Six Steps To Buying A Home In Ontario
So, you are thinking of buying your first home, but where do you start? Buying a home should be a pleasure and can be, providing you follow a step-by-step approach. After all, this is probably the biggest investment you will make and you owe it to yourself to do this right.
1. Get Preapproved
When searching for a home, most people don’t know where to begin. Many people start by going to open houses, viewing homes with a realtor or looking online. The first step in shopping for a home is finding out how much of a mortgage you can afford and if you will be approved.
Buyers that are pre-approved are taken more seriously when negotiating a purchase of a property, especially where there are multiple offers on the same property. There is not much point in shopping for your new home when you are not sure if you can get financing. Once you have the pre-approval you can start shopping for your home immediately in the price range for which you qualify.
There are three main factors that will decide whether or not you will be pre-approved for a mortgage; your credit history, your income, and the amount of down payment you have. Unless you have a 20% down payment for your home, the rules to obtaining a mortgage are set by Canadian Mortgage and Housing Corporation (CMHC). No matter what financial institution you apply to, being approved for a mortgage is adjudicated the same way under CMHC’s guidelines.
Here at CENTUM Discount Mortgage Canada Inc., we spend the time to explain the Mortgage process and give you all the options available. This way you can make a more educated decision as to which mortgage you should take.
After completing a mortgage application, your mortgage specialist will submit your information to a lender to get you pre-approved for a mortgage that is best suited to your particular circumstance. There is no cost for this service, so let us do the shopping for you.
After the pre-approval has been submitted, the mortgage specialist will receive a pre-approval from the mortgage lender detailing what you need to provide to qualify. With this information, you can now go shopping for your new home knowing your price range and what conditions must be met to finalize the financing.
Apply online or call us to see if you can get pre-approved for a mortgage and how much.
2. Find a Realtor
Finding a realtor is a very important step in the buying process. You may have dealt with a REALTOR in the past that you liked, or you may be referred to a REALTOR by a family member, friend or co-worker. Sometimes your mortgage specialist can recommend someone that they have dealt with in the past and an introduction can be arranged. Whatever the case, it is important that you feel you can discuss your business and personal affairs with that person as you will be in a partnership with them while finding your new home.
Your realtor is the person who will help you find the type of home you are looking for, a home within your price range, and in the location that you desire. Most realtors will have references that they can make available to you, so it doesn’t hurt to ask for them. It’s also important to sign with them to represent you as a buyer’s agent, that way you are sure that they are working exclusively for you.
Before viewing homes, you should discuss the following things with your REALTOR:
- The type of home you are looking for? (Condominium/Townhouse/Semi-detached/etc.)
- The style of home you are looking for? (Two-storey/Bungalow/etc.)
- What special features? (air conditioning and finished basement? Two-car garage, etc.)
- What location? (Close to work, or maybe your children’s school?)
- What are your needs? (Number of bedrooms, number of bathrooms, etc.)
- What is your time-frame? (Looking to move in 45 days, or 5 months, etc.)
- When are you available to view homes?
- What type of communication/updates do you expect? (An e-mail every second day with updates, a phone call every third evening, etc.)
- What price range can you afford?
You should also be prepared to sign a contract with the REALTOR. This way, the realtor knows that you are committed to using their services. Then in turn, the realtor can dedicate the time and effort required to find your dream home.
You should now be ready to go searching for a home with your REALTOR.
Ask Discount Mortgage Canada for a name of a top REALTOR in your area.
3. Negotiate the Best Deal for that Particular Home
Even though purchasing a home can be quite scary, the fun part is shopping for it. Make sure when you are viewing homes that you don’t view too many in one day; otherwise it will be hard to remember which home had which features. Many people take a checklist with them so that they remember the specifics that are important to them. Communicating your thoughts with your realtor is vital. Make sure that he or she is aware if one of the homes you view is not what you are looking for, that way he or she can rule that home out. Sometimes going out the first time will give you a better idea of what you are really looking for.
After you have narrowed your search down to the home you want,your realtor should provide you with the market research on that particular property. You can negotiate your buying price after your realtor has determined the “fair market value”, which is usually done by comparing recent sales of similar homes in that area. Remember to ask your realtor to provide data of comparable sales on similar homes that have sold in the area. Ask for history on the property that you are interested in, including how long it has been on the market. What did the previous owner pay for the property? What improvements were made to the property? With all of this information you are now better prepared to make an offer. Your realtor will be able to guide you through this step as your offer should be in writing.
The offer will specify price, when you take possession of the home, and anything to be included with the home (window coverings, fridge and stove, etc.). Another condition you might want to place on the offer is a home inspection. You may want to consider having an inspection done to ensure that all plumbing and electrical items are functioning properly. The inspector will also check things like the roof, windows, etc., to ensure that everything is in good working condition and that there are no surprises.
Once an offer is accepted it is now a firm and binding contract and is known as an “agreement of purchase and sale”. It’s always best to have the agreement of purchase and sale “conditional upon financing”. Even though you already have received a pre-approval from your mortgage specialist, the approval gets firmed up based on the fact that there is now an actual property in place.
4. Turning the Pre-approval into a Firm Deal
As mentioned, a pre-approval is a good way to know what mortgage amount you will qualify for based on your income, your credit history, and your down payment. However, it’s not an actual firm deal. After you have selected your property and made an offer conditional upon financing, your pre-approval becomes a “live deal”. Your mortgage specialist with resubmit your pre-approval to the mortgage lender with the property information attached.
If you have 20% or more of a down payment on your home, the mortgage lender will be adjudicating the property based on their criteria. If your down payment is less than 20% the lender will be adjudicating the property based on CMHC’s guidelines.
Once the mortgage lender has approved the property, and you are confident that you can meet all the conditions, you can then waive the condition of financing and you bought your new home!
5. Meeting All of the Conditions and Waiving of Conditions
After receiving a mortgage approval from the lender, your mortgage specialist will need some documents from you. Employment letters, recent pay stubs, recent bank statements showing your down payment, Notice of Assessments etc. This means that your mortgage specialist will provide you will a list of things that he or she will need from you. You can still waive your condition of financing on the property if you are confident that you can prove everything on the original mortgage application and as outlined in the Mortgage Commitment provided by the lender, but it is best to get all requested documents reviewed by the mortgage lender/specialist to ensure that they are satisfied with the documents provided.
6. Closing the Deal
Now that you have made an offer on your new home, the offer has been accepted, and the mortgage conditions have all been met, the deal gets closed through your solicitor.
After the lender has all conditions satisfied, they will send mortgage instructions to the solicitor enough in advance that he or she can do their legal work. Sometimes the lender has a list of solicitors that they will request you to work with, mostly because they have worked with that solicitor before and the title searching and registration of the mortgage is something that is in their interest. Your mortgage specialist will have a list of solicitors for you to choose from that the lender has approved if this is the case.
The solicitor will take care of title searches, preparing the deed, pay land transfer tax, and a few other things that the lender requires to be done before the closing date of your mortgage and purchase. The solicitor will ensure that all of these things are done prior to the closing of the sale and mortgage financing.
Also, it is important to remember that you have at least 2% of the total purchase price of the property to cover your legal fees and closing cost. When you go to the solicitor’s office, you will be required to sign endless amounts of paper work. Don’t be intimidated; just ask if you don’t understand something before signing. You will also be expected to bring in the balance of your down payment on or before the day of closing in the form of a certified cheque payable to the law firm “In Trust”.
After you have given your cheque and signed all the necessary documents the solicitor will finalize the deal and, upon closing of the deal, will give you your set of keys. A couple of months later you will then receive supporting documents from the solicitor including the deed and mortgage.
Please do yourself a favour in selecting a lawyer. Call around and speak with them to find out if they have time to work on your behalf. Be sure to find out if they specialize in real estate law as well. Find out their fees. Find out what costs are included in their fees. Do not select a lawyer based on price, as they have a very important job to do and sometimes you get what you pay for.
Discount Mortgage Canada's First Time Home Buyer's Guide (.PDF Version)
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