Steps to Take When Buying a Home
STEP 1: LOCATION, TYPES, NEW HOME or RESALE
Living in an urban setting can offer a large variety of living styles and is
more often than not, near to the amenities that you would use on a regular
basis, such as shops, restaurants and entertainment. However, living in the
suburbs can prove to be easier on your pocket book! Suburban living often times
offers larger lots and more square footage than urban living at the same cost.
Furthermore, suburban living offers a larger variety of newer homes while the
amenities may not be so conveniently located, not to mention to possibility of
future development in the area with construction and building close by.
Many factors should be considered when choosing the location of your new home.
For instance, take into account whether property values have increased or
decreased in the area.
Choosing a Neighborhood
Potential expansion and development in an area can be a factor in property
values as well as the taxes, so take into account if any future development or
zoning has been proposed.
Contacting your local municipal office will give you all the necessary
information you will need regarding this.
Things to consider asking your local municipal office:
Is a high-rise office tower going in next to your home?
A new highway?
A new sub-division on a near by property?
Are there any zoning by-laws that might affect your future plans, such as,
running a business out of the home?
Different Types of Homes
Single family detached: A free standing home which sits on its own lot
and is occupied by only one family
Semi-detached: A single family home that is jointed to another one by a
Duplex: Two Units, one above the other, The owner may live in one unit
and rent the other
Row or townhouse: One of several single family homes joined by a common
wall. These can be condominium or freehold units
Link or Carraige: Houses, freehold or condominium, joined by garages or
carports which provide access between the front and rear yards. Builders
sometimes join basement walls so that link houses appear to be single family
homes on small lots.
High-rise condominium: Multi-story residential building, containing
condominium units. A condominium is not a type of house but a form of
Advantages to purchasing a new home:
Often offered choices for upgrades or select certain items such as siding,
finishing materials, flooring, kitchen cabinets, plumbing and fixtures etc.
You are assures the most modern building code, electrical and energy efficiency
standards will be applied
Builder warranties are usually available in all provinces. This is vital if a
major system, such as plumbing or heating, breaks down
Maintenance costs are usually lower
Note: Unless you're a builder, builder warranties are not applicable to homes
you build for yourself
Disadvantages to purchasing a new home:
Often times many amenities, such as schools, public transportation and
shopping, may not be complete if the area is newly developed
There could be construction noise and traffic
It may take time for landscaping or trees surrounding the home to grow
Advantages to purchasing a re-sale home:
The neighborhood is more likely to be well established
Landscaping and fencing is usually already there
It may have upgrading such as finished basement
There is no GST unless the house has been substantially renovated
Disadvantages to purchasing a re-sale home:
Maintenance are often times higher than for a newer house
You may require a professional home inspector to check for structural problems,
such as a leaky basement or a deteriorated plumbing system
You may need to renovate, re-paint, modernize or redecorate the home
Things to consider when purchasing a re-sale home:
Exterior Condition Inspect the condition of the roof, eaves roughing, brick,
siding, decks, patios and foundation.
Energy Efficiency What kind of heating and insulation is in the home? Is the
whole house well insulated?
Air Quality Does the house smell clean and fresh? Check for conditions and
materials that could be tell-tail signs of how the house was cared for.
Basement/Crawlspace Conditions Is there any sign of mold moldy? Look for water
stains, leaks, cracks or a cover-up job
Structural Problems Doors and windows that are not easy to open and close as
well as uneven floors can point toward future problems.
Test the Water Pressure Turn on the taps or the flush the toilet to test. Run
two taps simultaneously to see if it significantly affects the water pressure
Is There Parking? Does the home have a personal or shared driveway?
STEP 2: COSTS TO BE AWARE OF
There is a possible list of extra costs involved in buying a home:
Appraisal fee: If your loan is not insured, your lender may need a
property appraisal at your expense.
Property taxes: There are always taxes involved, if you have a
high-ration mortgage, your lender may require that you add your property tax
installments to your mortgage payments.
Survey Fee: An up-to-date survey may be required by your lender. Ask the
vendor to supply one as a condition of your offer to purchase, or you will have
to pay for one to be done.
Property Insurance: Property insurance covers the replacement value of
the structure of your home and its contents. Your lender will insist you
acquiring the proper insurance on your home, is this is the security for your
Prepaid taxes or utility bills: You may have to reimburse the vendor on
a prorated basis if some bills have been prepaid after the closing date.
Land Transfer tax: Land Taxes apply in most provinces. They vary as a
percentage of the property's purchase. It is usually about 1%-4%.
Service Charges: Keep in mind the additional fee's that will need to be
paid to hook up new services and utilities, such as your telephone, internet
and/or cable television at your new home.
Lawyer: Even the most clear-cut home purchase requires a lawyer to
assess and review the offer to purchase, search the title, prepare mortgage
documents and tend to the closing details.
Mortgage loan insurance premium and application fee: If you have a
high-ratio mortgage, your lender will want a mortgage loan insurance provided
by CMHC or a private company. The insurance will cost between 0.5% and 3.75% of
the amount of the total mortgage (extra fees may apply) and can be incorporated
into the mortgage. The application cost will range from $75 to $235 depending
upon how the lender processes your application. (Check with your local lender
for additional details).
Moving Costs: Don't overlook the cost of a qualified moving company or a
Estoppels Certificate: An Estoppels Certificate is one that outlines a
condominium corporation's financial and legal status. This certificate and its
supporting documents can cost you up to $100.
Condominium fees: There are monthly maintenance fees for common-areas
associated with condominium living.
Home Inspection fee: In many provinces home inspectors are unregulated,
so fees can vary widely, from about $150-$350 for a home that costs under
$300,000, larger, more expensive homes can cost more to inspect. A two-hour
inspection done by a qualified engineer, providing a written report will cost a
little more. Your local municipality can also provide inspection reports on the
property for a cost.
Renovation and repairs: A home inspection may very well show that the
home is in need of major structural repairs such as a new roof. Don't forget to
include these possible costs into the price of the home.
STEP 3: MORTGAGE BASICS 101
Mortgage costs are made up a primary amount (the total borrowed) and interest
(the cost of you of borrowing money).
The best arrangement for any kind of mortgage is to decrease the sum of
interest you pay-and lenders present several ways to facilitate this;
A bigger down payment means your home ultimately costs less because a lesser
mortgage equals less interest
A shorter amortization, the time over which a loan is repaid
A weekly or biweekly payment plan, instead of monthly
Extra or additional lump sum payments
Minimize uncertainty with a Pre-Approved Morgage
The most essential process:
Buying a home is likely to be one of the biggest investment decision you will
ever make. For many, home ownership represents security and a better lifestyle.
However it is often also a long term commitment that carries enormous
Knowing how much of a mortgage you can afford and what your ongoing payments
will be before you begin looking for a home, takes the uncertainty and anxiety
out of home hunting and gives you the information you need to make informed and
A pre-approved mortgage is often very common. With a pre-approved mortgage,
your lender will approve the sum of your mortgage and gives you a written
confirmation or certificate for a fixed time period before your start looking
for a home. The pre-approval term, usually lasting from 60-90 days, this also
sets the mortgage rate the lender will offer to you. If rates go down during
that time period, the lender should present the new lower rate to you.
With the ideal mortgage, one that's flexible and customized to fit your
financial circumstance, you can have the comfort of owning your own home. You
can also have the peace of mind and luxury of being able to relax, knowing that
your money is being well spent, gaining you long term equity and stability.
STEP 4: THE DETAILED OFFER
Things to include in the offer:
Fundamentals, for instance, your full legal name, the name of the vendor, as
well as the legal and civic address of the property
The purchase price., in the first offer the price is unfixed and negotiable, so
you may want to consider starting lower than your highest affordable cost
The chattel or items in the home which are to be included in the purchase
price, these may include window coverings, appliances, fixtures, basically any
items that are in or around the home that you wish to be included, these items
should be specifically stated and included in writing in your offer
All financial details, including the amount of deposit, interest to be paid on
it and details of mortgage financing
The day you take possession of the home and the closing date. This is typically
30 or 60 days from the date of the agreement, but with some home sales, it can
be 90 days or longer
Request for a up to date land survey of the property
The expiration date and the time indicated when the offer becomes null and void
Any condition that you want to be added in to the body of the offer
Know your financial limits before you start negotiating:
Tips on Making an Offer:
You may want to present a conditional proposal; a typical contract with your
personal conditions attached is frequently more attractive to the vendor since
it is usually straightforward. Often times the vendor will alter it and return
it to you, this is known as a counter-offer.
You may agree to, reject or even modify a counteroffer. Offers and
counteroffers often modify the closing dates or chattel
It's best to know what your total cost limit is prior to negotiating, or you
may possibly get caught up in the action and propose more than you can actually
STEP 5: THE CLOSING DAY
The closing day is the day you actually gain legal possession and get the keys
to your new home. But keep in mind there are a few things that still need to be
Your lender will supply the mortgage money to your lawyer. You must provide the
balance of the purchase cost to your lawyer
You will also be liable for paying legal fees, disbursements and land transfer
Your lawyer pays the vendor, registers the home in your name and provides you
with the deed and the keys to the home Moving into a new home and neighborhood
can be exciting, make sure that the transaction is a smooth one and plan ahead
to avoid costly mistakes.