First Time Home Buyers
As a first time home buyer you are making your biggest financial investment to date. There is a lot to consider when making your first purchase, and no matter what age you are it is a big commitment. The process shouldn't be overwhelming, it should be one full of excitement as you find your new home. You may have a lot of questions about how to get started, or just want to have a better understanding of all the costs involved. Below are some of the answers to your many questions and how I can help you with the most exciting and rewarding purchase you will ever make!
What is the best type of property and neighbourhood suitable for you?
This depends greatly on your lifestyle, and where you see yourself over the next 5 to 10 years, or the short term. If you love to be downtown with easy access to shops, theatres, restaurants and pubs, and easy maintenance, then a condo will be a great option. If you love to have a big yard and spend your evenings barbecuing on the patio, or gardening on the weekends, then a house may be more desirable. Once you think about your short and long term plans, if moving again is desirable, and if you would like to have a family or dog in the near future, you will be able to better determine the best properties and neighbourhoods for you. To help you make this important decision of what and where to buy, we will tour the different properties and neighbourhoods at the beginning of your home search.
How much should I have for a down payment? What is CMHC?
Mortgage lenders will look for at least a 5% down payment for properties up to $500,000. For properties between $500,000-$1,000,000, the minimum down payment for new insured mortgages is 10% for the portion of the house price above $500,000. For properties with a purchase price over $1,000,000 a down payment of at least 20% is required. A down payment of 5%-20% is considered a high ratio mortgage and requires mortgage default insurance, also known as CMHC insurance. The mortgage default insurance (CMHC) is for the lender to protect them in the event that the borrower defaults on the mortgage.
Should I use a mortgage broker or my bank? How much money can I borrow and what are the current interest rates?
It is recommended that you meet with both your bank and a mortgage broker. Many people have a good working relationship with their bank, and have done investing or taken out loans with their banks in the past, so they are comfortable using them. However, a mortgage broker can help you by providing the current interest rates for all lenders, and go over the different terms and "fine print" for each lender. Both the bank and a mortgage broker will be able to help you determine how much money you can borrow looking at your current equity and income.
Why should I get a home inspection? What can a home inspection tell me?
A home inspection happens once you have an accepted offer on your home, and will take place during the condition removal period. It is important to get a home inspection done by a professional home inspector as it provides you with a detailed report on the property you are looking to purchase, and makes you aware of any past, present or future issues. The inspector will look over items such as the roof, foundation, exterior walls, plumbing, electrical, heating, fire safety, appliances and give you an explanation of their findings. It can save you from incurring any costly improvements or fixes on your household after purchasing the property. They can also provide you with maintenance instructions and items which need your attention around the house.
What are the closing costs?
When purchasing a home, there are a variety of expenses which are seperate from the final purchase price. Typical costs incurred during the home buying process are a property inspection, legal fees and disbursements, property transfer tax, title insurance, CMHC insurance (morgage default insurance), adjustments for utilities etc., home and property insurance, and moving costs. It is good to be aware of the additional fees needed throughout the process so you can have the funds available apart from your down payment.
What does the home buying process look like?
There are a large amount and variety of questions when a first time home buyer has made the important and thrilling decision to purchase a home. The above questions are just a few of the first questions that many first time buyers have, but upon making this decision I can provide you with a Home Buyers Consultation package outlining more details, and answer all of your additional questions. There are a few important aspects to the home purchasing process which are often overlooked or not known ahead of time. Below are three important things to consider when purchasing a home, getting pre-approval for a mortgage, knowing and understanding property transfer tax, and what a depreciation report is for strata properties. I hope that this information helps you with making your first home buying decisions, and I look forward to helping you through the process.
Loan Pre-Approval: One of the most important things to do when you are thinking of purchasing a home is to get pre-approved for a mortgage. A broker will look over your finances and figure the amount of mortgage you can afford. It will help in your home search as you know what price range to keep your search in, you will be able to get the best financing possible with time to research, and make a strong offer when you find the right home. They will also go over your financing options and what expenses will be incurred on closing day so there are no surprises.
Property Transfer Tax: Property transfer tax is payable upon completion in the amount of 1% on the first $200,000 of the purchase price, 2% up to $2,000,000, and 3% on any portion of the purchase price over $2,000,0000. First time home buyers are provided a Property Transfer Tax (PTT) exemption for any purchase under $500,000, and a partial exemption applies to properties under $525,000. The Property Transfer Tax is in addition to your down payment and can not be added into your mortgage.
Depreciation Reports: Depreciation reports are now mandatory for all strata complexes made up of 5 or more strata units, unless turned down by a ¾ vote. These are very important to lenders, insurers, and you as the buyer looking for your new home. They provide a detailed analysis of the common property assets over the next 30 years and provide 3 funding models to account for upcoming maintenance. For example, the deprecation report may provide that the roof is 25 years old and needs to be replaced in 5 years, the funding models will analyze how to obtain the money in that time frame, and avoid a large special assessment when the work is done.