First Time Home Buyers
Buying your first home can be exciting and overwhelming at the same time. That’s why it’s a good idea to work with a qualified real estate broker who can guide you through the process, schedule appointments, recommend qualified real estate professionals, prepare the legal forms as well as negotiate on your behalf. In working with a realtor, you will have access to new listings as soon as they come on the market, as well as notifications for price reductions! Here is a step-by-step guide for first-time home buyers.
1. Get Pre-Approved
Meet with a mortgage broker before you start shopping so you don’t waste your time looking at homes you can’t afford. Pre-approved buyers are often favored when several offers are presented to the sellers simultaneously. It’s important to shop around to get the best interest rate. Start with your bank. Your realtor is also another valuable resource for suggesting good mortgage specialists who may be able to get you a better deal.
If you put less than a 20% down payment, the Canadian Mortgage and Housing Corporation (CMHC) will add default insurance into your mortgage, and you will be subject to tighter mortgage regulations. You have the option to add disability and/or life insurance to your payments. You can also have your city and school taxes paid monthly via your bank. Ask the mortgage specialist to educate you on any possible penalties if you end up breaking your mortgage early. Penalties for fixed mortgage rates can be much higher than the variable. You will likely have the option to transfer your mortgage if you sell and buy a new property. The mortgage specialist will help you find a financial option that suits your lifestyle.
2. Contact your Realtor
Shop around for a realtor.
A first-time homebuyer, or any home buyer for that matter, should start by asking your friends, family, and colleagues for a recommendation. You can also find realtor reviews online. Interview a few realtors to see who is knowledgeable about their market, who responds quickly to your messages, and who you are most comfortable working with. Once you have chosen your realtor, you have the option of signing a buyer’s contract with them. To have that realtor represent you, you will need to let them contact the listing broker and arrange the visits on your behalf. Most buyers don’t realize that if you contact the listing broker yourself and visit the property with them, the listing broker has the right not to allow your realtor to assist you through the buying process on that home. Communicate your needs and wants to your realtor: type of home (house, condo, plex), price range, location, parking, # of bedrooms, # of bathrooms, fireplace, pool, square footage, move-in date, fixer-upper vs. turn-key, etc. Don’t be shy to offer as many details as possible. It helps your realtor understand your needs and preferences.
3. Start Shopping
Your realtor will do a detailed search on MLS and email the listings to you. You will then chose several preferable homes that you would like to see, and the realtor will arrange the visits depending on your availability. He or she will walk you through each home, pointing out the property’s positives and negatives. Remember to overlook aspects that can be easily changed, such as paint or carpet.
4. Make an Offer
When you find the perfect home that feels right, go for it. In a hot market, buyers may present several offers to the sellers within a few days of the home’s appearance on MLS. Your realtor will assess and research recently sold comparables to advise you on the appropriate amount to offer. Sellers sometimes overprice their homes to cover renovations and closing costs. The value of renovations may not match the fair market value of the property. Every situation is unique. This is where a broker’s knowledge of market conditions plays an important role in your buying process. Ultimately, as a first-time homebuyer, you need to decide on a price that you are comfortable with. You don’t want to end up being ‘house poor. Talk to your realtor if you have concerns or need advice. He/She will be happy to explain the details to you. Once a price is determined, your realtor will prepare all necessary paperwork to submit the offer. Don’t be afraid to ask questions.
The seller may accept your offer, but, most likely, there will be a counteroffer. Sometimes the negotiation process will go back and forth. The average offer takes 2 to 8 days before acceptance. Negotiations are generally based on price, inclusions, exclusions, repairs, and occupancy date. If you can cater to the seller’s desired moving date, it may make your offer stronger. Most importantly, try to avoid letting emotions colour the perception of the counteroffer. A first-time homebuyer must know when to walk away.
6. Accepted Offer
Once you and the seller have reached an agreement, the offer will be contingent on certain conditions that must be met within a specific time frame, generally about two weeks. Those conditions are usually a building inspection and final mortgage approval. Other stipulations may be that the offer is conditional to reviewing invoices, a pyrite test, pool inspection, chimney inspection, the buyer selling his/her home first, or buying plexes, verification of all leases/documents, and a walkthrough of the entire building.
Final Mortgage Approval
Contact your mortgage broker and tell them that you have made an offer. Your realtor will send him or her the appropriate documents. The bank may decide to send an evaluator to verify if the property is worth the agreed-upon price. If the evaluator determines fair market value, the bank will sign the final mortgage approval.
Contact a licensed building inspector. Ask your friends and family if they have had a good experience with any. Your realtor can also recommend someone. When shopping around, ask the inspector to send you a sample report. Also, inquire about what kind of tools he uses (i.e., humidity detectors, floor levelers, etc.) and visit their websites (if they have one). The inspection normally takes place within 10 days of an accepted offer and typically costs $400 – $900 (costs vary depending on the property type). The inspector will investigate the foundation, roof, electrical, plumbing, heating, windows, doors, etc. You should be given a full report with pictures within 2-4 days following the inspection. The inspector may recommend you bring in an expert to inquire further into potential issues. If the inspector identifies significant deficiencies, you can either back out of the offer, renegotiate the price, or demand the seller repairs the problem.
You must contact an insurance broker before you move in. The notary will need the insurance company to send the policy to them. Property insurance begins on the closing day of the transaction, which is when legal ownership of the property transfers from the vendor to the buyer.
Contact the utility companies to have them set up the day of occupancy
- Hydro Quebec for electricity
- Hydro Solutions for the hot water tank rental (if applicable)
- Gaz metro for gas (if applicable)
7. Notary Appointment
When all conditions have been met, your real estate broker will arrange the notary appointment. You may choose your own notary or ask your realtor if they have a few to recommend. The selling broker will send all the documents to the notary. The notary will contact you to arrange the time of signing the Deed of Loan and the Deed of Sale. You will have two separate notary appointments, as you must sign the Deed of Loan 2-5 days in advance of the Deed of Sale. Your realtor, the seller, and the sellers’ realtor will be present at the signing of the Deed of Sale. The notary will make the adjustments for any prepaid expenditures, such as taxes and condo fees, which will be payable either by check or factored into the bank draft, along with the notary fees. Notaries typically charge between $1150 – $1800 (as of 2019).
8. Transfer Tax
Approximately 30 days after your occupancy date, the city will send you a “Welcome Tax,” otherwise known as the “Transfer Tax.” You will have 30 days to pay it. Please refer to my “Welcome Tax” blog for the calculations or ask your realtor what amount to expect.
9. Settle in and Enjoy Your New Home!
Now it’s time to reap the rewards of your investment. No more wasting your money on rent! You can paint and renovate to suit your tastes. Sit back, relax, and settle into your new home…BECAUSE IT’S YOURS!
And don’t forget to invite your realtor over for the housewarming!
Summary of Expenses:
- Building Inspection
- Deposit (if applicable)
- Notary Fees
- Adjustments (for municipal taxes, school taxes, condo fees, etc.)
- Welcome Tax
- Moving expenses
- Utility connections
- Mortgage (if applicable)
- Default mortgage insurance (if the downpayment is less than 20%)
- Mortgage life and disability insurance (if applicable)
- Condo Fees (if applicable)
- Municipal and School Taxes
- Home Insurance
- Gas and water (if applicable)
- Hot water tank rental (if applicable)
- Septic cleaning (if applicable)
- Utilities (phone, cable, internet)