How do you prepare for your first purchase?
Are you about to make your first real estate purchase? Let us help you make it a success. Please contact us if you have any questions.
For many of us, buying our first property is a lifelong goal. No more rents and money down the drain!
With the Covid-19 health crisis, having your own home where you feel good is now a must, and many people want to become homeowners.
However, it’s not always easy to approach this project calmly when you’re not well prepared. You can quickly become overwhelmed by the process.
Here are six tips to help you approach the subject with peace of mind
1. Evaluate your borrowing capacity
First and foremost, it’s essential to assess your borrowing capacity, to find out how much mortgage your financial institution could grant you. Make an appointment with an advisor as soon as possible. And don’t hesitate to store around, as each financial institution offers different products and promotions.
Financial pre-qualification
Many are now demanding it. This step allows you to reassure sellers and increase your negotiating power. It confirms that you are serious about buying. You can even make this request online. You’ll know your real borrowing capacity, and your interest rate will be guaranteed for 90 days.
2. Determine your down payment
It’s important to determine the size of your down payment. This will have an impact on your loan by reducing the interest you pay.
We recommend a down payment of 5% for a property up to $500,000 and 10% above $500,000. With a down payment of at least 20%, you could qualify for a conventional loan and avoid the costs associated with mortgage default insurance. Below 20%, financial institutions are required by law to take out mortgage loan insurance with Canada Mortgage and Housing Corporation (CMHC) or Genworth Canada. The mortgage insurance premium is then added to the financing amount.
The different ways to raise funds
There are many ways to raise funds. They can come from your investments, your RRSP, a gift, an inheritance or your cash flow.
You could also benefit from the HBP, the Home Buyers’ Plan. This federal government program exists to facilitate access to home ownership.
More details here
3. Consider additional costs
When you buy a property, it’s important to think about all the additional costs that are added to the sale price.
You’ll probably have to pay inspection and appraisal fees, as well as the mortgage default insurance premium tax. Property taxes are also added, such as municipal and school taxes, as well as the Welcome tax.
You also need to take into account moving costs, insurance, furnishings and service charges such as electricity, heating, etc.
4. Start your property search
Once you’ve taken these first three steps, you can start looking for the property that’s right for you.
It’s important to define your search criteria carefully, and bear in mind that you may have to make concessions.
Do you want an apartment, a house or a multiplex with rental possibilities?
How many bedrooms and bathrooms do you need?
Would you like an outdoor space or a garage? Which neighborhood do you prefer?
You can do your research yourself or call on a real estate broker to guide you.
5. Make an offer to purchase
Once you’ve found the right property for you, it’s time to make an offer to buy.
This document contains all the information needed to conclude the sales agreement. It must mention the purchase price, inclusions and exclusions, the date on which the sale will be carried out by the notary chosen by the buyer, and the occupancy date.
Take the time to introduce yourself in a short paragraph. This can make all the difference to other interested buyers.
6. Get your mortgage
Congratulations! Your offer has been accepted.
Now it’s time to get your mortgage.
To do this, you need to gather all the documents requested by the financial institution. This includes the offer to purchase, confirmation of employment and income (tax return), confirmation of down payment, and assessment of loan insurance needs. Other documents may also be required, such as leases, ….
Your financial institution may also request a market appraisal of your future property. Don’t worry, it’s a common request.
As soon as you meet all the conditions required to obtain your mortgage financing, your loan is granted and you are now officially a happy homeowner!
The final step is simply to hand over the property to the notary. You’ll sign the deed of sale, the mortgage deed, the municipal and school tax adjustment document and the credit agreement.