First time home buyers

[fvkasm2x]

So I've read multiple articles online about buying a home for the first time.

Common mistakes, helpful suggestions, etc...

What are some of YOUR tips, assuming you've done the dance before.

We've just been pre-approved for X amount. We've found a real estate agent who has been very helpful. And yet we still feel scared, overwhelmed, etc...

How do I sort through the "fluff" given to me by various professionals. Not all of the info they give me is in my best interest, right?

[kgcayenne]

Visit the houses you are interested in at various times of the day to see what type of people you will be living with.

[coffeeFreak]

There are many, many added costs when purchasing a home so never, never over extend you budget and don't be pressured into buying anything!

Although it sounds like you have researched this stuff, I thought I'd add this list from Remax anyway. When we purchased our first house we had no idea how many extra costs there were.

In preparing to buy your first home, you need to budget for expenses that will be incurred up-front in the process including:

Deposit. This is part of your down payment and must be paid when you make an Offer to Purchase. Deposits are usually around 1% but can be as high as 5% of the purchase price depending on the area. Sellers may request that the deposit be increased once all conditions have been satisfied.

Down Payment. At least 5% of the purchase price is usually required for a high-ratio mortgage and at least 20% of the purchase price is usually required for a conventional mortgage.

Mortgage Loan Insurance Premium. If yours is a high ratio mortgage (less than 20% down payment), you may need mortgage loan insurance. To get this insurance, you will be asked to pay the required insurance premium. Your lender may add the mortgage insurance premium to your mortgage or you can pay it in full upon closing. Mortgage loan insurance helps protects lenders against mortgage default, and enables consumers to purchase homes with a smaller down-payment — with interest rates comparable to those with a 20% downpayment.

CMHC Mortgage Loan Insurance. The amount of the premium varies and can range between 0.65% and 2.75% depending upon how much of the purchase price/home value is financed with a mortgage loan.

Appraisal Fee. Your mortgage lender may require the property be appraised at your expense. An appraisal is an estimate of the value of the home. The cost is usually between $250 and $350 and must be paid when you contract for those services. Some banks will waive this fee in return for your mortgage which is another reason to shop around.

Home Inspection Fee. A satisfactory home inspection is often an important condition of the Offer to Purchase. A home inspection is a report on the condition of the home and generally ranges around $500, depending on the complexities of the inspection. Larger or older homes may cost more, especially if there is any suspicion of latent defects.

Land Transfer Tax. You have to pay this provincial tax upon closing. The cost is a percentage of the property's purchase price and varies by province. Use our calculator on http://www.remax-western.ca .

Prepaid Property Taxes To reimburse the vendor for pre-paid costs (if any).

Property Insurance. The mortgage lender requires this because the home is security for the mortgage. This insurance covers the cost of replacing the structure of your home and its contents. Property insurance must be in place on closing day.

Survey or Certificate of Location Cost. The mortgage lender may ask for an up-to-date survey or certificate of location prior to finalizing the mortgage loan. If the seller does not have one or does not agree to get one, you will have to pay for it yourself.

Water Quality Inspection. If the property has a well, you will want to have the quality of the water tested to ensure that the water supply is adequate and the water is potable. This should be a condition on your Offer to Purchase.

Legal Fees and Disbursements. Must be paid upon closing and cost a minimum of $500 (plus GST).Your lawyer will also bill you for any disbursements they incur such as land titles costs to check on the legal status of the purchased property.

Title Insurance. Title insurance covers loss caused by defects of title to the property and may be recommended by your lawyer.

Costs After Possession:

Appliances. Check to see what comes with the house, if anything.
Gardening equipment.
Snow-clearing equipment.
Window treatments. Check to see what comes with the house.
Decorating materials. Paint, wallpaper, flooring and tools for redecorating.
Hand tools. You will need some basic hand tools for your new home.
Dehumidifier. May be required to control moisture levels, especially in older homes.
Moving Expenses including van rental and boxes
Service Hook-Up Fees. Charged for utilities. You may be required to pay a deposit for utilities such as telephone and heating services.
Condominium Fees. You may have to make the initial payment for these monthly fees.
Homeowner's association fees. Some subdivisions have an annual or monthly fee to maintain recreation facilities.
Repairs, upgrades, renovations. Depending on the condition of the home you buy, remember to budget for the work it will take to make it move-in ready.
Household items. As a first time buyer you may need any number of household items such as trash cans and shower curtains.
http://www.remax-western.ca/buying-costs

[NAB]

Start small, ...and own your land first and foremost!

Nab

[Captain Awesome]

Get as much as possible for the down payment. Aim for 20% min.

[fvkasm2x]

Thanks CoffeeCanuck, that's a good piece.

I hadn't heard of 2 of the things on there, good to know.

Captain:

Get as much as possible for the down payment. Aim for 20% min.

Would love to pay 20% down. However, anything over $300 grand and you've got a considerable chunk of coin if you want to hit that. I've got what I thought was a nice chunk of change, but nowhere near 20% down. 10% is do-able.

[Logitack]

i am sure you know this but recent changes by the federal govt requires banks and other financial institutions to only have mortgages with a minimum of 20% down payment AND 25 year amortization period. That is not to say you cant still get a mortgage, but you will have to pay extra for a mortgage guarantee (cmhc mortgage loan insurance) either wait until you get the 20% down payment, reduce your expectations on a home, or get into the condo market where prices have plummeted.

if at all possible, do not rely on home inspection by these home inspection companies...most are rip offs. get your own electrician, plumbing/heating and building professional, and roofer to do the inspection. it will cost you more, obviously, to do that, but peace of mind should be a factor. one only has to watch the series on HGTV and the mike holmes show, holmes inspection, to understand that home inspection companies do not provide value for services rendered.

[SmokeOnTheWater]

CoffeeFreak's post was excellent.
Even if you do all your homework and do everything right, it is normal to be worried and apprehensive until you have the house keys in your hand.
I promise you it will all go away once you enter the house.
P.S. Don't buy a house you can't afford just to keep up with the Joneses. Also real estate agents don't really care if you can make the mortgage payments or not once the house is sold ( bought ), don't let them push you into buying too big.

[Lady tehMa]

Home inspection is something I'd recommend, especially with the number of former grow-ops in this area.

Late 60's early 70's homes are usually not bad, but watch for aluminum wiring.

[coffeeFreak]

Home inspection is something I'd recommend, especially with the number of former grow-ops in this area.

Late 60's early 70's homes are usually not bad, but watch for aluminum wiring.

Asbestos and lead paint is a big concern with the older homes.

[coffeeFreak]

How's the house hunting going fvkasm2x?

[fvkasm2x]

How's the house hunting going fvkasm2x?

Good and bad. We've narrowed it down to 7 possibilities. We had 9, but the top 2 on our list sold on Friday.

Sucks because we REALLY wanted to view those homes. Going to see some tomorrow and Wednesday... then hopefully pick a winner.

[coffeeFreak]

Good luck! Here's a link with some good information, pay special notice to "what to include in the offer". Also, Realtor's fees can be negotiated, or that's been my experience -- even a 1% drop can be a good savings.

This script covers buying a house. If you’re buying a condominium or townhouse, you should also check script 407, called “Buying a Condominium.”

Should you have a lawyer?
A house is probably the most expensive thing you’ll ever buy. And buying a house is complicated. The potential for disaster is great – one mistake could cost a lot. As well, there are risks in real estate, and when buying or selling, you should be careful. For example, people can:

use a false identity to pretend they are the true owner of a property and sign documents fraudulently.
“flip” the same property through back-to-back transactions to falsely inflate the asking price of the property.
These are just two examples of many possible types of real estate fraud. To protect yourself, you should use a lawyer, instead of trying to do it yourself.

Be careful – there are many other costs besides the purchase price
There are many extra costs when you buy a house. One is the property purchase tax (or PPT), though you may not have to pay this tax if this is your first home. For more information, call the Property Transfer Tax office of the BC government in Victoria, at 250.387.0604. Outside Victoria, call Enquiry BC at 604.660.2421 in Vancouver and 1.800.663.7867 elsewhere in BC and ask for the Property Transfer Tax office. Or check the website, at http://www.gov.bc.ca/sbr. Click on “Individuals”, then on “Property Taxes” and finally on “Property Transfer Tax”.

Another cost is the 12% Harmonized Sales Tax (or HST). It applies to the legal fees and some of the other costs you pay. It also applies to the whole purchase price if you’re buying a new house or one that’s been substantially renovated. You may be able to get an HST rebate if you’re buying a new home. There are also registration fees in the Land Title Office, and usually legal fees to prepare and register the conveyance (the transfer of title) and the mortgage.

So you may have to pay several thousand dollars more than the purchase price. Before you make an offer to buy a house, decide if you can afford both the purchase price plus all the other costs.

Do you need a realtor? Who pays the realtor?
You may decide to look for a house yourself or you may use a professional to help you. If you decide to use an agent, pick one that you trust and who you’re comfortable with. The seller pays both real estate agents, the one for the seller and the one for the buyer. If there’s no sale, there’s usually no commission paid to the agent. If you don’t use an agent, good places to start looking for houses are local newspapers and the multiple listing website at http://www.mls.ca.

You have to make a written offer
If you find a house you want to buy, you have to make a written offer to buy it. Oral agreements for land may not be valid. The realtor provides the form, usually from the local real estate board. It’s called a contract of purchase and sale. Read it carefully, because this contract is legally binding. If there’s anything in it that you don’t like or doesn’t apply, cross it out. Then initial the change and get the seller to initial the change too.

What should you include in the offer?

1. Give the seller a time limit to accept your offer – normally a day or so. If the seller doesn’t accept it by then, your offer expires.
2. If there are things in the house you want the seller to include in the price – such as appliances, curtains, mirrors or chandeliers – add a sentence that the purchase price includes these items and make sure each item is listed.
3. Make your offer conditional on the house passing an inspection by a professional building inspector. Use a “subject to” clause to do this – a real estate agent or a lawyer can help you with the wording. While the seller usually gives you a “Disclosure Statement” listing any potential problems the seller knows about, you might still want your own inspector.
4. If you have to sell your own home before you can buy the new one, make your offer conditional on selling your current house by a date that you decide.
5. If you need a mortgage, make your offer “subject to” (or conditional on) getting satisfactory financing, even if the bank has already “pre-approved” a mortgage amount.
6. Include a statement saying the offer is “subject to” your lawyer’s approval, so your lawyer can check the offer before it becomes a binding contract.

How much should you pay as a deposit?
When you make an offer, you’ll have to make a deposit, which you’ll want to keep as low as possible. The normal deposit is 5% to 10% of the purchase price, which should be paid to the realtor in trust, not the seller.

What if the seller makes a counteroffer?
The seller may accept your offer, or may cross out some of your terms and add new ones. Once the seller changes your offer in any way, it becomes a counteroffer, or a new offer, by the seller. That cancels (or revokes) your original offer. Then you must decide if you want to accept the new offer or make another counteroffer of your own. You do not have to accept a new offer or a counteroffer.

What do you need to get a mortgage?
As soon as you and the seller have signed an offer or counter-offer, you should start to get a mortgage. Shop around to get the best terms, and promptly give the mortgage company any documents and information it needs. Usually, a mortgage company will need an appraisal of the house (that you have to pay for) before it promises to give you the mortgage. And it may need a survey certificate showing that the house is within the property boundaries, or “title insurance”, before the completion date (when the property transfers from the seller to you and you become the owner).

Once you’ve arranged your financing, ask the mortgage company to give you a written commitment letter promising to give you the mortgage. The lawyer doing the mortgage can often do your legal work for the purchase too.

What about title searches and insurance?
Your lawyer will do a title search. It shows the registered owner of the property and any charges, such as mortgages, liens, or easements, registered against it. Any existing mortgages and liens will have to be paid off by the seller before you buy the house.

Also, talk to your lawyer about when you should get fire and liability insurance on the house and how much you should get. The mortgage company will require proof of this insurance.

When do you remove the “subject-to” clauses?
When you’re satisfied with the results of the subject-to clauses or conditions – for example, the house inspection is fine and you’ve arranged a satisfactory mortgage – you should give written notice to the seller that you’re removing the conditions. Once you do this, the offer or counter-offer becomes a legally binding contract. If you can’t meet the conditions and don’t remove them, the contract ends and you don’t have to buy the house.

What is the “statement of adjustments”?
Before the completion date, your lawyer will give you a document called the statement of adjustments. This document shows all money coming in and going out. It covers things that you and the seller share, like property tax. The most important figure for you is the amount you need by the completion date. This is the money you have to pay, in addition to your mortgage.

How do you finish the purchase?
Normally, your lawyer prepares the transfer documents and sends them to the seller’s lawyer. The seller signs the documents and the seller’s lawyer returns them to your lawyer. Then, when your lawyer has your cash and the promise of the mortgage money, your lawyer registers the transfer documents and the mortgage with the Land Title Office. When the Land Title Office confirms the registration, and the mortgage company has given your lawyer the mortgage money, your lawyer gives the money to the seller’s lawyer. The realtor usually gives you the keys to the house once the registration is finished.

More information
Read the booklet called “Buying a Home in BC Information Booklet” prepared by the Real Estate Council of British Columbia. For a free copy, call them in Vancouver at 604.683.9664 or toll-free 1.877.683.9664 elsewhere in BC. Or go to their website at http://www.recbc.ca and click on “Consumer Info” and then “Publications.” For more information on mortgages, check script 408, called “Mortgages and Financing a House Purchase.”

[updated January 2011]

http://www.cba.org/bc/public_media/housing/406.aspx

[fvkasm2x]

Good link. Thanks

ANother question:

When does a home inspection get done? We find a guy/company to do this and they can arrange for an inspection at their leisure? Should we be with them during the inspection?

[Captain Awesome]

When does a home inspection get done? We find a guy/company to do this and they can arrange for an inspection at their leisure? Should we be with them during the inspection?

Usually after you put in an offer but you can arrange for a prior one too. Usually when you put in offer, there are "subject to" clauses - "subject to available funding" meaning you'll arrange for a mortgage or "subject to inspection" meaning it will pass an inspection with no issues. RE agent will walk you through it.

- Put in an offer with clauses
- Offer gets accepted (or not)
- If accepted, you can start removing clauses - perform an inspection, arrange for mortgage
- Remove all clauses
- Close the deal

You don't really have to be there unless you have extensive knowledge of home construction and can offer expertise. Just let the guy do his thing, he'll give you a summary. If it doesn't pass the inspection, your offer is void.

PS: DON'T go with RE agent recommended inspector to avoid conflict of interest. Get someone else, hopefully a real shark. RE agents will never recommend somebody very anal as it can stop a deal from closing. They all swap recommendations and don't want to step on each others toes to guarantee future business.