Should I have a plan in place before I begin the buying process?
Yes, this is very important. Every goal requires a plan. Buying a home is a very important decision and the preparation is crucial.. Your Sales Representative will help put together a systematic plan for you which will ultimately save you time and effort and minimize your level of stress throughout the process. Knowing how the process works ahead of time and what your needs are will provide a solid foundation going forward….and provide for a very enjoyable experience.
Should I speak to my lender about obtaining a full mortgage pre-approval prior to looking at homes to purchase?
Yes, this is a very necessary first step in the home buying process. Your pre-approval on paper is like a credit card with a spending limit. Your home search is based on your level of financing. Also, having your interest rate locked-in for 4 months protects you from interest rate increases. Being pre-approved also gives you strength in your negotiations with the Seller. Sellers typically do not want to entertain an offer on their property unless a Buyer has been fully pre-approved.
Should I use the full amount of financing the bank offers me?
It is very very important to prepare a personal budget as part of your initial preparation. Your mortgage pre-approval is based on your gross income. Your monthly expenses are paid from your net income. Therefore your personal budget is based on your net income. Know the amount of your net income left over at the end of the month that will be used for your fixed shelter costs ( principal , interest, heat, hydro, insurance, property tax, water/waste, condo fees) . Your Sales Representative should prepare a cash-flow analyses for you . The analyses will show you what purchase price range will be ideal based on your personal budget.
What does it cost as a buyer to use a sales representative?
There is no cost for a Buyer under a Buyer Representation Agreement to use a Sales Representative. The Seller pays the commission which is typically 5% split between the Listing Agent and the Buyer Agent.
Can my Sales Representative give me information regarding properties from other Companies?
Yes, if that other company is a member of Multiple Listing Service (MLS) which most companies are. For Sale By Owner ( FSBO) properties are not listed on MLS so a Sales Representative likely would not be able to provide information regarding them. However, with a Buyer Representation Agreement your Sale Representative may be able to help you purchase a FSBO.
What if I find a property on my own?
You should contact your Sales Representative and not the property owner or the Listing Agent. Having the address or MLS number is very helpful and will assist your Sales Representative in gathering information about the property. The Listing Agent is working on behalf of the Seller and does not have your best interests in mind.
What type of information will my Sales Representative need from me?
A Sales Representative will need any type of information regarding the property you are looking for that is important to you. For example; type of house, number of bedrooms, number of bathrooms, garage size, price and location are common criteria. Other considerations include; the school district and room sizes. Keep in mind that a search that is too specific may narrow your list of properties too much while one that is too broad may give you more properties to look at than you have time to go through.
Can I go to open houses without my Sales Representative?
Yes, it is a terrific way to research homes. However, you must inform the attending Sales Representative that you are already under a Buyer Representation Agreement.
How can I find out about new properties?
Your Sales Representative will enter your search criteria into the MLS system and you will be automatically emailed Realtor listings as soon as they come on the market or there is a price change. This is a terrific research tool.
What if I am unhappy and want to cancel my Buyer Representation Agreement?
Let the Sales Representative know why you are unhappy and see if you can work through the problems . If you cannot then the Sales Representative should accommodate your request.
Am I obliged to use the service providers that my Sales Representative recommends?
No, you can use whomever you would like. However, your Sales Representative is recommending for example a certain lawyer, lender or home inspector for a good reason; because he or she knows how that particular service provider works . That is extremely valuable and helps to minimize any turbulence during the home buying process.
Can I use my RRSP’s to use as a down payment to purchase my home?
Yes, under the Federal Government’s Home Buyers Plan (HBP) you and your partner can each use up to $25,000 of your RRSP funds . Essentially you are loaning yourself the funds and the payback period is 15 years interest free using straight-line amortization. Certain criteria apply so be sure to check them out first.
What is the minimum down payment required to purchase a home?
If the home will be your principle residence the minimum down payment is 5%. If you are purchasing an investment property that you will not be living in the minimum down payment is 20% .
Is there such a thing as a 0% down payment?
Yes, this is known as a “cash-back” mortgage. As an example the bank will give you cash equal to 5% of the mortgage principal with a six-year fixed rate mortgage. The interest rate charged is the posted rate not the discounted rate. Certain restrictions apply.
What’s the difference between a chattel and a fixture?
Chattels are items of personal property in a home . Examples: fridge, stove, washer, dryer, window coverings. Fixtures are items that are attached to the property. Examples: built-in shelving, broadloom and light fixtures. It is important to clarify on the agreement of purchase and sale which items are staying with the buyer and which items are going with the seller to save on costly misunderstandings.
What closing costs should I anticipate?
Outside of the cost of the home itself there will be closing costs due on your closing day. These costs may include: home inspection, termite inspection, appraisal fees, HST on your CMHC insurance, legal fees, provincial and city land transfer taxes, title insurance, survey, mortgage application fee, home insurance, adjustments for property taxes, mortgage interest rate and maintenance fees if purchasing a condo. Typically the closing costs can run anywhere from 1.5%-2.5% of the purchase price. Your Sales Representative should have prepared a closing cost spreadsheet for you in the initial buyer consultation.
Am I exempt from paying the Provincial or Toronto land transfer taxes?
If you have purchased a home anywhere in the world you are not exempt . If you are a first time buyer then you are exempt up to $400,000 of the purchase price in the City of Toronto and exempt up to $227,350 of the purchase price in the Province of Ontario.
Can I back out of an agreement of purchase and sale once it has been accepted by the seller?
The agreement once accepted is a binding contract. There is a risk of legal liability if you want to cancel the agreement.
What is the minimum deposit required?
Typically the minimum deposit required is 5% . A seller may refuse to accept your offer if a small deposit is proposed. The deposit will signify your interest in the property and a higher deposit shows the seller that you are taking the offer seriously . Your strong deposit can be used in your favour during negotiations. Typically the deposit is due 1 banking day after offer acceptance payable by a certified cheque or bank draft to the Listing Broker’s trust account.
What is mortgage insurance?
If your mortgage is “ high-ratio” ( exceeding 80% of the property’s value or less than 20% down payment) it must be insured by the Canadian Mortgage and Housing Corporation ( CHMC) or Genworth Capital. The insurance protects the lender in case you default on your mortgage. The insurance premium is added to your mortgage principal and amortized over the life of the mortgage.
What are the typical conditions in any offer?
Once you have found that perfect home it is time to make an offer provided certain conditions are met. These may include:
a) Financing-Even if you are pre-approved for a mortgage the property will require an appraisal to assure the lender that the price you are paying falls within accepted market value. The typical condition period is 5 banking days from offer acceptance.
b) Home Inspection- This condition provides an opportunity to have the property inspected by a qualified home inspector who will look for any MAJOR defects in the home. It is not common to have a condo apartment inspected as the structure is covered by the condo corporation. Condo townhouses are usually inspected. The typical condition period is 5 banking days from offer acceptance.
c) Condominium Status Certificate- This condition applies only to the purchase of a condominium. The status certificate is a financial snapshot of the condominium corporation. Your lawyer will review the documents to ensure the corporation is financially sound and meets all of the requirements under the Condominium Act. By law the property management company has up to 10 banking days to prepare the Status Certificate . The cost is a maximum of $100 and the Seller normally pays for this. Your lawyer will have 2 banking days to review the documents and provide an opinion.
What is the role of my lawyer?
Your Sales Representative will forward all documentation related to the purchase to your lawyer. Your lawyer will examine the status certificate in a condominium purchase. Your lawyer’s job is to certify good and marketable title to the property free of encumbrances , liens and judgments. Your lawyer will also receive instructions from your lender and prepare the draft mortgage documents. The lender will release the funds to the lawyer once the documents are signed. Some lenders will hold back a certain amount from the advance on closing to start a property tax account. This insures property taxes are never in arrears. Your lawyer will prepare a statement of adjustments which itemizes the debits and credits from the balance to be paid on the closing day.
Should my Sales Representative be overseeing my purchase from start to my closing day?
Absolutely! Under a Buyer Representation Agreement your Sales Representative will be looking after your best interests, protecting you and providing you with objective counsel and advise along the way. Your Sales Representative should also be keeping in touch with you after you have moved in to insure everything is going well.
Should I rent or should I buy? Does a Sales Representative have the magic answer?
This is something that only you can answer. Are you ready, willing and able to purchase a home? Most people are ready and able, it is the willingness that is holding them back. Your Sales Representative should be providing the correct facts about the local real estate market. The positives of buying certainly are many. To name a few positives: a place to call home , building wealth through equity growth, low financial volatility, a capital gain tax advantage, government programs such as the Home Buyers Plan, a sense of community, pride of ownership . Remember, landlords are building their wealth renting out their real estate.
Please call me at 416-520-6746 or email me, David@TorontoRealEstate.ca