Home Buying Guide
Buying a home is a complex process. I put together a home buyers guide, which lists 15 steps involved in the home buying process, so that you will have a better understanding.
1. Make a list of your “Must Have” features and a list of your “Nice to Have” features
Buying a home is one of the biggest investments you’ll ever make, so be sure you make an informed decision. Home Buyers need to ask themselves a few questions before they start looking for their new home.
- How much money can I afford?
- Where do I want to live? Do I have a preference for certain neighbourhoods? Do I want to avoid certain neighbourhoods?
- What type and style of home do I want? Do I need a single detached, a townhouse, or a condo?
- How large should the house be for my family to be comfortable?
- How many rooms and bathrooms are required?
- Do I need comfortable eating area in the kitchen?
- What size of yard do I need? Do I need a bigger backyard for kids or pets?
- What are my parking and transportation needs? Do I need a garage? Do I need proximity to the bus stop?
- How important is having my house close to work, local amenities, public transportation?
- Do I need a family room?
- Do I need special features such as guest room, hobbies room, granite countertops, bigger storage area, pool, garden, etc.?
- Are there any special considerations such as physical limitations or disabilities?
- Do I need an additional suite as a mortgage helper?
- Do I want hardwood floor or carpet?
After answering the above questions and considering your budget, think about your “needs” and “wants”. The “needs” are the things you must have. The “wants” are the things you would like to have if possible. Make a list of the “Must Have” features, and a second list of the “Nice to Have if Possible” features. These lists will be very useful for establishing your house hunting criteria. When choosing your criteria, you should consider your present and future lifestyle. Is your family going to increase so that you might need more space? Or, will your children be moving out of your house soon? For more information, click here to read the article Buying a Home: Your Needs and Wants.
2. Go to the bank and get pre-approved for your mortgage
Most people will need mortgage to buy their homes. If you do, make sure to go to the bank first and get pre-approved for mortgage. This way you will know how much money you can afford and you will avoid the frustration of looking for a house that is to expensive for your budget.
3. Hire a realtor
Look for an experienced realtor with good knowledge of the local market and with good references. The services of your realtor will not cost you anything, as he will be paid by the seller. So, you get the benefit of having the expertise of a professional real estate agent at no cost to you. Your realtor will help you clarify your wants and needs if you have questions. He or she will arrange the showings and tour the homes with you offering advice.
If you hire me, you will get also the bonus of getting cash back from my commission. So, not only that I will work for you at no cost, but when I get my commission, I will give you a cheque for up to 75% of my commission as my way of saying thank you for using me as your realtor.
4. Start looking for the right home
Give your realtor your search criteria. I offer home buyers my Exclusive VIP Buyer Profile System. This service is free, and there is no obligation to you. If you sign up, you will receive daily listings of properties that match your criteria. So, you will be the first to know when a house is listed. I will personally show you all the properties that you want to see. Once you decided on the perfect home for your family, make sure you are objective and look beyond the first impression. Consider your needs and see if the home meets them.
5. Put an offer for your dream home
Once you decided on your home, your realtor will help you make an offer. Your real estate agent has specialized training in handling offers. He will present the offer to the seller and negotiate it to get you the best price and conditions. The offer will specify the price, closing date, and conditions.
The offer could be firm (unconditional) or conditional (includes stipulation such as home inspection, financing, or selling of your existing home). The conditions are meant to protect the buyer. Your realtor will explain you the details and give advice on the terms.
The seller might not agree on the price or the terms and he might respond with a counter-offer. Then, the buyer will have to either agree or counter the offer again. The offer will go back and forth between the buyer and the seller till both parts agree on the price and terms. If the offer is conditional, the buyer will have a few days to make sure the conditions are met. The most common conditions are home inspection and financing.
6. Hire a home inspector
Home inspection is a common condition put in an offer. Because buying a house is a big investment, it is recommended to hire a home inspector. The inspector will conduct a thorough inspection of the home and point out if the house has any structural problems. He will write up a report showing if any repairs will be needed. He will be able to estimate how much the repairs might cost. If you are satisfied that the house is good, then you can remove the inspection condition.
7. Go to the bank for mortgage approval
Another common condition of most offers is the financing. It should be completed by the day specified in the offer. To get your mortgage approved, you need to go to your bank or mortgage broker and give them a copy of the offer. Once the mortgage is approved, then you can remove the financing condition.
8. Remove the conditions
Once you finish with the inspection and the mortgage approval, you can remove the conditions. After the conditions are removed, the contract is binding.
9. Make a deposit
Once the conditions are removed, you will then need to make a deposit to secure the transaction.
10. Hire a lawyer
You need to hire a lawyer to represent your interest in handling legal documents. Your lawyer will receive a copy of the offer. He or she will review the conditions of the sale, the contract, and the information for title transfer and registration. It is your lawyer’s responsibility to search the title of the property to make sure there is no legal problem with it and that there are no liens on the home.
Your lawyer will prepare a statement of adjustments to show the selling price, the adjustments, less the deposit that you already paid. The adjustments include pro-rated expenses such as property taxes and utilities (hydro, water, gas). That means that any amount that the seller prepaid will have to be paid back to him through an adjustment. As well, any amount that the seller still owes will have to be paid to the buyer through another adjustment. The adjustment day taken into account in the calculations is usually the possession day.
12. Contact your utility providers
Contact your hydro, water, gas, phone, cable, internet provider to make sure the services will be in place on your moving day.
13. Get home insurance
Call your insurance to start your insurance policy on your day of closing. Your lawyer also will need a copy of your insurance policy before closing day.
14. Completion / Closing day
On closing day, your lawyer transfers the money to the seller and registers the home in your name. Your realtor will hand you the house keys. Make sure you have all keys, including garage door and shed, if applicable.
15. Possession / Moving day
You can move right away after completion. This could be in the same day as the completion or next day.
In addition to the price of the home and the adjustments, there are also the closing costs that need to be considered. Examples: Property Transfer Tax, home insurance, home inspection fee, legal fees, etc. For new homes there is also GST.
Besides the steps outlined in this Home Buyers Guide, I put together some information about closing costs. To find out about closing costs, click here: Closing Costs When Buying a Home.