Congratulations! You’re buying a home! Here are 8 important things you need to think about before you get started.
- Find out how much house you can afford
- Research neighbourhoods in your price range
- Get pre-approved for a mortgage
- Plan your dates
- Find a great Realtor
- Research closing costs
- Find a BC Notary or lawyer
- Do Inspections and Investigations
Step 1: Find out how much house you can afford
Emotions can take over when buying a home, so it’s important to create a budget and stick to it.
It won’t do any good to find the perfect house only to learn that you can’t afford to buy it. Or even worse, or to keep it.
First, determine how much you can put towards a down-payment. The more you can put down on the property, the easier your ongoing mortgage payments will be.
Next, determine what your costs will be for running the kind of home you want to buy. If you are buying a strata, what can you afford to pay each month in strata fees? What will your utilities costs be in the summer versus the winter? What kinds of property taxes will you have to pay each year?
There are a number of online calculators can you can use to determine how much your mortgage payment will be. These calculators use the price of the home and your down payment amount. This information can help you set a budget for expenses, utilities and maintenance fees.
Be very firm with yourself when you are working out your down payment and maintenance budget. It is very easy to get carried away when you are house-shopping. You need to be really clear about what you can afford. You do NOT want to spend a lot of money on buying a home, only to find out you cannot afford to live in it.
Step 2: Research neighbourhoods
Now that you have decided how much house you can afford, it’s time to think about neighbourhoods. Falling in love with a home in a neighbourhood with no amenities, or transportation, will make your daily life harder.
Start with what you need in your neighbourhood – make a list of things that are important to you, and a list of things you do NOT want to have in your new neighbourhood.
Need good schools? How are the schools in that neighbourhood? What about before- and after-school care?
Need access to public transport? Want to be able to walk to work?
Want to be able to shop in all the new and cool foodie places? Will your local box grocery store going to be enough?
Now think about house prices in these neighbourhoods – how do they fit in with your budget? Here’s where you need to be very strict with yourself – your budget has to be deciding factor. If you cannot afford to live in a neighbourhood you have fallen in love with, then you need to honour that reality. Choose another neighbourhood, or re-assess the kinds of properties you are looking at in that neighbourhood.
Step 3: Get pre-approved for a mortgage
Find a good mortgage broker, or work with your bank to get pre-approved for a mortgage.
Getting pre-approved for a mortgage means a lender has said “yes, we can see loaning you money if all of these conditions are true or met”. It is not a guarantee that the lender will actually go through with the mortgage. Lenders can change their minds right up to the last date.
Going through a pre-approval process means you will submit all kinds of information about your wages, savings and debts. Your mortgage broker or bank will work through all of that information to confirm how much mortgage you can afford, and what that mortgage will cost you each month.
Step 4: Plan your dates
Think carefully about when you want to be in your new house, and how much time you will need to pack your things where you are, move them and get unpacked.
Most people move at weekends or the end of the month; this makes finding movers and other helpers difficult. Can you move in the middle of the week, or in the 3rd week of the month instead?
If you are relying on money from a family member, or from your savings accounts, make sure you are getting that money in your hands as soon as you can – do not leave it to the last moment to get your money in order.
In some cases, your lender will require you to have your down-payment in your accounts for a minimum of 3 months, or to sign gift letters if the money is coming from a family member.
If you are relying on money from the sale of another property, try to leave at least one day in between the sale of one property and the purchase of another. This gives everyone enough time to get the sale closed and the money transferred in time for your purchase.
Step 5: Find a great Realtor
Realtors can help you save lots of time and cost when you are buying a home. They can refer you to a good mortgage broker, or BC Notary or lawyer if you don’t have one already. They can help you research neighbourhoods.
It’s important for you to spend a bit of time with your Realtor at the beginning talking about your wants and needs, and your budget. Your Realtor needs to know the parameters you are working within in order to get you what you need.
Be very clear with your Realtor when you have questions – if you don’t understand something, it’s important that you feel comfortable enough to ask. This will be one of the biggest purchases you make in your life – you want to make sure you ask all of the relevant questions.
There are two things you can look at when choosing a Realtor – referrals from your family and friends, and who you see as a big name in your community. Sometimes using a well-known Realtor means they will have knowledge about your desired neighbourhood that a less busy Realtor might have, but there is a trade-off in availability.
Referrals from family and friends is often a safer way to go, because if your family and friends used them and liked them, you will likely have a similar experience.
If you don’t have anyone in your life who has already used a Realtor, you can find a Realtor here.
Step 6: Research closing costs
Before you sign that contract, think about the closing costs you will encounter when you are closing your deal. This includes legal costs, but also moving costs.
For example, common legal closing costs might include:
- Property Transfer Tax
- paying your share of the property taxes for the year
- adjusting for your share of any strata or park management fees
- paying for various searches your notary public or lawyer will need to do for you – title insurances, proof of insurance, tax searches
- ordering surveys or inspections
Common moving costs might include:
- the cost of the movers themselves
- packing materials
- storage costs if you can’t get into the property when you expected you would
- deposits for utilities in your new place
- hotels for a night or two if your deal doesn’t close when you expected
- sitters for kids or pets
- furniture or supplies for the new home
Your notary public or lawyer will be happy to give you an estimate for your purchase – just call!
Step 7: Find a Notary Public or lawyer to help complete the purchase of your home
Word of mouth is often a good way to find a BC Notary or lawyer; your Realtor may also be able to refer you.
You are looking for them to provide you what we call “conveyancing services” – the term for the legal paperwork required when you are buying a home.
This paperwork includes the documents needed to get your new home registered in your name, and your mortgage registered on title to the property. Depending on the timing and complexity of your deal, this could be more or less expensive.
You want to give your BC Notary or lawyer at least 2 weeks between the time you sign your contract and the completion date. Anything quicker than that and you may have to pay additional costs for a quick close.
Your BC Notary or lawyer will want to see you to sign documents up about 3-5 days before the completion date. Make sure you are in town and available for signings to keep your costs down.
In BC, you can use a BC Notary or lawyer for your conveyancing needs – both are legally allowed to do this work and give you legal advice.
If you decide to use a lawyer, however, make sure you pick a lawyer who normally does real estate work – don’t pick a family law lawyer, as they won’t have the training and experience to help you most efficiently.
All BC Notaries are very well educated in the law around conveyancing, can give you legal advice, and carry substantive errors & omissions insurance.
You can find one of our great BC Notaries here.
Step 8: Do your inspections & investigations
Don’t just fall in love with a house and sign on the dotted line.
You will want to do some inspections and investigations, such as:
- a survey: tells you how big your property is and where the various building are on it – useful if you want to build an addition or carriage house on the property, or put a pool in
- a home inspection: identifies various physical issues about the home that may need repairs, or cost money to maintain; can also confirm the square footage of the house if that is important to you
- well or septic inspections: if the property is on a well water system, or has a septic tank, you should have those inspected to make sure they work the way you expected
- geotechnical surveys: useful if the property is on an incline, to ensure the safety of the buildings, and that they conform to zoning requirements
Just because you get an alert on one of these issues doesn’t mean the end of your deal – it just means you now know what additional costs you might have to deal with, and whether you can budget for those items or not.
Never fall in love with a house so much that you ignore any red flags, however – you want to always go in “eyes open” so you don’t end up in financial ruin.
Have more questions about buying a home?
Call us – we’d be happy to answer any questions you might have.October 23, 2019 10:28 am
Tags: buying a home, buying a new home, mortgage broker, real estate, real property