Steve Dreany - Legend Real Estate Inc.

Buying a home

Is Home Ownership Right For You?

If you're considering buying a home you've come to the right realtor. My web site can turn you into a house hunting master. But before we jump right in, you must make sure three things are ready. You, your bank account and the real estate market.

Do you enjoy moving often?
Do you prefer using your savings for such things as vacations, retirement or starting your own business?
Do you enjoy not having to worry about regular maintenance and repairs?
Do you consider yourself a responsible person?
Are you disciplined with finances?

If you answered yes to any of these questions you are ready for home ownership. Continue reading to learn the home buying process.

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Are You Financially Ready?

You have decided that home ownership is right for you. Now you need to determine if you are financially ready. To have a better understanding of the purchase price of your home you should schedule an appointment with your financial advisor or mortgage broker to determine your purchasing power.

For many first time home buyers, the hardest part of buying a home is saving the necessary down payment. Most people will not be able to save the traditional 25% of the purchase price. With mortgage loan insurance you can put as little as 5% down. Mortgages loan insurance protects the lender, and buy law, most Canadian lending institutions require it. The way it works, if the borrower defaults (fails to pay) the mortgage payment, the lender is paid back by the insurer. The cost for this type of insurance is in the form of a premium and can be paid in a single lump sum, or it can be added to your mortgage and included in the monthly payment.

There are various providers of this type of insurance in Canada; among them are Canada Mortgage and Housing Corporation (CMHC) and General Motors Acceptance Corporation (GMAC). Your mortgage professional can help you decide which company is best for you.

The table below will help you to determine the cost of your mortgage insurance.

Financing Required	Premium Percent of Loan Amount	Premium on Purchase Price
Up to and including 65%	0.50	Place calculation here.
Up to and including 75%	0.65
Up to and including 80%	1.00
Up to and including 85%	1.75
Up to and including 90%	2.0
Up to and including 95% Traditional down payment Flex down	2.75
Up to and including 95% Traditional down payment Flex down	2.90
Secured line of credit Repayment option: 5 years (5/20) 10 years (10/15)	0.25
	0.50

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Mortgage Pre-Approval

Some buyer's may not wish to pursue a mortgage pre-approval until they have found they home they want to buy. However the idea of having a pre-approved mortgage makes the search for your new home much easier, less time consuming and can avoid the disappointment of realizing that the home you have chosen is not within your financial reach.

Some of the things that you will need to have the first time that you meet with the lender are:

your personal information including your drivers license
details of your job including confirmation of salary in the form of a letter from your employer
your sources of income
information and details on all bank accounts, loans, and other debts
proof of financial assets
source and amount of down payment and deposit on purchase
proof of source of funds for closing costs

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Importance Of Your Credit Rating

Before approving you for a mortgage, lenders will want to see how well you have paid your debts and bills in the past. To do this, they simple get a copy of your credit history (credit report) from a credit bureau. This provides them with information about your financial past and use of credit. Before your lender sees your credit history you should get a copy for yourself to make sure the information is complete and accurate. Simply contact one of the two main reporting agencies (Equifax www.equifax.ca or TransUnion Canada www.transunion.ca.)

Lack Of Credit History

If you have no credit history, it is important to start building one buy, for example, applying for a standard credit card with good interest rate and terms, making small purchasing and paying them as soon as the bill comes in.

Fixing A Credit Record

If you have bad credit, lenders might no want to give you a mortgage loan until you can establish good credit history by making debt payments regularly and on time. Most unfavorable credit information, including bankruptcy is dropped from your credit file after seven years. If you have bad credit you may want to consider credit counseling (www.cccnip.com).

Despite your poor credit history, you might still be able to get a mortgage loan if you have a relative willing to be a guarantor or co-signer on the loan.

How Much Will It Really Cost?

Once you have determined a home price you can afford and the type of mortgage you qualify for, you will need to calculate all of the associated costs of the transaction to make sure you are financially ready.

Up Front Costs

You'll need to plan ahead for the many up front costs of buying a home. Timing is important to help make sure things go smoothly.

Mortgage loan insurance application fee and premium:: If yours is a high ratio mortgage (less than 25% down payment) you may need mortgage Loan insurance. To get this insurance you may be asked to pay the required application fee. Your lender may add mortgage insurance premium to your mortgage or ask for you to pay it in full upon closing
Appraisal Fee:: Your mortgage lender may require that the property be appraised at your expense. An appraisal is an estimate of the value of your home.
Deposit:: This is part of your down payment and must be paid when you make an offer to purchase.
Down Payment:: At least 5% of the purchase price is required for a high ratio mortgage and at least 20% of the purchase price is usually required for a conventional mortgage.
Status Certificate:: This applies if you are buying a condominium. A status certificate is a document containing information regarding the operational, legal and financial dimensions of the condominium corporation.
Home Inspection Fee:: Remember that this may be a condition of your offer to purchase. A home inspection is a report of the condition of the home. Casts may vary depending on the complexity of the inspection. For example it may be more expensive to examine a home that has large square footage, more than one kitchen, etc.
Land Transfer Tax:: The land transfer tax is a provincial tax that is assessed on property when it changes ownership from one party to the other. The amount of tax varies depending on the selling price of the property. First time home buyers may be eligible for a rebate (link to rebate form) on this tax. Click here to see current rates.
Prepaid Property Taxes/Utilities:: To reimburse the vendor for prepaid costs such as property taxes, filling oil tank, etc.
Property Insurance:: The mortgage lender requires this because the home is security for the mortgage. This insurance covers the cost of replacing the structure and its contents. Property insurance must be in place on closing day.
Water Quality Inspection:: If the home has a well you will want to ensure the quality of the water has been tested to ensure the water supply is adequate and the water is potable.
Legal Fees and Disbursements:: Must be paid on closing. Your lawyer will also bill you for the direct costs of checking the legal status of your property. Fees and cost will vary depending on your lawyer.
Title Insurance:: Your lender or lawyer may suggest title insurance (www.firstcanadiantitle.com) to cover loss caused by defects of title to the property.

If you feel you cannot cover the entire up front costs you can ask your lender for a loan. Remember that payments for this loan amount will be based on a 12 month repayment period.

Other Costs

Besides up front costs, there are other expenses to consider.

appliances - check to see what's included with the house
gardening equipment
snow clearing equipment
window treatments - check to see what's included with the house
decorating materials
hand tools
moving expenses
renovation or repair costs
service hook-up fees - you may be required to pay deposits on utilities such as cable, gas, telephone, etc...
condominium fees - you may have to make the initial payment for these fees

Use The Home Purchase Cost Estimate Table To Estimate Your Own Buying Costs

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What Should I Buy?

Your Current And Future Needs

Before you start searching for a home you need to think about your needs, both now and in the future. Here are some things to consider:

size requirements: Do you need several bedrooms, more than one bathroom, space for a home office, a two car garage?
special features: Do you want air conditioning, storage, or hobby space, a fireplace, swimming pool? Do you have family members with special needs?
lifestyles and stages: Do you plan to have children? Do you have teenagers that will be moving away soon, will you retire soon?

Try to buy a home that meets most of your needs for the next five to ten years, or find a home that can grow and change with your needs. Click here to complete a home feature checklist. This will help you to determine home features most important to you. By clicking submit (optional) the form will be submitted to me to select listings for you to view that are most suited to your lifestyle.

Choosing A Location That Is Right For You

Even if the home that you choose has everything that you need, the location might not be appropriate. When deciding where to live you should take the following things into consideration.

whether you want to live in a city, town or even a rural location
where you work and ease of commute
where your children will attend school and how they will get there
whether you need a safe walking area, or recreational facility such as a nearby park
how close you would like to be to family and friends

New Home, Previously Owned Or Build Your Own

When thinking about the type of home you want the first thing you should consider is whether you want a previously owned home or a new home. Here are some characteristics that may help you to decide.

New Home

personalized choices: You may be able to upgrade or choose certain items such as siding, flooring, cabinets, blinds, electrical fixture, etc.
up to date with the latest codes and standards: The latest building codes, electrical and energy efficiency standards will be applied.
maintenance costs: Lower maintenance costs because everything is new and many items are covered by warranty.
building warranty: Home builders warranty is available through Tarion. This can be important is a major system such as plumbing or heating breaks down. This warranty does not apply if you build the home yourself.
taxes: Taxes such as GST will be applicable but depending on arrangements with your builder and the cost of the building you may be eligible for a partial rebate. The Canada Revenue Agency website lists programs that may benefit you (www.cra-arc.gc.ca/tx/bsnss/sgmnts/cnstrctn/bldrs-eng.html).
extra costs: You may have to pay extra if you want to add a fireplace, plant trees, sod, or pave your driveway. Make sure you know exactly what's included in the price of your home.

Resale Home

easy access to services - probably established in a neighborhood with schools, shopping malls, and other services.
landscaping is usually done, and fencing installed - previously owned homes may have extras such as fireplaces or finished basements.
no GST - You don't have to pay GST unless the home has been renovated substantially, and then taxes are applies as if it's a new home. See the Canada Revenue Agency website (www.cra-arc.gc.ca/tx/bsnss/sgmnts/cnstrctn/bldrs-eng.html) for details.
possible redecorating and renovations - You may need to redecorate, renovate or do major repairs such as replacing a roof, windows and doors.

Building Your Own Home

Some people prefer the challenge and flexibility of building your own home. On one hand you can get exactly what you want in terms of size, design, location, quality of material, levels of energy efficiency, etc. However you should expect to invest lots of time and energy.

Deciding on the Type of Home to Buy

There are many types of homes to choose from and each has its advantages and disadvantages. Think about your needs before making a decision. Don't forget to look beyond the walls. The environment surrounding your home can be almost as important as the environment inside of it.

Single Family Detached: The most popular style and the most solid investment. It is a free-standing home which sits on its own lot thereby offering a greater degree of privacy.
Semi-Detached: A single-family home that is joined to another one by a common wall. It can offer many of the advantages of a single-family detached home and are usually less expensive to buy and maintain.
Duplex: Two units - one above the other or side by side. The owner usually lives in one unit and rents the other.
Row House or Townhouse: One of several types of single-family homes joined by common walls. It offers less privacy than a single-family detached home but still provides a separate outdoor space. These homes can cost less to buy and maintain.
Link or Carriage Homes: Houses joined by garages or carports which provide access to the front and back yards. Builders sometimes join basement walls so that link houses appear to be single-family homes on small lots. These houses can be less expensive than single-family detached homes.
Manufactured Home: A factory-built home that is transported to your chosen locations and placed on surface-mounted foundations. The term manufactured home had replaced the term -mobile home.
Modular Home: Also a factory-built home constructed in compliance with local building codes. The home is typically shipped to your location in two or more sections. It may or may not have a longitudinal sub-frame.
Condominium: Refers to a form of legal ownership as opposed to a style of construction. Condominiums can be high-rise residential buildings, townhouses complexes, individual houses and low=rise residential buildings.

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What Professionals Should You Call On

Because purchasing a home is probably the biggest investment you will ever make, you'll definitely want a team of professionals working with you throughout the process.

The Real Estate Agent

No one will play a more important role in helping you find a home than your real estate agent. Your real estate agent's job is to:

Help you find the ideal home.
Write an Offer of Purchase and Sale
Negotiate on your behalf to help you get the best possible deal.
Provide you with important information about the community arrange and coordinate the home inspection and essentially save you time, trouble and money.

When the time comes to select a real estate agent, don't be afraid to ask questions - especially about any possible service charges. Vendors normally pay a commission to the agent but some agents charge buyers a fee for their services. Use the Checklist for Evaluating Real Estate Agents at the end of this Step to help you choose your real estate agent.

If you would like to know more about a real estate agent's ethical obligations, you can visit the Canadian Real Estate Associations' website www.Crea.ca or call your local real estate association. Visit the North Bay Real Estate Board's website www.nbreb.com.

The Lender or Mortgage Broker

If you haven't already gone through the mortgage pre-qualification process, you will need to find a good lender to assist you during the purchasing process and for a long as you have your mortgage.

Remember that many different institutions lend money for mortgages, such as banks, trust companies, credit unions, caisses populaires, pension funds, insurance companies and finance companies. It's a good idea to shop around and speak with more than one lender because terms and options will vary.

Some people find it helpful to use a mortgage broker. Mortgage brokers don't work for any specific lending institutions. Their role is to find the lender with the terms and rates that will best suit the buyer.

To find a lender or mortgage broker, you can:

Get a referral from your real estate agent, family members, friends or other professionals.
Contact the Canadian Institute of Mortgage Brokers and Lenders at 1-888-442-4625 or visit their website at www.cimbl.ca.

The Lawyer

You need a lawyer to protect your legal interests such as ensuring the property you are thinking of buying does not have any building or statutory liens or chares or work or clean-up orders associated with it. He or she will review all contracts before you sign them, especially the Offer to Purchase. Having a lawyer involved in the process will give you peace of mind and ensure that things go as smoothly as possible. Law associations (link here) can refer lawyers who specialize in real estate law.

Lawyers' fees range widely and depend on the complexity of the transaction. Shop around for rates and use the following checklist for selecting a layer:

Remember that a lawyer:

should be a licensed full-time lawyer
should be local and understand real estate laws, regulations and restrictions
should have realistic and acceptable fees
can explain things in plain language

The Home Inspector

You should consider having any home you are thinking of buying inspected by a knowledgeable and professional inspector.

The home inspector's role is to inform you on the property's condition. He will tell you if something is not functioning properly, needs to be changed or is unsafe. You will also be informed of repairs that need to be done and he/she may even be able to tell you where there may have been problems in the past.

Every inspection should include an evaluation of at least the following:

foundation
doors and windows
roof and exterior walls
attics
plumbing and electrical systems
heating and air conditioning systems
ceilings, walls and floors
insulation
ventilation
septic tanks, wells or sewer lines
any other buildings such as detached garage
the lot, including drainage away from buildings, slopes and natural vegetation
overall opinion of structural integrity of the buildings
common area (in the case of a condominium)

There is presently no uniform certification and no requirement for home inspectors to take any courses or to have passed any tests. Anyone can say that they are a home inspector. However, a good home and property inspector generally belongs to a provincial or industry association such as the Canadian Association of Home and Property Inspectors (www.cahi.ca). Before deciding on a home inspector be sure to ask if the inspector has liability insurance in the event of errors or omissions in the home inspection.

The Insurance Broker

An insurance broker can help you with your insurance needs, including property insurance and mortgage life insurance. Lenders insist on property insurance because your property is their security for you loan. Property insurance covers the replacement cost of your hoe, so premiums may vary depending on its value.

Your lender may also suggest that you buy mortgage life insurance. Mortgage life insurance provides coverage for your family should you die before your mortgage is paid off. This type of insurance is often available through your lender, who then simply adds the premium to your regular mortgage payments. However, you may want to compare rates between both an insurance broker and your lender.

Be careful not to confuse property or life insurance with mortgage loan insurance which may be required for a high-ratio mortgage.

The Appraiser

Having an independent appraisal done on a property before you make an offer is a good idea. It will tell you what the property is worth and help ensure that you are not paying too much. Your lender can also ask for a recognized appraisal in order to complete a mortgage loan.

The appraisal should include an unbiased assessment of the property's physical and functional characteristics, an analysis of recent comparable sales and an assessment of current market conditions affecting the property.

Your real estate agent may be able to refer an appropriate professional.

The Land Surveyor

If the seller does not have a Survey, you will probably need to get one for your mortgage application. If the Survey in the seller's possession is older than five years, it will probably need to be updated. Remember that you must have permission from the property owner before hiring surveyor to go onto the property. Ask your real estate agent to help co-ordinate this with the owner.

The Builder/Contractor

If you are buying a newly constructed home or require renovations to a resale home, you will have to hire a builder or contractor. Here are some things to keep in mind when choosing one:

ask for references and talk to other customers about the builder's performance
check with Tarion Warranty Corporation (www.tarion.com) to see if the builder has unresolved warranty claims against them
visit other housing developments that the company has built
ask builders or contractors if they are members of the North Bay Home Builders Association (www.northbayhomebuilders.com) or ask for a provincial license number

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Guaranteeing and co-signing a loan are different

If you guarantee a loan for someone who borrows money (called the debtor), the lender must first demand payment from the debtor, before going after you, the guarantor. But if you co-sign a loan, you are just as responsible to pay the loan back as the debtor is. So the lender can demand payment from you before, or even instead of, demanding payment from the debtor.

Steve Dreany - Legend Real Estate Inc. - REMAX