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Category Archive: Buying a Home

1. Costs and Considerations when Buying a Home

   July 14, 2014 1:27 pm Comments Off on Costs and Considerations when Buying a Home

   Costs and Considerations when Buying a Home

   In the excitement of beginning a search for a home, many people jump right in without considering all of the elements that make a home truly right for them. It is a complicated and personal process. An unsuitable choice can be costly in many ways – you could lose money, waste time and effort relocating, or even put your family’s health in danger. The following are some things to consider when identifying your ideal home and planning a successful purchase.

   Choosing a Neighbourhood

   Remember that you can renovate a house but neighbourhoods take years to change and there’s no guarantee they’ll change for the better! On the other hand, if you really love a certain part of town but it’s out of your price range you may want to consider buying a less-than-perfect home then doing renovations. They can be quite expensive so try to make improvements that will be reflected in the value when you sell. These renovations have been found to have the greatest payback: kitchen 70%, bathroom 68%, interior painting 65%, exterior painting 62%.

   Tips on choosing a suitable neighbourhood:

   • When you find a locale you like, walk around it. See what it’s like from street level.
   • Are the people friendly?
   • Are there stores and recreation facilities nearby?
   • Contact the local school board if you have children. Do local schools provide good education opportunities? If applicable are there private/religious schools?

   Figure out what you can afford:

   Consider how much you currently need to live on and how much you actually have leftover every month. People have a tendency to create budgets that look nothing like reality – when we should have $400 left over, for some reason we only have half that.

   Consider these basic costs of buying a new home:

   • Most homes require a down payment of several thousand dollars.
   • Monthly mortgage payments can be 1/3 of the average person’s annual net income.
   • You may want to pay for a home inspection. Consider more than just the structure. Ask the inspector to check for asbestos, radon, animal infestation and lead.
   • Moving costs can be from a couple hundred to several thousand dollars depending on the distance of your move and the quantity of belongings.

   Financing

   The sort of home you can afford depends on several things:

   • How much you have saved
   • How much you earn
   • Past earnings
   • Your credit rating

   The past has a way of haunting new homebuyers. If you are concerned about your credit rating you can usually get a free copy of your rating report from your local credit bureau. Normally all that’s required is a couple pieces of photo identification. Remember, a few late payments or disputed bills can besmirch your record. Try to pay everything on time and don’t have more than two credit cards. A bad rating can spell trouble getting a mortgage or you end up paying more for your mortgage as a form of insurance to the lender.

   Pre-Qualification

   This refers to documents from a bank or other lender indicating that you have the financing to back up your offer on a house. Pre-qualification is free and most lenders are happy to sit down with prospective buyers and figure how much they can afford. Having an accurate idea of price range will save time in the bidding process. If there are several people making offers on your dream home, being pre-qualified can make your offer more attractive since financing is not in question. It is important to note, however, that lending institutions will base their final decision about a mortgage on ability of the buyer to service the debt as well as the property. Most lenders state that the two components go hand in hand – the buyer with the ability to repay a mortgage and the property as security in the event of default on payment.

   By taking all these points into consideration, you can worry less about the process of buying and get busy finding your ideal home!

2. Market Time and Price Reductions

   1:27 pm Comments Off on Market Time and Price Reductions

   “How long has it been on the market”? This is a question many buyers ask. The thought behind it is often one of two things. Either there’s something wrong with the home or the price is too high. Both of these notions may need clarification. Let me deal with the first thought.

   Consumers need to know that under the closest scrutiny one could argue that there is something “wrong” with every home. The real question here is:- does the price reflect what is being offered. In this case what is “wrong” with a home may be exactly what makes it right for some one who appreciates the opportunity and the reflected price.

   Regarding the thought of overpricing, it must be considered that where a home is extremely unique, a long marketing time may be necessary in order to obtain market value while pursuing a buyer with the same unique interest. On the contrary, with atypical homes, a long period of time on the market may point toward inferior marketing but mostly toward an overpriced listing for that market regardless of what is “right or wrong” with the home. However, sometimes when homes are reduced and buyers ask “how long has it been listed” the proper response is “at that price only…weeks”. By illustration and a bit of exaggeration to make the point, suppose a home is on the market for 2 years at $300,000 and the seller reduces it to $250,000. Then, while the buyer is asking “how long has it been listed”, there are 5 offers being presented, followed by the hollow apology “Sorry it’s sold”.

   It is obvious then that both notions for time on the market may be incorrect. While you can always make an offer, it’s always best to ask yourself “does the price reflect what is being offered” to avoid disappointment.

3. Some Steps to Follow and Questions to Ask when buying a New Home

   1:26 pm Comments Off on Some Steps to Follow and Questions to Ask when buying a New Home

   • Visit your financial institution and ask to be pre-approved for a mortgage – this will help you know how much you can afford and consequently focus your search for your “new” home;
   • Make a list of “wants” versus “needs”;
   • Visit display suites, compare asking prices and selling prices, and check out local amenities and the neighbourhood;
   • Do not be lured by a beautiful brochure, a comfortable floor plan, or the new finishing. All of these appeal to buyers’ emotions. Despite public perception, a new home is not automatically guaranteed to be well built nor perfect. It is essential to research the builder.
   • Some important questions to ask:
     • How long has the builder been in business?
     • What are the names and addresses of the homes and projects the builder has constructed?
     • Ask for references &/or home owners who have purchased from this builder.
     • Are they happy with their home?
     • Have they experienced any problems?
     • Would they buy another home from this builder?
     • What is the builder’s after sale service policy?
     • What responsibility will the builder assume for the subcontractor?
     • Does the builder belong to a professional organization such as the Canadian Home Builders’ Association or the Urban Development Institute?
     • Does the builder and the trades in their employ have any formal training?
     • Is the builder registered with the New Home Warranty Program?
     • Is the home enrolled with the New Home Warranty Program?

   • Inquire as to the availability and applicability of the New Home Warranty Program;
   • Hire a lawyer (or Notary) to represent your interest and to review all documents on your behalf

4. First Home, First Hints

   1:25 pm Comments Off on First Home, First Hints

   Congratulations! You’re about to move out of an apartment into your first home. What a great move, but you need to know a few things and buy a few things. Remember there will be no “building manager” to take care of things for you – you’re it!

   First things first. Let there be light, but where is the fuse box? Does it use fuses or just switches? (Hint: Label each switch with white tape and black letters so you can see them easier in the dark.) It’s a good idea to turn the switches off and on a few times so you’re used to how stiff they can be.

   Water, water everywhere. Find the turn-off valve inside the house so minor floods don’t become major. Make sure you know where the toilet turn-off valve is. Can you turn off the outside faucets in the winter? (Hint: you may have to leave one outside faucet dripping during the cold months so you don’t burst the pipes during freezes.) Find the water meter and make sure it is functioning. If your garbage disposal stops working, find the red reset button on the unit under the sink. Before you turn it back on, check with your fingers to see if anything is blocking the blades, and then press the reset button. (Hint: Remove your fingers and the offending objects from the blades before turning the disposal on again…duh.)

   Keeping warm and toasty. It’s important to find the furnace. What kind of fuel does it use? If you have an oil furnace, ask how often you need to refill it and who refills it. Do you have a maintenance contract for repairs? If not, can you get one? If you’re going to have to replace or clean the filters, where do you get them? (Hint: buy a couple of them, you never seem to need to replace them when the store is open.) Find the reset button and label it. Does the furnace have a fan for cooling the house in the summer? Where are the thermostats for controlling the temperature? No matter what the source of energy for your heating, find the main shut off valve.

   Curl up by the fire. But make sure the fireplace flue is cleaned every one to three years, depending on how much you use it. Otherwise, the chimney may not draw well and “smoke gets in your eyes”, which is not as romantic as the song. A clogged chimney can cause a fire, which is not cool.

   Nothing like a long hot bath. Check the water heater to see if it has a pilot light. If it goes out, how do you re-light it? Find out how to set the temperature and decide what temperature you should set it to.

   Your very own washer and dryer. Clean the lint tray on the dryer every load or two, or it will build up and slow down the drying process. Also, too much dry lint can cause a fire. If your washer drains directly into a utility sink, place a filter on the end of the hose to keep from clogging your sink.

   How about a tall cold one? At least twice a year, clean the water tray under your frostless refrigerator, and vacuum the coils at the back now and then to keep it cooling effectively. (Hint: Check the seals around the doors of your refrigerator to make sure no cool air is escaping. If there is moisture on the rubber seal, you’ve got a faulty seal.) Now pop open the cold one and toast your new home.

5. Tips On Buying Your First Home

   1:24 pm Comments Off on Tips On Buying Your First Home

   • Make a list of all the features you want in your new home such as number of bedrooms, bathrooms, proximity to schools, shopping and workplace.
   • Be sure you can afford your home. Your monthly housing costs should not be more than 32% of your gross monthly income and your entire monthly debt load (which includes other debts such as car loans and credit card payments) should not be more than 40% of your gross monthly income.
   • Calculate your other monthly living expenses such as food, clothing, transportation, personals and childcare to ensure you can afford your mortgage payments.
   • Call a REALTOR® in your preferred area. They are trained professionals with knowledge about local conditions and the housing market in general. Through the Multiple Listings Service they have access to virtually every property listed for sale in the province. Your REALTOR® can narrow down your search and provide you with information on properties for sale and those that have recently sold. This will allow you to make informed decisions about pricing. Licensed by the province and members of local real estate boards, REALTORS® must adhere to high standards of ethical behavior.
   • Obtain a pre-approved mortgage form the lender of your choice. This will help you determine the price range you should be looking in. With a pre-approved mortgage, your lender will guarantee the interest rate for up to 60 days.
   • You may wish to have an independent appraisal done of a property before you offer a price. It can keep you from paying more than the market value.
   • Ask your REALTOR® for a copy of the Property Condition Disclosure Statement. This document is completed by the sellers and ensures the buyer gets complete information about the property they are about to purchase, and alerts buyers when they need to do more research on a property.
   • If buying a new or existing condo, look beyond style and amenities and investigate whether the construction is of good quality. You can ask for a copy of the minutes to Strata Council Meetings to determine what kind of problems the condominium has had in the past, and the expenses.
   • To assess potential water leakage problems, visit a condominium project immediately after a rainfall and check to see if flat areas such as roof deck and walkways have large pools of standing water on them. All building surfaces except specially designed ponds should drain freely and be immediately clear of water after a rainfall.
   • It is always a good idea to have the home inspected from a professional home inspector. An inspector’s written report should include how well-built the home is and whether any repairs are necessary and the estimated costs.
   • Don’t forget about other costs when you buy your own home such as legal fees (they will most likely be at least $500), property taxes and the GST (if purchasing a new home).

6. Do Your Homework – Home Inspections

   1:24 pm Comments Off on Do Your Homework – Home Inspections

   Home inspections are often an important part of the pre-purchase routine when buying a house. You do not want to end with faults that you had not anticipated. Choosing a home inspector can be a difficult process. It is important to consult with family and friends to find a reliable inspector that has good references. You should also contact several inspectors in your area and interview them in advance to ascertain their qualifications. Be sure to do your own independent investigation of the Inspectors’ qualifications.

   Questions to Ask

   1. How long has the inspector been in business AS A HOME INSPECTION firm?
   2. Is the inspector specifically experienced in RESIDENTIAL CONSTRUCTION?
   3. What does the inspection include? Inspections should include visual inspections covering exterior, structure, garage, plumbing, heating, cooling, electrical, interior, insulation and ventilation. Extras include radon testing, a pest infestation survey or inspection of septic systems or wells. Be sure the inspector will provide a written report.
   4. How much will it cost? Determine fees up front. Inspections cost from as little as $200 to as much as $1,000 depending on the size of the home and which inspection services are requested.
   5. How long will the inspection take? The time depends on the size and age of the home, the average is 2 to 3 hours. Anything less isn’t enough time to do a thorough inspection but many inspectors take a full day to thoroughly inspect your prospective purchase.
   6. Does the inspector encourage the client to attend the inspection? This is a valuable educational opportunity, and an inspector’s refusal means you should look for a better qualified inspector.
   7. Bluntly ask what educational and/or training facility the inspector attended. Does the inspector participate in continuing education programs to keep his/her expertise up to date? Ask to see the inspector’s papers. When hiring a company, make certain that your home will be inspected by a registered professional.
   8. Does the company offer to do any repairs or improvements based on its inspection? This might cause a conflict of interest. We do not recommend that you deal with these firms.
   9. Do they belong to an association that will investigate a consumer complaint?
   10. Do they carry errors and omission insurance?

7. Homeownership for Young People

   1:23 pm Comments Off on Homeownership for Young People

   Looking Ahead

   No one likes to think they will get old but we all seem to. Equally, no one likes to think that they will be living in their parents’ basement until they’re thirty-something! While saving for a mortgage may be the last thing on young minds preoccupied with sports, dating, or academics, it’s never too early to plan for the future. A few small steps can become giant leaps towards financial security!

   Every dollar counts!

   If there are two key words every young adult and teenager should know they are “compound interest”. A simple mathematical calculation demonstrates how savings can build. If the initial investment is $100 at a conservative interest rate of 5% per year, by the end of that year the investment will be $105. If the money remains invested through the next year, the investment will grow to $110.25 ($105 x 5% = $110.25). The following year it would be $110.25 x 5% = $115.76. So it is easy to see how quickly an investment can grow. It’s a great habit to get into setting aside a certain amount from every paycheck. Regular “payments” to your investment not only result in greater savings, they can help even out the ups and downs of the marketplace. There is nothing worse than investing one large sum of money and immediately afterwards seeing the stock market or interest rates plummet. Also try to think of invested money as being out of reach and avoid dipping into those savings.

   Elephants aren’t the only ones with good memories…

   A credit history can go as far back as the first loan (even those co-signed by a parent) or the first credit card. A bad credit rating can make it hard to lease a car, get a mortgage, or any type of loan. Always pay at least your minimum monthly credit card payment and pay it on time. Of course, the best plan is to never carry a balance. The lure of credit, however, can be too hard for anyone to resist especially for a young adult on a limited budget. If you can establish good habits early, think of how much you will save by avoiding years of paying 18-20% credit card interest. (That’s compound interest too, by the way.)

   A poor credit rating can haunt you for years but a good rating can help you get a loan or mortgage in the future. Most lenders need to see that a borrower is financially responsible. Credit cards can be a great beginning. Most credit card companies will give accounts to students in their last year of university or most applicants over the age of 21.

   Research the area where you would like to live.

   No one can predict where the future will take him or her. Society is more mobile than ever. Educational pursuits or new jobs often force people to leave their hometowns and relocate in other cities or provinces. Wherever a person decides to put down roots, it’s important to research the market. Talk to local real estate agents. Most will be happy to share their knowledge and experience. Some important questions to ask include How much will I expect to spend in order to purchase a house with a certain number of bedrooms or a certain square footage? What sort of features should I look for in a home? Is there a strong resale market in this area? Also check out the local real estate companies on the Internet to get an idea of local home prices and sizes.

   Mortgage Calculators

   The best place to start is a mortgage calculator on the Internet. You can simply type in “mortgage calculator” and several options come up. (Ensure that you are using a Canadian mortgage calculator since rules differ between countries. A good calculator can be found at (www.canadamortgage.com.) A mortgage calculator is a quick, easy way to see what you can afford. If you enter an approximate home value and current interest rates, the calculator will show the required monthly payments and the value of the mortgage. By changing the amount of your down payment or the length of the mortgage payment period (amortization period) you can see how monthly payments change. Remember that this calculator only provides general information. When an individual applies for a mortgage the lender will take numerous factors into account including income, length of employment, and of course that omnipresent credit rating!

   The tortoise and the hare…

   Even if buying a home is years away it’s a good idea to start planning today! The slow steady building of your investments pays off richly in the end. Save a specific percentage of your income on a regular basis starting from your very first part-time job. Also try to make payments to your credit card on time and don’t carry a balance. Eventually we all get to the finish line but it’s nice to get there in style!

8. Home Buyers Checklist

   1:21 pm Comments Off on Home Buyers Checklist

   LOCATION

   Area ______________________________________________________________
   Street Address ______________________________________________________
   REALTOR® or Sales Person _______________________________________________
   Phone ____________________________

   COSTS

   Asking Price $ _____________
   Likely Price $ _____________
   Property Taxes $ _____________
   Utility / Garbage or Other Municipal Levies $ _____________
   GST Applicable $ _____________
   Property Transfer Tax $ _____________
   Other Costs $ _____________
   Down Payment $ _____________
   Mortgage Terms $ _____________
   Monthly Payments $ _____________
   Principal & Interest $ _____________
   Taxes $ _____________
   Life Insurance on Mortgage $ ____________
   Household Insurance $ _____________
   Total $ _____________

   SQUARE FOOTAGES

   Home Type___________________
   Age ______________
   Total Square Feet _____________
   Kitchen _____________________
   Dining Room _________________
   Living Room _________________
   Family Room ________________
   Great Room _________________
   Den _______________________
   Master Bedroom _____________
   2nd Bedroom _______________
   3rd Bedroom _______________
   Other Room ________________
   Number of Bathrooms ________
   Master Ensuite _____________
   Storage Space _____________
   Fireplace: [ ] gas   [ ] wood burning
   Garage: [ ] attached   [ ] detached
   Carport __________________
   Font Yard ________________
   Back Yard _______________
   Fence ___________________
   Patio ___________________
   Driveway ________________
   Special Features _____________________________________________________

   THE NEIGHBOURHOOD

   Distances to:
   Work __________
   Schools ____________
   Shopping ____________
   Highway Access ____________
   Public Transit ____________
   Doctors/Dentists ___________
   Hospital ____________
   Church ______________
   Community Centre ____________________
   Parks/recreation/jogging trails/bike paths etc.______________
   Train Tracks _____________
   Airport ______________
   Neighbours’ property maintenance standards _____________
   Garbage collection services ________________
   Street Lights ______________
   General maintenance of streets & alleys ________________
   Area Zoning _____________
   Neighbourhood or Municipality covenants or restrictions on property use ________________________________
   Proximity to industrial or manufacturing areas __________________
   Flood or earthquake potential ____________________
   Traffic Volumes _________________________

   GENERAL CONDITION

   Roof ___________________________
   Furnace Pipes _____________________
   Gas / Electrical Capacity ______________
   Electrical Outlets location ______________
   Cable ___________________
   Telephone ________________
   Flooring __________________
   Appliances List & Conditions
   ________________________________
   ________________________________
   ________________________________
   ________________________________
   Landscaping _____________________

   CONTACTS

   REALTOR® _________________
   Phone __________________

   Mortgage __________________
   Phone ____________________

   Lawyer/Notary ______________
   Phone _____________________

   Home Inspector______________
   Phone _____________________

   ADDITIONAL NOTES OR COMMENTS ON THIS HOME
   ____________________________________________________________
   ____________________________________________________________

   We suggest you make several copies of this list and complete one for each home you visit. When you make an offer to purchase be sure you include a “subject to satisfactory home inspection”.