes, etc.  As a general thumb of rule, your GDS ratio should not be more than 32% of your gross monthly income.

* TDS ratio is the percentage of your gross monthly income which is required to pay for your cover monthly housing costs, and other loans, such as your car and towards your credit card payments and any other debt that you may have. As a general rule of thumb, your TDS ratio shouldn’t be more than 40% of your gross monthly income.

  • Mortgage Options:
  • Decide what type of mortgage is the best for you before you purchase a house: 

* Fixed Rate Mortgages: Your interest rate is fixed for the entire period of the mortgage.

* Variable Rate Mortgages: Your interest rate is variable and may go up and down for the entire period of the mortgage.

* Conventional Mortgages: Requires you to do a down payment of 20% or more of the total value of the property.

* Closed Mortgages: This type of mortgage cannot be paid earlier than the specified period.

* Open Mortgages: This type of mortgage that can be paid off at any time during the term, without having to pay a charge.

  • Mortgage Features:

* Portable Mortgage: If you sell your existing home, you can transfer your mortgage to a new home you purchase, while also keeping your existing interest rate.

* Prepayment Privileges: You can make lump-sum pre-payments or you could also increase your monthly payments without having to pay any extra charge.

  • Offer
  • An offer is defined as a formal and a legal agreement to purchase a house and it is legally binding once it has been accepted by the seller of the house. Offers can be conditional on a lot of factors, for example, financing, home inspections, repair work etc., if any of the conditions are not met, either the purchaser or the seller or both can change or cancel the offer, even if the seller had previously accepted it. Please note that most offers are presented along with a deposit, the amount of which is different based on the purchase price and the market.
  • Home Inspection: A home inspector checks and assesses the condition of a property, and can tell you if something is wrong with it or not working properly, they also identify where they might have been problems in the past, such as terminate damage, bird damage, leakages, etc.

  • Closing & Other Related Costs
  • Closing costs such a land transfer tax will be levied by the province on a purchase of a property. Some local bodies also charge a land transfer tax over and above the one charged by the local province.
  • Legal costs which include things like reviewing terms of the offer, conducting a title search on the property, registration of a new title, obtaining relevant documents such as surveys and evidence of lines of the property.
  • Other taxes like GST/HST or interest adjustments between the date of closing and the first payment of the mortgage should be taken into account too.
  • Appraisal fees, moving costs, service charges from utility companies, real estate commissions, home inspection costs, etc.

And finally, now that you have decided what you wanted, go through the process of getting what you wanted, and finally closed the deal, it is time to come home and enjoy yourself in your newly acquired house!

There’s co-operatives ownership, which means that instead of owning your unit, you own shares in the building, along with other residents, cooperatives residents also pay for the upkeep of the common places by paying maintenance towards the co-op board.

Realtor:

    • Get a good, reputed realtor or a realtor firm on whom you can rely on and trust, navigating the purchase of a home without a realtor is painful and cumbersome.
    • A good realtor will help you breeze through the entire process of selecting and getting you a home of your choice, along with the paperwork that comes with.
    • Your realtor can also help you in comparing homes which fall in your budget and give you experienced opinions on localities and neighborhoods.
    • A realtor can also help with knowing and helping you understand if you are eligible for any incentive programs from the government.  for purchasing a home.
    • Realtors can also connect you to other qualified professionals that you may need during the purchase of your house including real estate lawyers, home inspectors, and appraisers.
    • Realtors can also help you with planning the closing cost of the home and other related expense towards your purchase.
    • Not only that, realtors can negotiate the price, contractual terms such as possession date, furniture and electrical appliances which need to be changed, replaced or repaired for you and help you assess your mortgage options and see what fits your needs.
  • Calculating Mortgage & Credit Rating:
  • One can check their annual income and budget to determine a mortgage which they can afford, there are many Mortgage Affordability Calculators available online, where one can do this.
  • A credit rating is a rating, one gets as an individual which shows whether or not you have had any issues with your debt, loans, mortgages in the past. Make sure before you get involved in purchasing a house, you get a copy of your credit report, just to make sure it doesn’t contain any mistakes or errors because lending companies will check your credit rating before approving your mortgage.
  • Before looking at a home to buy, one might consider looking at getting pre-approved for a mortgage which gives you, as the buyer, a more realistic expectation as to what you can afford. You can get pre-approved from a bank, credit union or you could let your realtor fix it up for you by working with a mortgage broker, who acts as the middleman between you and the lender.
  • Lenders calculate mortgages in two ways, Gross Debt Services (GDS) ratio, Total Debt Service (TDS) ratio.
      • GDS ratio is the percentage of your gross monthly income which is used for mortgage payments, taxes, etc.  As a general thumb of rule, your GDS ratio should not be more than 32% of your gross monthly income.
      • TDS ratio is the percentage of your gross monthly income which is required to pay for your cover monthly housing costs, and other loans, such as your car and towards your credit card payments and any other debt that you may have. As a general rule of thumb, your TDS ratio shouldn’t be more than 40% of your gross monthly income.
  • Mortgage Options:
  • Decide what type of mortgage is the best for you before you purchase a house:
      • Fixed Rate Mortgages: Your interest rate is fixed for the entire period of the mortgage.
      • Variable Rate Mortgages: Your interest rate is variable and may go up and down for the entire period of the mortgage.
      • Conventional Mortgages: Requires you to do a down payment of 20% or more of the total value of the property.
      • Closed Mortgages: This type of mortgage cannot be paid earlier than the specified period.
      • Open Mortgages: This type of mortgage that can be paid off at any time during the term, without having to pay a charge.
    • Mortgage Features:
      • Portable Mortgage: If you sell your existing home, you can transfer your mortgage to a new home you purchase, while also keeping your existing interest rate.
      • Prepayment Privileges: You can make lump-sum pre-payments or you could also increase your monthly payments without having to pay any extra charge.
  • Offer
  • An offer is defined as a formal and a legal agreement to purchase a house and it is legally binding once it has been accepted by the seller of the house. Offers can be conditional on a lot of factors, for example, financing, home inspections, repair work etc., if any of the conditions are not met, either the purchaser or the seller or both can change or cancel the offer, even if the seller had previously accepted it. Please note that most offers are presented along with a deposit, the amount of which is different based on the purchase price and the market.
  • Home Inspection: A home inspector checks and assesses the condition of a property, and can tell you if something is wrong with it or not working properly, they also identify where they might have been problems in the past, such as terminate damage, bird damage, leakages, etc.

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