STEP 1: Is home ownership right for you?
STEP 2: Are you financially ready?
STEP 3: Which home is right for you?
STEP 4: Do you understand the buying process?
STEP 5: Do you want to be a home owner?

At Royal LePage Realty Plus, our goal is to help you make smart real estate choices. That is why with Chris as your sales representative he will make sure you are a top priority. Buying a new home is a big decision, and there's a lot you need to know before signing on the dotted line. In this section you'll find information and advice about every step of the home buying process, from determining how much house you can afford to presenting an offer you can live with.

Buying a home is one of the biggest emotional and financial decisions you'll ever make. Prepare by learning about the process of homebuying and the responsibilities of homeownership. Before moving forward, though, here are some questions to consider.
  • Do you have the necessary financial management skills?
  • How financially stable are you?
  • Are you ready to take on the responsibility of all the costs involved in homeownership, including mortgage payments, repairs, and maintenance?
  • Are you able to devote the time required for home maintenance?
  • If homeownership is for you, you must be both financially and emotionally ready. Buying a home isn't only about money. You should listen to your heart and take an honest look at your lifestyle.

Start figuring out your financial readiness by evaluating your present house hold budget. How much are you spending each month? Knowing exactly how much, will give you a better idea about whether you can afford to become a homeowner. Calculate Your Monthly Debt Payments

Do you know how much debt you are carrying? You need this information to figure out whether you are financially ready for homeownership. If you decide to buy a home, mortgage lenders will ask for this information.

Before you begin shopping for a home, it's important to know how much you can afford to spend on home-ownership. You will want to plan ahead for the various expenses related to home-ownership. In addition to purchasing the home, other significant expenses will include heating, property taxes, home maintenance and renovation as required. Two simple rules can help you figure out how much you can realistically pay for a home. You must understand these rules to understand if you will be able to get a mortgage.

AFFORDABILITY RULE 1
The first rule is that your monthly housing costs shouldn't be more than 32% of your gross monthly income. Housing costs include your monthly mortgage payments (principal and interest), property taxes and heating expenses.

AFFORDABILITY RULE 2
The second rule is that your entire monthly debt load should not be more than 40% of your gross monthly income. Your entire monthly debt load includes your housing costs (PITH) plus all your other debt payments (car loans or leases, credit card payments, lines of credit payments, etc.). You have calculated these on the Monthly Debt Payments form. This figure is called your Total Debt Service (TDS) ratio.

YOUR MAXIMUM HOUSE PRICE
The maximum home price that you can realistically afford depends on a number of factors. The most important factors are your household gross monthly income, your down payment and the mortgage interest rate. For many people, the hardest part of buying a home - especially their first one - is saving the necessary down payment.

It's a very good idea to get a pre-approved mortgage before you start shopping. Many realtors will ask if you've been approved. A lender will look at your finances and figure the amount of mortgage you can afford. Then the lender will give you a written confirmation, or certificate, for a fixed interest rate. This confirmation will be good for a specific period of time. A pre-approved mortgage is not a guarantee of being approved for the mortgage loan.

Even if you haven't found the home you want to buy, having a pre-approved mortgage amount will help keep a good price range in mind. Bring these with you the first time you meet with a lender:
  • Your personal information, including identification such as your driver's license
  • Details on your job, including confirmation of salary in the form of a letter from your employer
  • All your sources of income
  • Information and details on all bank accounts, loans and other debts
  • Proof of financial assets
  • Source and amount of down payment and deposit
  • Proof of source of funds to cover the closing costs (these are usually between 1.5% and 4% of the purchase price)

Try to buy a home that meets most of your needs for the next 5 to 10 years, or find a home that can grow and change with your needs. Here are some things to consider:

Size:
  • How many bedrooms do you need?
  • How many bathrooms do you need?
  • Do you need space for a home office?
  • What kind of parking facilities do you need? For how many cars?
Special Features:
  • Do you want air conditioning? If so, what type?
  • Do you want storage or hobby space?
  • Is a fireplace or a swimming pool high on your list?
  • Do you have a family member with special needs?
  • Do you want special features to save energy, enhance indoor air quality, and reduce environmental impact?
Lifestyles & Stages:
  • Do I plan to have children?
  • Do I have teenagers who will be moving away soon?
  • Am I close to retirement?
  • Will I need a home that can accommodate different stages of life?
  • Do I have an older relative who might come to live with me?
Location:
  • Do you want to live in a city, a town or in the countryside?
  • How easy will it be to get to where you work? How much will the commuting cost?
  • Where will your children go to school? How will they get there?
  • Do you need a safe walking area, or recreational facility, such as a park, nearby?
  • How close would you like to be to family and friends?

A sustainable neighbourhood meets your needs, while protecting the environment. Homes in a sustainable neighbourhood are located near shops, schools, recreation, work and other daily destinations. This helps reduce driving costs and lets residents enjoy the health benefits of walking and cycling. Land and services, like roads, are used efficiently. Sustainable neighbourhoods also feature a choice of homes that are affordable. In your search for a sustainable neighbourhood, here are some questions to ask:

Easy Transportation:
  • Are stores, schools, recreation facilities, restaurants, and health services within walking or cycling distance? Will your children need to take a bus to school? Can they walk to the park? Can you do most of your shopping without a car?
  • Are there nearby bus stops and cycling lanes? How long is the bus ride to work, or school? Can you safely bike?
House Sizes & Features:
  • Are the homes compact with shared walls to reduce heating costs?
  • Are homes reasonably sized with lots requiring less upkeep?
  • Are there different dwelling types (such as single-detached, semi-detached, townhouse and apartments) in the neighbourhood?
  • Are the lots modestly sized? Roadways narrow? Driveways/parking areas small? Do natural drain ways lead to streams and storm water ponds or park lands? Is there native vegetation and streams with woodland edges?
"Look & Feel":
  • Do the buildings have a friendly face to the street? Are the community centres, shops and meeting places welcoming?
  • Are there trees lining the street? Do you find the homes interesting to look at? Do the building sizes feel comfortable to you? Are the roads easy to walk along or cross?
Safety:
  • Do the homes have "eyes on the street"? (In other words, are there people around who might watch out for you? Is there somewhere to go in an emergency?)
  • Is there adequate street lighting?
  • Are there safe places for children to play?
  • Are the streets safe for cyclists and pedestrians?
  • Is traffic slow moving and light?

A new home is one that has just been built - no one else has lived in it yet. You might buy a new home from a contractor who has built it, or you might hire a contractor to build it for you. A previously-owned home (often called a resale) has already been lived in. Here are some characteristics of each type of home.
"New Home"
Up-to-date:
  • A new home has up-to-date design that might reflect the latest trends, materials and features.
Choices:
  • You may be able to choose certain features such as style of siding, flooring, cabinets, plumbing and electrical fixtures.
  • You may have to pay extra if you want to add certain features, such as a fireplace, trees and sod, or a paved driveway. Make sure you know exactly what's included in the price of your home.
Costs:
  • Taxes such as the Goods and Services Tax (GST) (or, in certain provinces, the Harmonized Sales Tax (HST)) apply to a new home. However, you may qualify for a rebate of part of the GST or HST on homes that cost less than $450,000. For more information about the GST New Housing Rebate program, visit the Canada Revenue Agency website at www.cra-arc.gc.ca.
  • A new home will have lower maintenance costs because everything is new, and many items are covered by a warranty. You should set aside money every year for future maintenance costs.
Warranties:
  • A warranty may be provided by the builder of the home. Be sure to check all the conditions of the warranty. It can be very important if a major system such as plumbing, or heating, breaks down.
  • New Home Warranty programs are generally provided by provincial and territorial governments. There are also private new home warranty programs. In some provinces a warranty may be provided by the builder of the home. Check with your realtor or lawyer/notary to find out what the new home warranty program in your province or territory covers.
  • Neighbourhood Amenities:
    • Schools, shopping malls and other services, may not be completed for years.

    What types of homes will you be visiting with the idea of buying? Do you see yourself living in a detached single-family home? Or, perhaps a townhouse? Maybe, a duplex?

    Single-Family Detached:
    • A semi-detached home is a single-family home that is joined on one side to another home. It can offer many of the advantages of a single-family detached home. It is often less expensive to buy and maintain.
    Row House (Townhouse)
    • Row houses (also called townhouses) are several similar single-family homes, side-by-side, joined by common walls. They can be freehold or condominiums. They offer less privacy than a single-family detached home, although each has a separate outdoor space. These homes can cost less to buy and maintain, even though some are large, luxury units.
    Stacked Townhouse:
    • Stacked townhouses are usually two-storey homes. Two two-story homes are stacked one on top of the other. The buildings are usually attached in groups of four or more. Each unit has direct access from the outside.

    After you have found the home you want to buy, you need to give the vendor an Offer to Purchase (sometimes called an Agreement of Purchase and Sale). It is very helpful to work with a realtor (and/or a lawyer/notary) to prepare your offer. The Offer to Purchase is a legal document and should be carefully prepared. These items are typically included:
    • Names Your legal name, the name of the vendor and the legal civic address of the property.
    • Price The price you are offering to pay.
    • Things included Any items in or around the home that you think are included in the sale should be specifically stated in your offer. Some examples might be window coverings and appliances.
    • Amount of your deposit
    • The closing day The closing day is the date you take possession of the home. It is usually 30 - 60 days after the date of agreement. But, it can be 90 days, or even longer.
    • Request for a current land survey of the property.
    • Date the offer expires After this date the offer becomes null and void - that means it's no longer valid.
    • Other conditions Other conditions may include a satisfactory home inspection report, a property appraisal, and lender approval of mortgage financing. This means that the contract will become final only when the conditions are met.

    • Response 1: The vendor accepts your offer. The deal is concluded and you move on to the next steps in the buying process.
    • Response 2: The vendor makes a counter-offer. The counter-offer might ask for a higher price, or different terms. You can sign the offer back to the vendor, offering a higher price than your original offer, but lower than the vendor's counter-offer. If the vender accepts this counter-offer, the deal is concluded.
    • Response 3: The vendor makes a counter-offer, asking for a higher price or different terms. If a counter-offer is returned to you at a higher price, ensure that you know exactly how much you can afford before you start negotiating. You don't want to get caught up in the heat of the moment with costs you can't afford. You reject the counter-offer because the price is still too high, or you can't agree to the conditions. The sale doesn't go through, and your deposit is returned.

    Once your Offer to Purchase has been accepted, go to see your lender. Your lender will verify (and update, if necessary) your financial information and put together what's needed to complete the mortgage application. Your lender may ask you to get a property appraisal, a land survey, or both. You may also be asked to get title insurance. Your lender will tell you about the various types of mortgages, terms, interest rates, amortization periods and, payment schedules available.

    CLOSING DAY
    Closing day is the day when you finally take legal possession and get to call the house your home. The final signing usually happens at the lawyer or notary's office. These are the things that happen on closing day:
    • Your lender will give the mortgage money to your lawyer/notary.
    • You must give the down payment (minus the deposit) to your lawyer/notary. You must also give the remaining closing costs.
    • Your lawyer/notary pays the vendor, registers the home in your name, and gives you the deed and the keys to your new home

    You can make your mortgage payments monthly, biweekly or weekly. But, whichever timetable you've chosen, it's important to always make payments on time. Making late payments is called delinquency. Delinquency may result in late charges and negatively affect your credit rating. Failing to make payments can even lead to very serious consequences, like foreclosure.

    A good way to prevent late payments is to have the amount automatically deducted from your account every month. It's also recommended that you keep at least three months' worth of mortgage payments in savings for emergency situations. If you are having trouble making payments, discuss the situation with your lender.

    Besides your mortgage, property taxes and insurance, operating a home has many other ongoing costs. Maintenance and repair costs are at the top of the list. There may be other costs as well, for example a security alarm, snow removal, or gardening. If you have a condominium or strata, some of these expenses may be included as part of your monthly maintenance fee.

    Even when you can do repairs yourself, there are costs. When you have to pay for repairs, the costs are higher. As your home ages, it will need major repairs or replacement - this happens to every building. For example, when you bought your home, you might already know that the roof will need to be replaced in a few years because of its age. These are expected repairs and can be planned for. However, many repairs are unexpected, and can sometimes be costly.

    Set aside an emergency fund to deal with unexpected problems ranging from major repairs to illness and job loss. A good guideline is to save 5% of your take-home pay, and to keep the money in a special account.

    LIVE WITHIN YOUR BUDGET
    Prepare a monthly budget and stick to it. Take a few minutes every month to check your spending and see if you are meeting your financial goals. If you spend more than you earn, you must find new ways to save. If you are having trouble sticking to your budget, ask a professional money manager for help.

    FIRST-TIME HOME BUYERS' (FTHB) TAX CREDIT
    The costs associated with purchasing a home, such as legal fees, disbursements and land transfer taxes, can be a particular burden for first-time homebuyers who must pay these costs, as well as save money for a down payment. To assist first-time homebuyers with the costs associated with the purchase of a home, the Government of Canada introduced a FTHB Tax Credit in 2009 - a $5,000 non-refundable income tax credit amount on a qualifying home acquired after January 27, 2009. For an eligible individual, the credit will provide up to $750 in federal tax relief starting in 2009.

    EXPANSION OF HOME BUYERS' PLAN (HBP)
    To provide first-time homebuyers with greater access to their RRSP savings to purchase or build a home, the Government of Canada has increased the Home Buyers' Plan withdrawal limit to $25,000 from $20,000 per person for withdrawals made after January 27, 2009

    ADVANTAGE OF OWNING (INCENTIVE)
    Two out of three Canadian families own a house - that's one of the highest rates of home ownership in the world. And for a good reason. Real estate is a great investment. And with increasing housing prices, it's all the more important for first-time buyers to get a foot on the first rung of the property ladder.

    FINANCIAL ADVANTAGES OF HOME OWNERSHIP
    • Homeownership is the single largest source of savings for Canadian households.
    • Your payments build equity (as opposed to renting, where your money goes to the building owner).
    • Unlike other investments that can be volatile, when you buy a home the increase in its value is relatively steady. The average price of a house for sale on the Canadian real estate market has increased every year since 1998.
    • The return on investment for a house can be substantial. In 2004, the average house price in Canada rose by 9% in just one year. It also experienced a 27% increase over four years.
    • Homeowners can use the equity in their homes as security for other loans.
    • Buying a home and building equity is the first step on the property ladder. It gets you into the housing market, keeps you in touch with increasing house prices, and puts you in a good position to trade up to bigger and better homes as your circumstances allow.
    • Other advantages of owning:
      • Pride of ownership. When you own, you have the freedom to renovate and decorate as you please.
      • Family and community. Homes can strengthen ties to your family and members of your community. More than basic shelter, homes can be a legacy passed on from one generation to the next.


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    Chris Rembisz Real Estate. All Rights Reserved.