This Home Buyer’s Guide provides a general overview of buying real estate property, the people involved and their responsibilities.
- Your Home Buying Team
- Is Buying a House Right for You?
- What Do You Need in a House?
- Questions You Should Be Asking
- Building Inspections
- Making an Offer
- Closing the Deal
- Additional Resources
TL;DR: Buying a home is a complex transaction with many legal and financial consequences. For expert advice contact Yasser Khan.
1. Your Home Buying Team
Buying a home can be a daunting task, and you can’t do everything on your own. When it comes to buying a home, there are numerous parties that you can involve and it can become confusing fast. It is important to know who is responsible for what as well as who you can get in contact with if you have questions or concerns regarding a certain area of your home buying experience. Below is a list of professionals that you can involve and what role they may play in helping you buy a home.
The Listing Agent
The listing agent is a licensed salesperson who can list a house on the market in the direction of the seller. The role of the listing agent is to provide you with details about the property, arrange a showing of the property for you, and explain any paperwork that is related to purchasing the home. The listing agent’s primary concern and responsibility are to the seller.
The Buyer’s Agent
The buyer’s agent is someone who is under contract with the buyer of real estate. They have your best interests in mind and their role is to provide you with invaluable advice to make sure you’re getting what you want in a home without any extra expenses. The buyer’s agent is responsible for finding properties that meet your requirements. Additionally, they are responsible for making an offer on a property on your behalf, as well as negotiating on your behalf.
A lawyer is another invaluable member of your home buying team who can save you a lot of stress and money. Their job is to ensure that you are getting what you are paying for. Ensuring that you know what you are agreeing to, have all the information that you require about your new home, that you know the up to date property taxes and condo fees is all a part of your lawyer’s job. The lawyer will also take care of making sure that your new property is transferred under your name and that there are no outstanding liens against your property before you purchase it.
The Building Inspector
A building inspector is an important member of your team, capable of saving you large amounts of unnecessary expense on repairs due to unforeseen circumstances with your home at the time of purchase. A building inspector is responsible for providing you with a thorough inspection of the home, along with a corresponding inspection report. This report will outline any issues with the home that were found including electrical, plumbing, insulation, roof, windows, heating and ventilation systems, and more.
The Land Surveyor
When you’re purchasing a home, it can be a good idea to get a survey done on the land. A land surveyor will study the land and inform you of illegalities, easements, or laws and regulations that may affect you.
The Mortgage Broker
When you purchase a home, you will need to acquire a mortgage. Finding and comparing mortgage options can be a tedious and time-consuming task. A mortgage broker’s role is to compare the current options on the market that will meet your needs as well as help to identify the most favorable mortgages to you.
“The right time buy is whenever you are ready to take on the financial responsibility of home ownership and invest in the long-term security of your investment.”
2. Is Buying a House Right for You?
Buying a house isn’t for everyone. Before you begin looking at houses, it’s important to understand if you are financially ready for the responsibility of a mortgage, as well as how much you can afford to put down towards a mortgage.
Your Monthly Expenses
First, let’s look at how much you are currently spending on a monthly basis. Start by creating a list of your expenses, noting the value and what it is for. This list should include how much you spend monthly on housing, utilities, groceries, loans, credit cards, savings, entertainment, etc. Once you’ve listed all of your expenses, add them all together. Now that you’ve totaled your expenses you can subtract them from your monthly net income, your income after taxes are deducted. The remaining number is the amount of money that you have remaining each month after all of your expenses.
How Much You Should Be Spending on Housing (debt-to-income ratio)
The next step is to calculate how much money you can afford to put towards housing each month. You should be spending no more than 30% – 32% of your gross monthly income on housing costs. Start by adding up your current monthly mortgage or rent payment, your property taxes, your heating expenses, and 50% of your condo fees if applicable. Take the total of your housing costs and divide it by your gross monthly income. Then multiply this number by 100. This will give you the percentage that you are currently spending on housing each month. Refer to the example below:
|Debt-to-Income Ratio||($1,900 / $6,000) * 100 = 31.67%|
Where Do You Go from Here?
Now that you know the current percentage that you are spending on housing each month, you have a better idea of what your income can support and what your maximum affordable expenses are for each month.
If your monthly housing costs are within the 32% mark, you are ready to apply for a mortgage. Applying for a mortgage first and getting pre-approved will significantly help you when you are searching for a home. Getting pre-approved means knowing how much you can afford to spend on a house, your interest rate, and your monthly mortgage payment. Check out this calculator to get an idea of what your monthly mortgage payments could be like.
Do you need a castle?
3. What do you need in a house?
When buying a home, it’s important to create a list of things you are looking for in a potential home. This will help your realtor find you homes that meet your requirements. Start reading the list of questions below, asking yourself what aspects of a home are most important to you and create a list of those aspects.
- What type of home are you looking for? Condominium or House?
- If you’re looking for a house, new or resale?
- How do you feel about attached, semi-detached, and detached homes? Do you have a preference?
- How far away from the city do you want to be?
- How close to work do you want to be?
- What kind of neighborhood are you looking for? Do you have a specific neighborhood in mind?
- Are you concerned about schools nearby?
- How close to emergency services do you want to be?
- Do you want a finished basement?
- How many bedrooms do you require?
- How many bathrooms do you want?
- Is there certain square footage you’re aiming for?
- Is there parking? Do you want a garage? Do you want a double driveway?
- Are you open to doing renovations?
Now that you have your list, talk it over with your realtor. Your realtor will do their best to find you homes that meet your requirements and are in your price range. However, it is important to keep realistic expectations in mind, noting that it may not be possible to get everything that you are looking for.
4. Questions you should be asking
Before you make an offer on a house, there are some important questions you should be asking. Asking questions about zoning, easements, and restrictive covenants can help save you time, money, and legal issues.
Zoning refers to a by-law that establishes and regulates land use. The land in a municipality is divided into zones where specific land uses are allowed or prohibited, an example of this would be residential or industrial zones. This defines how land and buildings can be used, where structures can be located, and dimensions and building heights, etc. When you purchase a property, it is important to ensure that the zoning in that area permits the use you intend to use that land for. For example, purchasing a plot of land in a residential zone with the intent of building an industrial building there.
An easement is the right to use property that belongs to someone else without actually possessing it. A utility easement is an example of one of the more common types of easements. This allows companies to access privately owned land in order to maintain and service their equipment.
Although utility easements are the most common, some properties may have easements that are not related to utilities. These easements can depend on the location of the property, and agreements made between landowners. These could include but are not limited to; a fence put up by your neighbor on your property or the right to travel across your land.
It is important to discuss easements before purchasing a property so that you are aware of your rights, your property boundaries, and any potential adverse possession claims.
A restrictive covenant refers to a contractual agreement, a clause in a deed that limits what you, as the owner, can do with the property. Restrictive covenants are typically placed by land developers in new or up and coming residential developments. Some restrictions may include what colour you’re allowed to paint the outside of your home, how far your home is from the street, what type of fence you put up, etc. If you do not adhere to the restrictive covenants, a neighbor is in their right to sue you. When you purchase a home, the restrictive covenants on the land come with it. Thus, it is important to ask about restrictive covenants before buying a property. This will ensure that you are aware of the clause and you can then decide if you are willing to follow those rules in place or move on and find a different property.
“Don’t save $400 on a home inspection when buying a $400,000 house.”
5. Building Inspections
Once you have found a property that you want to purchase, you should consider getting a building inspector to take a look at any structures.
What is a building inspection?
A building inspection is when you hire a building inspector to come and take a look at prospective property. The home inspector will go through the property, examining electrical, heating, air conditioning, plumbing, roofing, and any other major systems. Once the inspector has completed their analysis of the property, they will provide you with a property inspection report in order to help you make an informed decision before you make a purchase.
Why You Should Get One
It is important to hire a building inspector to examine the property before you buy it. A building inspection can help to identify major and expensive issues with a home that otherwise may have gone unnoticed. Having these issues identified before the purchase can save you time and money on renovations that you didn’t expect.
If there are issues detailed on your inspection report that you feel you shouldn’t have to pay to fix, you can bring those up to your realtor. Your realtor can negotiate at this point, asking for a lower price or for the current owners to fix the issues before you purchase the property.
6. Making an Offer
Once you have found a home you are happy with, it is time to make an offer. This is when your realtors’ skills really come into play, helping you make a promise to purchase that meets your needs, is in your budget, and will also satisfy the seller.
A promise to purchase is a legal contract that your realtor and/or your lawyer prepare for you. This contract will contain the names of the parties involved, the amount you’re offering, your deposit, any additional items you want to be included such as appliances or window coverings, the closing date, the date the offer expires, and any other conditions you want to be met before purchase such as a home inspection.
The process of negotiating can be hard on people. Once you’ve found a home you love, emotions can take over. It is important to stay calm, keep realistic expectations, and let your realtor do their job.
7. Closing the Deal
Now that you’re offer has been accepted, it is time to conclude the purchase. Your legal representative will go over the necessary paperwork with you, getting your signature where required. The mortgage amount will be provided to your lawyer by your lender and your lawyer will pay the seller. Once the seller has been paid, your lawyer will then register the home in your name as well as provide you with the deed to the newly purchased home.
Congratulations, you did it! Upon completing the purchasing process, however, you’re still not done. Below is a list of tasks that you may want to do as soon as possible.
- If you’re renting, inform your current landlord that you will be moving.
- Reserve a moving van or book a moving company for moving day.
- Begin packing. This is a great time to declutter, so think about throwing away, donating, or selling any unwanted or unused items.
- Notify your utilities that you will be moving. Remember to switch your services over to your new address and book an installation day.
- Inform friends and family of the move, giving them your new address.
- Change your address for your government identification and any bills that may come in the mail.
9. Additional Resources
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