Buying your first home?

If you are looking for a first home, you’ve probably been thinking about it for a while and hopefully saving for it too. Now that it’s time to start actively looking for a home in the London, Ontario area have you asked yourself the big questions?

Do you have the necessary financial management skills? If you saved a deposit for your first home then congratulations, you probably manage your finances well. It is important to keep in mind though that there will be new expenses with home ownership that were not part of being a renter.

What is your financial picture? It will be important to have a job and/or regular monthly income so that you can demonstrate to a lender that you are financially responsible.

Have you considered all the costs involved in home ownership, including mortgage payments, taxes, repairs, condo / HOA fees (if applicable), and maintenance?

Are you able to devote the time and money required for maintaining the home? When something in a home requires repairing or replacing it will be the homeowner’s responsibility to fix it. Typically, the 2 ways to do this are: To do it yourself, which means having the skills to perform the repair, and still having the money to cover the cost of repair items. Or to pay a professional to make repairs which will be more costly as you are paying for their labor and the cost of the items being repaired.

Have you been to a bank to see how much you will be pre-approved for a loan? Pre-approval gives you a number to work with and is based on the information you provide to the bank. Keep in mind that this is how much YOU will be approved for. A bank may still refuse to loan you the money if the house you wish to purchase does not meet the bank’s lending standards. Also, because pre-approval is based on the information you give to the bank about your financial picture, the bank may refuse to grant the loan if the documents they collect from you do not support the financial picture you painted for them during the pre-approval process.

Have you investigated first time home buying programs? Quite often there are programs to help first time home buyers purchase a house. This assistance could be in the form of tax rebates, money for closing, or other incentives to help a first-time home buyer afford a home. Here are some of the incentives currently in place:

HST New House Rebate allows you to recover some of the GST/HST paid for a new or substantially renovated house that is for use as your primary residence., when other conditions are met.

Home Buyer’s Plan allow a first-time home buyer to use funds from their RSP towards their first home.

Home Buyer’s Amount allows you to claim up to $10,000 for the purchase of a qualifying home if you or your spouse purchased a qualifying home and you did not live in another home inside or outside Canada in any of the preceding 4 years.

First-Time Home Buyer Incentive is a government subsidized loan where the Government of Canada provides a first time homebuyer with a shared-equity mortgage of 5% of a buyer’s purchase of a home or in some cases, 10% for the purchase of a newly constructed home.

Have you priced out movers vs renting moving equipment?

While looking for your new home make sure you have a Realtor that is acting in your best interests. Remember, that if you are in an open house that Realtor represents the seller’s interests and not yours. It will be important to engage a Realtor’s services to represent you as your buyer’s agent. Buying a house is both an emotional and a financial process. A realtor will help you navigate the issues that come up from the time you make an offer on a house until you close. There are many pitfalls that can come up and it is important to have a Realtor who can advise you to protect and defend your interests.

Below is a step by step guide of how the home buying process generally works:

Buying a home is an exciting but complex process, especially for first-time home buyers. Here’s a step-by-step guide to help you navigate the home buying process:

Step 1: Assess Your Financial Readiness Before you start looking at homes, evaluate your financial situation:

1.1. Check Your Credit Score: Obtain your credit report and ensure it’s accurate. A higher credit score can lead to better mortgage rates.

1.2. Determine Your Budget: Calculate your monthly income, expenses, and savings to establish a realistic budget for your home purchase.

1.3. Save for a Down Payment: Aim to save at least 20% of the home’s purchase price for a down payment. There are programs with lower down payment requirements, but a larger down payment can lower your mortgage costs.

1.4. Gather Financial Documents: Collect pay stubs, bank statements, tax returns, and other financial documents you’ll need for the mortgage application.

Step 2: Get Pre-Approved for a Mortgage Pre-approval helps you understand how much you can borrow and shows sellers you’re a serious buyer:

2.1. Research Lenders: Shop around for mortgage lenders and get quotes to compare interest rates and terms.

2.2. Complete a Mortgage Application: Submit your financial documents and information to your chosen lender for pre-approval.

2.3. Receive Pre-Approval Letter: Once approved, you’ll receive a pre-approval letter stating the loan amount you qualify for.

Step 3: Define Your Home Criteria Determine what you want in a home, considering location, size, style, and amenities:

3.1. Create a Wish List: Make a list of must-haves and nice-to-haves to help your real estate agent find suitable properties.

3.2. Research Neighbourhoods: Explore different neighborhoods and consider factors like schools, safety, and proximity to work and amenities.

Step 4: Find a Real Estate Agent Hiring an experienced real estate agent can simplify the process:

4.1. Interview Agents: Meet with potential agents to discuss your needs and evaluate their expertise in the local market.

4.2. Sign a Buyer’s Agreement: Once you find the right agent, sign a buyer’s agreement to formalize your working relationship.

Step 5: Start House Hunting Your agent will help you find suitable properties:

5.1. Visit Homes: Attend open houses and schedule private showings to see homes that match your criteria.

5.2. Evaluate Properties: Assess each property’s condition, potential for renovation, and whether it fits your needs.

Step 6: Make an Offer When you find the perfect home, it’s time to make an offer:

6.1. Review Comparable Sales: Your agent will help you determine an appropriate offer price based on recent comparable sales.

6.2 Submit an offer to the seller: When you submit an offer to a seller to purchase their home, they will respond in 1 of 3 ways:

1. The seller may accept your offer as written and you will move on in the buying process.
2. They may make a counteroffer. This means the seller was agreeable to some or all of your terms but requires some changes. The important thing to remember here is that you and the seller are still negotiating. When the seller submits a counteroffer back you may accept the offer and the process moves on, or you may submit a counter to the seller’s counteroffer. This process continues until either both parties agree on an offer or one or both parties decide to end negotiations.
3. The seller rejects the offer. If this happens, it only means that the seller found the offer unacceptable. Timing is important because if a seller is making a decision on accepting an offer by a certain time, it is possible to draft a second offer to present to the seller, but the seller might have already accepted another offer. This is why it is important to make your best offer first.

6.2. Negotiate Terms: Work with your agent to negotiate terms like price, contingencies, and the closing date.

Step 7: Perform Due Diligence After your offer is accepted, you’ll enter the due diligence phase:

7.1. Schedule Inspections: Hire professionals to inspect the home for any issues, such as structural problems or pests.

7.2. Review Disclosures: Carefully review the seller’s disclosures to ensure you’re aware of any known issues with the property.

Step 8: Secure Financing Finalize your mortgage and financing:

8.1. Submit Final Mortgage Application: Provide any additional information or documents required by your lender.

8.2. Lock in Your Interest Rate: Once you’re satisfied with the terms, lock in your interest rate to protect against rate fluctuations.

Step 9: Close on the Property You’re almost there! The closing process involves several steps:

9.1. Complete a Final Walk-through: Inspect the property one last time to ensure it’s in the agreed-upon condition.

9.2. Sign Closing Documents: Review and sign all necessary paperwork, including the mortgage documents.

9.3. Pay Closing Costs: Pay the closing costs, which typically include fees for the lender, title company, and escrow. *A good rule is to have approximately 1.5% of the sale price put aside for closing costs.

Step 10: Move In Congratulations! You’re now a homeowner:

10.1. Get the Keys: Receive the keys to your new home from the seller’s agent or attorney.

10.2. Settle In: Begin the process of moving in and making your new house a home.

Remember that the home buying process can vary by location and individual circumstances, so it’s crucial to stay informed, ask questions, and work closely with your real estate agent and lender throughout the journey. When you are ready contact us.