We've heard it said before that buying a home is the biggest purchase you will make in your lifetime, but this statement is more true now than ever before. Whether you are considering your first home purchase or you already own a home and want to move up or change things up, buying a home is a very big decision. The two partners most crucial to the home buying process are your financial institute or advisor you work with, and, of course, your Realtor.
First - Financial Considerations:
First time home buyers will not have any home equity to use towards the purchase of a home. In Canada, the Federal Government regulates mortgages, which means to finance a home purchase you must have a down payment of anywhere from 5% upwards depending on the mortgage amount. For example, a home under a $1 million purchase price will usually have a 5% down payment (5% of the $1,000,000 =$50,000 down payment requirement). A home over $1 million may require a downpayment of 20% of the value of the home.
Before going to your banking/financial institute, you should review your budget and answer the following questions for yourself:
- Do you have the savings required for the down payment?
- How much per month can you afford your mortgage to be, and does it fit in you budget?
- If you are paying rent already, how much of an increase is a mortgage going to add to your monthly living costs?
- Remember the added costs per month of owning a home, which are in addition to all your other month costs:
- A Mortgage will include the principal borrowed and the interest cost of borrowing
- Municipal & School Taxes per month
- Utility cost per month (heating, water, sewer, garbage pickup, etc)
Talk to people you know who already own a home. They can provide insight into costs you need to think about. - Can you take on the cost of moving into the home?
- Are there any renovations to be done? Things like painting, repairs, clean up, window and floor coverings, or yard work? Remember, if you have been in an apartment, moving to a house means you will need a lawn mower and other yard tools, for example.
The more prepared you are, the better your financial institution can help you. You should make an effort to come prepared with the answers to their questions. Don't wait until you have found a home to go to your mortgage company. Once you have realized your budget, talking to them first and getting pre-approved is very important as this will make the purchase go smoother. When you understand your budget and have been approved for a mortgage, you are ready to talk to the next professional, Your Realtor.
Home Owners
Concerning finances, what about the person who already owns a home but is ready to purchase their next home? Whether the new home is larger, smaller, or just in a different location, the mortgage broker/financial advisor still plays key a role. The biggest difference for a home owner is that it is best to talk to a professional Realtor before discussing a mortgage. Why? Already having a home means that the home owner could have equity in the current house, which should take the place of a down payment. Equity is "the value of the homeowner’s interest in their home." Current home owners have already been paying down their mortgage, and hopefully their home has increased in value. Working with an experienced, knowledgeable Realtor is essential at this stage as they can predict what the selling value of a home might be.
After working with your Realtor to find the value of your current home, you are now prepared to talk to a financial advisor. Current home owners are already aware of the monthly costs associated with owning a house, but may need to discuss changes to these expenses associated with a different property. Knowing the value of the home and understanding the operating costs, the current home owner is now ready to get pre-approved for a new mortgage.
Second - Working with the Professional Realtor
Finding the perfect home takes time. Most of us start by looking at the Realtor.ca website or the website of your chosen real estate agent, like THE PHIL LEPAGE TEAM. This will provide you with information about available homes, relative price points, and options to consider. What do homes in your price range look like? Are they walk-in ready or fixer-uppers? What styles do you prefer? Single story, two story, detached, semi-detached? Work through the online availability, but keep in mind, these are more like suggestions and there may be other possibilities that your Realtor can show you.
Understanding your budget, what you would like in a home, your desired location, and market availability is important at this stage. Keeping this knowledge in hand, it is now time to work with the Real Estate Agent. Why do you need an agent? The homes you have viewed online are not the only listings available, and the one you liked might already be sold or conditionally sold. You won't know this without an agent. Your realtor is invaluable:
- Realtors are licensed professionals
- Realtors are experienced in buying and selling homes
- Realtors know your city and surrounding areas
- Realtors are the ones to setup appointments and to pursue homes of interest to you
- When viewing homes, it is the realtor who knows the pros and cons of the property
- Realtors are aware of the value of any home and what a good offer to purchase would be
- Your realtor will be the person to get the paper work completed, conditions taken care of, and ensure the purchase is to your satisfaction.
Depending on your needs and what is available on the market for purchase, the process of purchasing a home can be very time consuming. Your realtor helps this process go smoother and meets your needs, while freeing up your time to focus on your day to day.
When you are ready to purchase a new home, or prepared to move from your current home, your realtor will guide you through the process. Once all the paperwork and the deposit to purchase have been prepared, the offer has been accepted, and the inspections completed and conditions met, you will move on to your lawyer. It is your lawyer who will complete the closing stage.
Your lawyer prepares any and all documents, making them legal and reducing your liability. The title of the property, for example, must be searched to protect your interests. The Government of Alberta has a Title Search database which will advise the lawyer of any liens (other interests) against the property. All liens or legal issues against the property must be cleared before title of the property can be transferred to you. It is the sellers responsibility to ensure title is clear, but it is your lawyer who makes sure this is done right.
You must also have home insurance before possession, and usually as a condition of your financial institute giving money to your lawyer.
Once all parties are satisfied, your lawyer will advise your realtor. The keys to the home will be handed over to you. You and your real estate agent will do a final inspection of the property. You are now ready to move in. Congratulations! Relying on professional guidance from your Realtor, financial institution, and Lawyer ensures that the biggest purchasing decision you will make is a relatively stress free process.
Choose the right team to assist you in getting the home you desire. Call THE PHIL LEPAGE TEAM 403.259.4141. Trust our experience to help you find your next home.
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