1) Determining Your Housing Requirements

 When buying a home, you have to consider three important factors – location, style and cost.  Here are some questions to ask yourself during your search: 

  • Does this home satisfy my living space requirements?
  • Are there enough bedrooms and bathrooms?
  • Will it accomodate what you’re bringing from your old house?
  • Is the yard big enough?
  • Is it in your general price range?
  • What is the condition of the home?
  • How old is the furnace and the wiring?
  • What is the condition of the roof and foundation.
  • What’s the condition of other homes in the neighbourhood?
  • Does the community appeal to you?
  • Is there access to public transit and major roads?
  • Are there public facilities like schools, hospitals, shopping and recreation facilities in the area?
  • Is this an older, more established neighbourhood or a new development?
  • How do the municipal taxes compare to those in other areas?
  • Are there any development plans that will affect the neighbourhood?
  • Are there any zoning bylaws that might affect you – such as your ability to have a home office in your house?
  • Does the property have the potential to increase in value?

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    2) Understanding Your Local Housing Market

    Market Conditions 

    Characteristics 

    Implications 
    Buyer’s Market:
    The supply of homes on the market exceeds demand.     		 High inventory of homes. Few buyers compared to availability. Homes on the market longer. Prices tend to drop.  More time to look for a home. More negotiating leverage. 
    Seller’s Market:
    The number of buyers wanting homes exceeds the supply or number of homes on the market.     		 Smaller inventory of homes. Many buyers. Homes sell quickly. Prices usually increase.  May have to pay more. Make decisions quickly. Conditional offers may be rejected. 
    Balanced Market:
    The number of homes on the market is equal to the demand or number of buyers.     		 Demand equals supply. Sellers accept reasonable offers. Homes sell within an acceptable time period. Prices generally stable.  More relaxed atmosphere. Reasonable number of homes to choose from. 

      

    3) Calculate Your Costs

    The amount you can afford depends on a number of factors.  Most importantly – your gross household income, your downpayment amount and the mortgage interest rate. 

    4) Choosing Your Realtor

    A good Real Estate agent: 

    • Will know the neighbourhoods where you are looking
    • Will understand the local market.
    • Will listen and advise
    • Is an expert at type of property you are buying
    • Is “in-the-know”
    • Will add you to email lists to get you timely information

    When discussing your needs with an agent, be as specific as possible about the kind of home you’re looking for and your price range. Your agent should know what is on the market, in what neighbourhoods and at what price. If you have provided your housing requirements (your wants and needs), your agent should be able to prescreen listings to save time. 

    Your agent will also assist you in making an Offer to Purchase. Agents are aware of current market conditions, what price offers are realistic and what conditions you should include in any offers. 

    5) Arranging Your Mortgage

    Mortgage Type  Definition  How it benefits you 
    Closed  This type of mortgage must usually remain unchanged for whatever term you agree to. 

    A penalty will apply if you payout, renegotiate or refinance before the end-of-term. 
    • Provides lower rates than open or convertible terms.
    • Allows you to make an annual prepayment of up to 20% of your original mortgage amount.
    Open  This type of mortgage may be repaid, in part or in full, at any time during the term without any penalty. 
    • Provides flexibility until you are ready to lock into a closed term.
    • Allows you to pay off any or the entire mortgage without penalty.
    Convertible  This is a mortgage which offers the same security as a closed mortgage, but which can be converted to a longer, closed mortgage at any time without penalty. 

    Typically associated with fixed rate mortgages. 
    • Provides security and flexibility allowing you to convert into a longer closed term mortgage without penalty, if you think rates will rise.
    • Allows you to make an annual prepayment of up to 20% of your original mortgage amount.
    Rate Type  Definition  How it benefits you 
    Fixed  An interest rate that does not change during the entire mortgage term. 
    • You can take advantage of the same low interest rate for the entire term and the same payment set up front.
    • You will have the security of knowing exactly how much your payments are and how much of your mortgage will be paid off at the end of your term.
    Variable  An interest rate that will fluctuate in accordance with the prevailing market prime rate during the mortgage term. 
    • Historically, variable rates have been lower than fixed rates and could save help you more money.
    • If rates go down, a larger portion of your payment goes towards principal, helping you pay off your mortgage faster.
    • Your regular payment may stay the same even if rates change.

      

    6) Preparing an Offer

    The process of going back and forth with the vender making offers and counteroffers is common. The entire process can seem like a roller coaster ride, but it is a part of making the deal work best for everyone involved. 

    A deposit is required when an offer is made. This deposit will go toward the purchase price on the closing date. Deposits are usually no more than 10% of the purchase price depending on your resources available. A deposit on an unaccepted offer will be returned. If you cancel an accepted offer, you may lose your deposit. 

    Your offer or agreement should include: 

    • Your proposed purchase price.
    • A list of items in the house (called chattels) to be included in the purchase price. For example, appliances, window coverings, and certain furniture items might be negotiated into the purchase price.
    • Amount of your deposit. Since the vendor will hold your deposit until your mortgage closes, you will want to be paid interest on that money.
    • Financial details (eg. how the balance of the purchase price will be paid).
    • Closing date. This is the date you will take possession of the house (usually 30 or 60 days from the date of the agreement).
    • Time period for which the offer is valid.
    • Making a conditional offer. You might want to make your offer conditional on arranging for financing, a building inspection, or the results of a survey. Make sure the Offer can be cancelled if any of your conditions are not met and always put a time limit on the conditions.

     

    7) Closing the Deal and Moving

    Closing is a process during which all the legal and financial obligations stated in your Offer to Purchase will be met. Your real estate representative and lawyer should keep you informed of the steps involved, but here’s an outline of what to expect. 

    1. Show your lawyer (notary) the agreement.
      A copy of the signed Offer to Purchase is sent to your lawyer, who will examine any conditions of sale and note the closing date. You’ll also tell your lawyer how you, and any other co-buyers of the house, will be registered on the title to the property.
    2. All conditions of your offer are met.
      During closing, all conditions in the Offer to Purchase must be satisfied by the stated dates. For example, you may have made the sale conditional upon a home inspection. This inspection must be completed before you close.
    3. A land survey is done.
      You or your lawyer will have to arrange for a current land survey on the property for the Lender.
    4. Your lawyer (notary) searches the title.
      Once all your conditions have been met, your lawyer will search the title to the property. This ensures that the vendor does really own the home and that you can purchase it without any legal problems.
    5. Check into taxes and liens.
      Your lawyer will also check for government regulations and other legalities. These include ensuring that the property taxes on the house are up to date and that there are no liens on the chattel, that is the personal property the vendor has agreed to sell with the house.
    6. Mortgage details are finalized.
      Your lawyer and lender will also draw up and finalize your mortgage documents.
    7. Arrange your utilities.
      It’s up to you to make arrangements for final payments of utilities at your old home and to begin service at your new home. Now is also the time to make arrangements for moving.
    8. It’s all over by the signing of the cheque.
      Your lawyer will prepare a Statement of Adjustment, which will confirm the selling price, the amount you have to pay the vendor, the balance of the down payment and adjustments. A certified cheque for this total should be made payable to your lawyer in trust. Don’t forget about those legal fees, which include closing costs and disbursements.

      

    Closing Day

    It’s finally here – Closing Day! This is the day you take possession of the house and get your keys. However, the homebuying process isn’t quite over yet. There are a lot of other things that also happen on closing day. 

    • Your lender will provide the mortgage money to your lawyer (or notary in Quebec).
    • You must provide the balance of the purchase price to your lawyer.
    • You will also be responsible for paying legal fees, disbursements and land transfer taxes.
    • Your lawyer pays the vendor, registers the home in your name and provides you with a deed and the keys.
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