Updated: Aug 5
So, you want to buy a house do you, here, I will answer all your questions and concerns, and describe the basic buying process, and hope to give you some helpful tips that worked for me.
The first thing you need to do is know your credit score. This is vital, as it will tell you if you will even qualify for financing, and the interest rate you will pay. Most financial Institutions want a credit score on average above 640. Some will take a lower score, but no lower than 620, but you will be paying a higher interest rate and in some cases, a larger down payment may be required. My advice, if you don’t qualify due to your credit score, then take the time to fix it first. Though you can still purchase a property with a bad credit score. The conditions and interest rate will be more.
The best way to check your score is through the site www.equafax.com this is the same information that most financial institutions will use. Another site is www.transunion.ca though this site is not as commonly used. To obtain a copy of your credit bureau, this will cost you approximately $40. Make sure your credit report is unto date and not a couple of months old
Now that you know your score. Its time to shop around for a pre-approval. This will tell you how much you can borrow to purchase your property, and also what amount is required for the down payment. Typically for a down payment, they will require a minimum of 5% of the purchase price. If this is all you have for the down payment, your finance company will insist on tacking on CMHC charges onto your mortgage payments (Canada Mortgage and Housing Corporation). This is an insurance policy that is mandatory if you have less than a 20% down payment. Thus ensuring the bank will be paid if the property value decreases below what is owed if its ever sold under duress.
Now, what you want to do is protect your credit score at all costs. So, print off your credit score, make an appointment at your favorite financial place, ask them what you need to bring in as in the proof of income, and what are their credit score requirements. Tell them your credit score, get their opinion on things. At the appointment, bring everything with you that was asked. During this time, show the individual your credit report, and say what do we qualify for with this credit score and income. Also mention you are just starting the process, and if possible do not do a credit check, as each inquiry can and will cause a decrease in your score, especially if you want to hear what other institutions can offer. When you feel comfortable with the terms, and what the institution mention to you is acceptable, then the choice is yours if you want to proceed with everything, as proceeding will include a credit score inquiry, so make sure that you are comfortable with what they said, Remember, there are other options than just your first inquiry.
Another option for financing is whats called a mortgage broker. This person will take your information and will then shop it around for you, trying to get you the best rate and terms. Do the same thing, mention your income and credit score, and get their opinion, as they should be familiar with the companies that they deal with. One thing to ask a mortgage broker is how do they get paid, as in some situations they will require you to pay a fee directly to them upon approval, other times the finance company will pay them when everything closes. Typically a mortgage broker will do a credit check to shop your application, and when you agree on an institution, they as well will do another one
I will talk more about mortgages in another blog, but until then, decide on what’s comfortable for you and your situation. This blog is more about the entire buying process
So you now have a pre-approval in place, so you know what you can afford, and the terms you are dealing with. Now its time to go look for a property that will suit your needs. You can do this yourself, or hook up with a real estate agent (most situations other than a private sale, you will need an agent to act on your behalf during negotiations) An agent will also know the market you are looking in and can make your search easier and quicker, but the choice is yours on how you want to find the property. Don’t be in a rush to buy a property, this is one of the most expensive things you will purchase in your lifetime, so you want to make sure that this property is right for you, and you feel comfortable with your decision.
You have now found a place that you like, and in your price range that you are happy with. Now its time to put in the offer, and negotiate When your offer is submitted to the sellers, this should also include a down payment. This can be as little as $100 or more and will come off of the purchase price and held in trust for you, either by your real estate agent, your lawyer if buying privately. Before I place an offer, I will find out, how long the property has been on the market, if there have been any price reductions and such before I put my offer in, and has any other offers been presented. I’m not going to tell you a magic formula, as in what to offer as in a price, that’s for you to decide. When you do put the offer in, add conditions as in a home inspection, financing, property appraisal (usually done by the finance company), Energy rating of the property, if the sellers have had one done in the past. If you are working with an agent, they can recommend some as well, or if its a private sale so can your lawyer. Adding conditions will give you a legal way out of the contract to purchase with no penalties if the property doesn’t meet your expectations.
During the negotiation process, its time to do some homework. You will need to find a qualified home inspector, as well as a lawyer who does real estate transactions.
I am starting to see the practice of the seller doing a pre-listing home inspection, and will make the home inspection report available for the seller to view. Now this is a great idea in my opinion. Definitely go over the report, or better yet, ask for a copy for your records. Some things I would pay attention to, is who performed the inspection, and when.What I would do, is contact the inspector and see if he would be willing to perform a walk around of the property with you, and go over the report in detail, just so you understand everything.
If no report is available, then how do you find an inspector, and what questions do you ask. Here you go. To find an inspector, most will advertise at the real estate offices. Just ask the receptionist and they will show you. Grab a bunch of different inspectors cards, and start calling. Some questions to ask is what is your background within this field, what is your education with the home inspection filed (you will be surprised, most are certified through an online course that they take) is their education hands-on or through the computer. How long have they been in the business, how many inspections have they performed, what type of report do they give you, and how long before you get the report, and do they belong to any associations related to home inspections, and how much notice do they need before booking an inspection. Ask as many questions as you can think of, as you are trusting this individual’s opinion on the condition of the property. Talking to them during your conversation, you should be able to tell what type of communication skills they have. As with this field, communication is critical. I put the most emphasis on their background and communication skills more than anything. When you do call the inspector, and get their voice mail, this could mean they could be in an attic or crawl space, so leave a message, and they will call back.
So you have gone back and forth in the negotiations, and you have agreed on everything. It’s now time to work on removing the conditions, and finalizing the sale. The first condition I would work on is the home inspection. Call the inspector that you have chosen, and book it in, let the sellers know the time, and date. When its time for the inspection, I can’t emphasis enough, attend the entire inspection, as some things can and will be missed or interpreted incorrectly if you rely on just the report. When attending the inspection, don’t be afraid to ask questions, though your inspector might be an expert in some areas related to your property, they will be a generalist in most other areas but should be able to answer all questions. Usually, during an inspection, some inefficiencies will be discovered. Now, this is up to you if you want to have these issues addressed either by yourself or by the seller, most real estate agents can advise you on these matters. During the inspection process. The inspector is unable to see into walls, or give you an accurate age on something like in the age of the roof shingles. They will also not give any warranties, or tell you how long something should last. Let’s face facts, nothing man-made will last forever. But they should say, budget to replace sooner, rather then later, or if it was me, I would have this inspected or assessed further, by a qualified individual.
Now, when your offer has been formally accepted , you should also inform where you are getting the financing from, that you now have a property under contract. They will want a copy of the formal offer along with everything else that they talked to you about, so make sure you have everything ready for them , and they will start working on getting the financing in place for the closing date listed in the offer. Once you have been formally approved, and your finance company has given you the green light, save the removal of this condition to the very last. Once this condition has finally been removed, you have now formally purchased the property, and its yours. You will just have to wait on the closing date to arrive.
Congratulations are now in order, you have just purchased your property. You are now on the final stages, all you have to do know is plan your move.
The closing date has arrived, and you take possession of your new property. This is where you will be dealing with your lawyer when it comes time to pick up the keys to your property. Once you have the keys in hand, all you have left to do is now move in and enjoy your new home
Owning a home, is the most desirable thing for all. It acts as your fiscal wealth and mental security, and establishes roots to grow