So you’re looking to purchase a home, but you don’t know where to start. There is really 10 steps to a home purchase. Following these steps will help your home transaction go smoothly.
1. Get Pre-Appoved – Get a pre-approval for a mortgage, This will let you know how much you can afford. It’s not fun when you are looking at homes for $400,000 but find out you may only qualify for $300,000. Make sure your payments for your mortgage are in your comfort zone. A mortgage company will usually let your GDS and TDS ratios go up to 35% and 42%. These ratios are used as a maximum for approval. If your ratios are at your maximum, it may make thing a little tight financially. Do up a budget and figure out how much you are willing to pay each month towards your mortgage payment. Nobody wants to live paycheck to paycheck.
2. Hire A Real Estate Agent – Hire a professional Real Estate agent to help you purchase your home. Using a Real Estate Agent does not cost you anything. They are going to get paid from the person that you buy the home from. Your Realtor will help you determine if the value of the home is there, or where it should be. They can often even help you if you are looking at building a home with a builder. You can buy a ‘for sale by owner’ home but there are major risks involved in signing a real estate contract. Let a Realtor help protect you and explain the legal parts of the contract.
3. House Shop and Write an Offer – This is the fun part. Everyone loves to look at homes and the various styles of floor plans and styles. After looking at all the various homes on the market in your price range, you can write an offer. Everyone wants to get a great deal on a home and write an offer way below the asking price, but there are risks in doing that. You may offend the home owner and they may not look at any other offers you make. Let your Realtor help you determine the value of the home by showing you some of the sales that have happened in that neighbourhood, and the prices they sold for.
4. Get Your Mortgage Approved – After you write your offer, you should have a subject to financing clause in there. This is usually one week, that will give you time to get your mortgage approval all finished up. If you are purchasing your home with less that 20% down, you will require mortgage insurance. The mortgage insurers do not look at any file until there is an offer on a home. So one thing to keep in mind is, just because you have a pre-approval doesn’t mean that everything is 100% finished. This is where it is very important that you have the condition in your offer.
5. Obtain a Lawyer – On any purchase transaction you will be required to use a lawyer. Your lawyer will make sure that everything is alright with your title when your purchase has gone through, and make sure that the property taxes are paid up to date. You can call around to get prices for this, as every lawyer will set their own price. keep in mind, like anything you buy, you get what you pay for. If one lawyer is charging $300 below everyone else, there is probably a reason for this. Ask your mortgage broker or Realtor for advice on who they have had success with.
6. Home Inspection – A home inspection is optional. They are not required by the bank to have, but they are highly recommended. For Red Deer, make sure you look into the home inspector to make sure they have some credentials and are members of CAHPI (Central Alberta Home and Property Inspectors). I have heard of some home inspectors that went from sales to Home Inspecting. Scary.
7. Property and Life Insurance – Before you go to meet with your lawyer you will have to have property insurance lined up. Calling the same insurance company as you currently have vehicle insurance with can sometimes earn you a discount. There are various types of home insurance that you can get. Life insurance is another optional, but highly recommended option. Keep your family protected, just in case. The banks mortgage insurance is not as good as the insurance you can get through a insurance broker. Call around to get quotes for life insurance. Make sure you ask if it is Term Insurance or Mortgage Insurance.
8. Set up your Utilities – Call around to your local gas, phone, cable and electricity companies to make sure you have everything all set up for when you arrive at your new home. Your Realtor or mortgage Broker should have a list with phone numbers available for you.
9. Meet with your Lawyer – Meeting the lawyer is the last step of the buying process. Here you will sign the last of the paperwork, and bring in any extra funds that are required for your home purchase. you will usually meet with your lawyer with about one week until possession. They will also ask you to bring in prof of your fire insurance.
10. Pick up your keys – Yay, the final step is here. Meet with your realtor to pick up the keys and do a walk through of the home. The home should be in the same condition as when you did your viewing unless stated in the contract.
Those are your basic 10 steps to buying a home. If you do write an offer with a quick close this can seem like a lot of things to do in the matter of a short time. Most of the big stuff happens within a weeks time. You write your offer, get approved, do your home inspection and have your solicitor.
If you have any questions please let me know anytime.
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