Step 1: Financing
Unless you are able to pay cash for your Real Estate purchase, you will require financing. Prior to looking at homes, you will want to know how much you are qualified to borrow to ensure you are looking in the right price range. Buying a home is likely to be the most expensive purchase you will ever make and choosing the right mortgage can save you thousands of dollars. But how to choose? Banks, Credit Unions, Finance companies and private lenders offer a vast array of mortgage products. You can speak to individual lenders on your own to learn about their products or you can use the services of a mortgage broker. Mortgage brokers work for their clients rather than for a specific financial institution, and in most cases their fee is paid by the lending institution where the mortgage is placed, so there is no cost to the client. In addition, the lenders offer Mortgage Brokers discounted rates and these discounts are passed on to the client. A lender or Mortgage Broker can have you pre-approved for a mortgage and offer you an interest rate hold for up to 120 days. Your lender or Mortgage Broker will discuss the type of documentation require from you to verify your income and the availability of funds for your down payment and closing costs.
Step 2: Estimating Your Closing Costs
In a Real Estate transaction, the bulk of the costs are paid by the Buyer. These costs include but are not limited to the following:
To show you have sufficient funds available, financial Institutions use a “Rule of Thumb” of 1.5% of your purchase price. This is the amount they want to see over and above your down payment. It is important to know that this is just a rough estimate and your actual costs may be more or less.
Step 3: What Are Your Needs?
Once you have a price range in mind, the next step is to think about what you are looking for in a property. If you are purchasing land only, your major consideration is location.
Step 4: Working with a Realtor
Your Realtor is the most important professional you will rely on when purchasing a home. She will show you available houses, help you with the negotiation process, refer you to other professionals (such as lenders/mortgage brokers, appraisers, home inspectors, insurance agents and lawyers), and guide you through the entire home buying experience. A good Realtor will explain each step of the process to you and be there to answer any questions you may have.
Step 5: House Shopping
Based on your desired purchase price and your housing needs, your Realtor will arrange for you to view available homes. It is best to wear comfortable, slip-on shoes as you may be repeatedly removing them. It is a good idea to take notes while viewing, as it is easy to forget what you liked about a property, or what you might like to have included, when looking at multiple homes. The first visit to a home may only last ten or fifteen minutes. If you are interested in a particular home, ask your Realtor to schedule another viewing appointment to spend more time there.
Step 6: The Offer
Once you have decided on a particular home, it is time to draw up and sign a Contract of Purchase and Sale. The most important components of the contract are:
After your offer is written, it will be presented to the Seller. The Seller has the option of accepting your offer, signing a counter-offer with changes, or rejecting your offer outright. Your Realtor will guide you through this process and keep you informed. It is common for offers to go back and forth several times, perhaps over several days, before terms are agreed upon.
Step 7: The Accepted Offer
Once you have an accepted offer, (both the Buyer and Seller have agreed on all terms of the contract), it is time to deal with any conditions or “subjects”. Normally, a contract is written with “subjects” to be removed within a short time frame, often ten to fourteen days. Some “subjects” are for a longer duration, such as “subject to the sale of another home”.
Step 8: Completion
Once all conditions have been met and your subjects have been removed, your Realtor will send appropriate documentation to your lawyer. Your lawyer will prepare the necessary paperwork to transfer the property into your name and, if applicable, have the lender’s mortgage registered on title. When the documents are ready, you will receive a phone call to arrange for an appointment to sign. The lawyer will also prepare a Statement of Adjustments. The statement has a debit side showing your purchase price, legal fees, taxes and adjustments. It also has a credit side showing the amount received from your lender, your deposit, and any credits for taxes or other adjustments. The bottom line will show the amount you are required to pay to complete the transaction. Your lawyer will ask you to bring in a certified cheque or bank draft for this amount.