Royal LePage Guide to Buying a Home
What you need to know before searching and buying.
“Guide To Buying A Home” has been prepared by Royal LePage Residential Real Estate to offer you practical information about the buying process. It outlines steps that we will follow during your search for the ideal home.
Determine What You Can Afford:
Purchasing a home involves one-time costs and monthly expenses. The largest one-time cost is the down payment. It usually represents between 5 – 25% of the total price of the property. In addition to the actual purchase price, there are a number of other expenses that you might be expected to pay for. These are listed in the following table:
|Mortgage Application and Appraisal Fee||At time of application|
|Property Inspection (optional)||At inspection|
|Property Survey (sometimes provided by seller)||Closing|
|Land Transfer, Deed Tax or Property Purchase Tax||Closing|
|Mortgage Interest Adjustment and Take Over Fee (if applicable)||Closing|
|Adjustments for Fuel, Taxes, etc.||Closing|
|Mortgage Insurance (and Application Fee if applicable)||Closing|
|Home and Property Insurance||Closing & Ongoing|
|Moving Expenses||Date of Move|
Typical monthly costs incurred with home ownership are mortgage payments, maintenance, insurance, condo fees, property taxes and utilities.
Understanding Market Conditions:
The real estate market is always changing. It helps to understand how market conditions can affect your position as a buyer. Your Royal LePage Niagara Realtor can provide you with current real estate market conditions and explain their impact.
The supply of homes on the market exceeds demand.
The number of buyers wanting homes exceeds the supply or number of homes on the market.
The number of homes on the market is equal to the demand or number of buyers.
Obtain a Pre-Approved Mortage:
Having a pre-approved mortgage will give you the confidence of knowing exactly what you can spend on a home before you start looking. You will also be protected against interest rate increases while you look for your new home.
Your Mortgage Specialist will answer your questions and help you determine which financing terms and options are right for you. Your Mortgage Specialist and I work as a team to help you find the right home and select the best financing.
Finalizing Your Mortgage:
Once you’ve found the home you want to purchase, there are some documents you’ll probably be asked for in order to finalize your financing. They will include:
- A copy of the real estate listing of the property.
- If the home is still to be built, the mortgage lender will need to see the architect’s or builder’s plans and details on lot size and location.
- A copy of the offer to purchase or the building contract, if this document has been prepared.
- Documents to confirm employment, income and source of pre-approval.
- If you have a Pre-Approved Mortgage, it’s a simple matter of finalizing a few details, which your Mortgage Specialist will explain to you.
The Major Elements of an Offer Price:
Depending on local market conditions, your opinion of value and marketing information provided by me, the price you offer may be different from the seller’s asking price.
The deposit shows your good faith and will be applied against the purchase of the home when the sale closes. I can advise you on an appropriate amount.
Includes the total price offered and the financing details. You may arrange your own financing or ask to assume the seller’s mortgage, especially if it has an attractive interest rate.
These might include “subject to home inspection”, “subject to buyer obtaining financing” or “subject to buyer selling their property”.
Inclusions and Exclusions:
These might include appliances and certain fixtures or decorative items, such as window coverings or mirrors.
Closing or Possession Date:
Generally, the day the title of the property is legally transferred and the transaction of funds finalized unless otherwise stated.
How to Make an Offer:
When it comes time to make an offer, I can provide current market information and will assist you in drafting your offer. I will communicate your offer, sometimes known as an Offer To Purchase’, to the seller, or the seller’s representative, on your behalf. Sometimes there may be more than one offer on a property coming in at the same time. I can guide you through this process.
Offer To Purchase: a legal document which specifies the terms and conditions of your offer to purchase the home. The offer can be Firm or Conditional.
Firm Offer To Purchase:
Usually preferable to the seller, because it means that you are prepared to purchase the home without any conditions. If the offer is accepted, the home is yours.
Conditional Offer To Purchase:
Means that you have placed one or more conditions on the purchase, such as “subject to home inspection”, “subject to financing”, or “subject to sale of buyer’s existing home”. The home is not sold until all the conditions have been met.
Acceptance of the Offer:
Your Offer to Purchase will be presented as soon as possible. The seller may accept the offer, reject it, or submit a counter-offer. The counter-offer may be in reference to the price, the closing date, or any number of variables. The offers can go back and forth until both parties have agreed or one of you ends the negotiations.
Hire a Legal Professional:
A legal professional is there to represent your interests and to provide the legal documentation required. I can recommend a legal professionals who specialize in real estate. Together, we will advise you on the steps to be taken before the keys to your new home are presented to you.
Have the Home Inspected (optional):
Having the property inspected by a qualified home inspector will give you the added confidence that you’ve made the right decision (costs vary). When the procedure is complete, you may wish to ask for a full written report plus estimated costs for any necessary repairs.
Some Moving Tips:
Once you have bought your home, I can help make the move easier for you. Follow this handy checklist:
Book the Movers:
You can choose to have your movers pack everything, or just the breakables, or you can pack yourself. It’s a good idea to obtain estimates from several different companies.
If You Own Your Present Home:
Arrange to have your gas and electric meters read on the day you leave and have the bill forwarded to your new address. Have the oil tank read and filled before your sale closes, and provide a receipt to your legal professional if required. If your water heater and/or furnace are rented, arrange for a transfer of the rental agreement to the purchaser. Disconnect your telephone, cable TV and water softener.
If You Rent Your Present Home:
Give the necessary written notice to your landlord and make arrangements for the return of any money you have on deposit.
At Your “New” Home:
Make arrangements for the gas and electric utilities, water softener, telephone and cable TV to be connected on the day the sale closes (or possession date).
- Get “change of address” cards from the post office and send them out well before moving day.
- Have the post office forward your mail to your new address.
- Cancel any contracted services and pre-authorized cheques.
- Inform gardening, dry cleaning, garbage pick up, newspapers, magazines and other home services.
- Arrange for services at your new address.
- Cancel or transfer social, athletic, civic, religious or business affiliationsand memberships.
- Arrange for transfer of medical, dental, prescription and optical records.
- Change the address on your driver’s licensees) effective the day of the move.
- Collect all items out for cleaning, repair or storage (e.g. dry cleaning).
- Make special arrangements for the moving of perishables, such as plants.
- Make special arrangements for the moving of your pets.
- Safely dispose of all flammable liquids, as it is illegal for movers to carry them.
The Home Buyer’s Glossary of Terms:
Amortization Period: The actual number of years it will take to pay back your mortgage loan.
Appraised Value: An estimate of the value of the property. Conducted for the purpose of mortgage lending by a certified appraiser. This appraisal is not to be confused with a building inspection.
Assumability: Allows the buyer to take over the seller’s mortgage on the property.
Closed Mortgage: A mortgage that locks you into a specific payment schedule. A penalty usually applies if you repay the loan in full before the end of a closed term.
Condominium: The owner has title to a single unit, as well as a share in the common elements such as elevators or surrounding land.
Condominium Fee: A common payment among owners that is allocated to pay expenses.
Conventional Mortgage: A mortgage loan issued for up to 75% of the property’s appraised value or purchase price, whichever is less.
Down Payment: The buyer’s cash payment toward the property. The difference between the purchase price and the amount of the mortgage loan.
Equity: The difference between the home’s selling value and the debts against it.
High-Ratio Mortgage: A mortgage that exceeds 75% of the home’s appraised value. These mortgages must be insured for payment.
Interest Rate: The value charged by the lender for the use of the lender’s money. Expressed as a percentage.
Land Transfer Tax, Deed Tax or Property Purchase Tax: A fee paid to the municipal and/or provincial government for the transferring of property from seller to buyer.
Maturity Date: The end of the term, at which time you can pay off the mortgage or renew it.
Mortgagee: The person or financial institution that lends the money.
Mortgagor: The borrower.
Mortgage Insurance: Applies to high-ratio mortgages. It protects the lender against loss if the borrower is unable to repay the mortgage.
Mortgage Life Insurance: Pays off the mortgage if the borrower dies.
Open Mortgage: Allows partial or full payment of the principal at any time, without penalty.
Portability: A mortgage option that enables borrowers to take their current mortgage with them to another property, without penalty.
Pre-Approved Mortgage: Qualifies you for a mortgage before you start shopping. You know exactly how much you can spend and are free to make a “firm” offer when you find the right home.
Prepayment Privileges: Voluntary payments in addition to regular mortgage payments.
Principal: The amount borrowed or still owing on a mortgage loan. Interest is paid on the principal amount. Refinancing: Paying off the existing mortgage and arranging a new one or re-negotiating the terms and condition~ of an existing mortgage.
Renewal: Re-negotiation of a mortgage loan at the end of a term for a new term.
Second Mortgage: Additional financing. Usually has a shorter term and higher interest rate than the first mortgage.
Term: The length of time the interest rate is fixed. It also indicates when the principal balance becomes due and payable to the lender.
Title: Legal ownership in a property.
Variable-Rate Mortgage: A mortgage with fixed payments but fluctuating with interest rates. The changing interest rate determines how much of the payment goes towards the principal.
Vendor Take-Back Mortgage: When the seller provides some or all of the mortgage financing in order to sell their property.