What can you afford?
When buying a home there is more to consider than simply the property price. Making a budget is very important because it will tell you exactly what you can afford when it comes to purchasing a new home. Purchasing a home involves one-time costs and monthly expenses.
Your budget for buying a new home should include
the following costs:
What are market conditions?
The sales-to-new-listings ratio measures the balance
between demand and supply. A ratio of above 55 to 60 percent for a sustained
period of time points to the seller's market conditions. The buyer's
market represents a downward trend in home sales and the sales-to-new-listing
ratio of below 35 percent.
If you are a buyer, you will need to make decisions quickly, buy fast, and in such a market, prices tend to increase.
As a seller, you have more negotiating power and can usually obtain a higher selling price for your property. Offers with limited or no conditions are more apt to present themselves.
As a buyer, you will have a satisfactory number of homes
from which to choose.
Buyers have more time to look for a home and more negotiating leverage.
If you are a seller, your home may take longer to sell and you will have less negotiating power in terms of the selling price since, in a buyer's market, there are many homes out in there competing.
Why a pre-approved mortgage?
Before starting your new home search, it is sensible for you to know what is in your price range and focus on homes that are right for you.
Many buyers mistakenly only get pre-qualified for a mortgage without understanding what a pre-qualification tells you. A buyer should be aware that they may not actually be approved for the loan amount suggested because factors such as your exact net income, taxes and expenses, outstanding credit balances as well as many others have not been calculated yet. Since you have not applied for a mortgage, the financial institution is going on your words alone.
When getting pre-approved , your lender will pull your credit report and find out what your financial liabilities are. Assets and income will be verified when you submit the final mortgage application.
In a Seller's market, having a pre-approved mortgage can eliminate the need for a financing condition on your offer. If several buyers are interested in the same property that you are, being pre-approved can give you a slight advantage.
Having a pre-approved mortage will protect you against rising interest rates and allow you to take advantage of falling rates while you look for your new home. Lenders usually offer a 90-120-day rate guarantee. If rates go up during this period, you still get to take advantage of the rate you were guaranteed (as long as your purchase completes before the guarantee's expiry date). If rates go down during your guaranteed rate period, your guaranteed rate will generally go down accordingly.
The home you are purchasing, work term and stability will all factor into the final decision your mortgage company will make. If you have gotten a pre-approved application you are certainly less likely to have a problem getting your financing in order during your agreements conditional period.
Home inspections are a must.
For BUYERS- Most houses for sale today, old and new, have defects or repair needs, many of them serious. In these cases, any savings achieved through lower mortgage rates or purchase prices can easily get absorbed by unanticipated repair costs after the family moves in. Finding faults in a home doesnt necessarily mean one shouldnt buy it, only that the consumer will know in advance the type of repair costs to anticipate. Often sellers will make adjustments on the basis of major problems discovered in an inspection. If the inspector finds no need for major repairs, then the peace of mind in making an informed purchasing decision can be just as important as avoiding a potential nightmare.
Besides providing information to help with the purchase decision, a good home inspection report is a gold mine of information concerning future maintenance and repair. Just as cars need regular oil changes and tune-ups to run smoothly and prevent major engine problems, so do houses need periodic preventive maintenance.
Home buyers must also remember to have their prospective purchase inspected even if it is brand new. It is the independent home inspector who works for and reports to the home buyer on all items not completed, or not done in a good workmanlike manner, etc. before closing date. Due to rising labour and material costs, some builders have used shortcuts and inferior products, which can lead to problems later on.
When buying a home most of us have to take out a mortgage to finance the purchase of that property.
The lending institution will require that you have home insurance to cover the property in case of a big loss, like a fire. However, protecting your home isn't the only reason to choose property insurance. Your coverage will also protect your valuable personal items and protect you against personal liability should anyone be injured while visiting your property or should you accidentally damage a neighbour's property.
In Canada, when you borrow more than 80% of the value of your property from a federally licensed lender, regulations require you to also purchase mortgage loan insurance. This insurance protects the bank or lender in the event that the person who owes the mortgage runs into financial difficulties and defaults on the mortgage, this insurance will ensure that the mortgage firm is able to recover all the outstanding principal of the mortgage, plus expenses, from the sale of the foreclosed property and the insurance.
Mortgage Life Insurance (MLI) is optional, inexpensive coverage on your life, which protects your beneficiaries by paying off your outstanding mortgage in the event of your death. The premium is added to your mortgage payment so there's no extra paperwork, and it remains the same until your mortgage is paid off. Some policies also cover the potential disability of the mortgage borrower
Disability insurance(optinal) provides replacement
income if an accident or illness prevents you from working. Some employers
offer some sort of combination of short and long term disability insurance
as part of their employee benefits package, but those who are self-employed
may need some insurance for such eventualities. Disability Insurance
is most important if your mortgage payments depend entirely or in part
on your income.
Recently insurance companies have started to offer Job Loss Mortgage Insurance(optinal). This insurance covers the mortgage payments in the event that you involuntarily lose your job.
Title insurance(optinal) is unlike any other kind of insurance. Title insurance protects your ownership to the property and protects you against:
The service your Realtor can provide.
Finding the perfect home doesn't happen in one day. There are a number of things you can do to simplify the process, including defining financial parameters, potential neighbourhoods and the desired features in your next home.
Do you need an extra bathroom, a garage, a fenced backyard, or lower utility bills? Do you want a fireplace, a short drive to work, or maybe minimal yard work? Once your list is complete, decide what is most important to your lifestyle.
Then it's location, location, location. Location affects your day-to-day living and is one of the most significant influences on value. Your choice of location may be limited somewhat by the price you can afford. Even so, make sure you consider such things as distance to work, schools, shopping and entertainment.
What type of property do you want? A single-family detached home is attractive to many people because it typically provides more living space and land. On the other hand, a condominium may be a more appropriate choice for you, with an emphasis on maintenance-free living.
A REALTOR® can help you analyze all of these buying issues. A REALTOR® working as a buyer's agent works to find the connection between homes available in the market and the needs and financial capacity of buyers. Talk to and compare the services of REALTORS® to help you navigate through this complicated business transaction. Be comfortable and confident with the REALTOR® you are selecting as your business partner.
Once you find the house you want to make your home, work with a REALTOR® to develop an offer. In the offer, you should specify how much you're willing to pay. State when the offer expires, and suggest a closing date for the transaction. You can also propose some conditions on the offer. Some common types of conditions are:
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