Home Buyers Guide in Ottawa, Ontario

A Handy Guide for Home Buyers

Most first-time home buyers put a lot of stock into the words of family, friends, and other important people in their lives who have gone down the path of home ownership themselves. However, the well-intentioned advice of your loved ones just isn’t enough information to base such a huge decision. More than once you will likely wonder if buying a home is even the right thing for you. Take a deep breath, and remember that reservations are perfectly normal when you are facing such a large investment into your future.

The more you know, the more confident you can be going into this process. This six-step buyers’ guide will help you to make the most informed decision possible as you consider taking the first steps toward home ownership.

Making an Offer and Closing the Deal

Once you have found the home where you’d like to live out your days, it’s time to prepare to make an offer to the seller. When you make an offer, you must include the following information and documentation:

• Your legal name, the name of the seller, and the property’s address

• The purchase price, which is the amount you’re offering to pay, as well as the amount of your deposit

• Any extra items you want to be included in the details of the purchase

• The closing day, the day that you want to take possession of the house

• A request for a current land survey

• The date that your offer expires

• Any other conditions that you want to be met before the contract is made final

Expect to make negotiations. There’s a lot of stress that is associated with buying a home, but that stress pays off when you are handed the keys to the next chapter in your life.

Getting a Mortgage

If your offer is accepted, you have to return to your lender or mortgage broker to complete the financing process. You will also need to bring some documentation in addition to the signed offer.

• A legal description of the property and building

• The online property listing, or photos if no online listing exists

• The most current property tax assessment

• An appraisal, home inspection report, and land survey

• Estimates for recent or planned renovations

• Heating and utility costs

• Condominium fees, if applicable

Closing Day

The closing day is when you take legal possession of the property. The final signings will likely take place at your lawyer or notary’s office.
Your lender will give your lawyer the mortgage money. You will proceed to give your lawyer the down payment, sans deposit, and the closing costs. Once this is all done, your lawyer or notary will:

• Pay the seller

• Register the home in your name

• Give you the deed and keys

Make Sure that You’re Financially Ready for Home Ownership

You’ll find yourself asking a lot of questions as you consider whether home ownership is the right investment for this stage in your life. One of the most important that you will ask will be to yourself: “Am I financially ready for this?” Be realistic with your financial capabilities, and take into account the following factors:

– How much do you currently spend on expenses and existing debt payments? Compare this figure with the amount of money that you have got saved, invested or otherwise stashed away.
– How much can you afford to spend each month without risking your financial wellbeing?
– How much money will you need to save so that you can pay the upfront costs of buying your first home?

Upfront costs include, but are not necessarily limited to:
• The down payment
• Home inspection and appraisal fees
• Insurance costs
• Land registration fees
• Prepaid property taxes or utility bills (this will involve the buyer reimbursing the seller or builder)
• Legal or notary fees
• Repairs and renovations, if necessary
• Moving costs
• GST/HST/QST on a newly built home
• Mortgage loan insurance

– How much will you be spending each month with home ownership expenses factored into your present financial situation?
– How does your credit look? What is your credit score? Your credit score reflects your ability to consistently pay bills and settle debts.

Qualifying for a Mortgage

There are to general rules of thumb to go by that determine how much you can spend on housing each month without putting yourself at financial risk.
– Your monthly housing costs should be 32% or less of your gross monthly income.
– Your monthly debt load, including your mortgage, should be at or under 40% of your gross monthly income.
You can easily explore your budget options by using a mortgage affordability calculator.

Even if you don’t qualify for a mortgage, you can still start taking steps toward owning a home:

– Arrange meetings with credit counselors to help improve your financial situation.
– Pay off loans and other debts that you owe. This will immensely help your credit score.
– Save up your funds so that you can put down a larger down payment.
– Reduce your home price range.
– Adjust your budget, if at all possible, to spend less and save more.

By taking these steps you will improve your financial standing, getting you on the right track for home ownership in the future.

Financing your Home

You will need to meet with a broker or lender to start the process of getting pre-approved for a mortgage. After arranging your appointment, make sure that you have each of these things to bring with you when you meet with them:

• Your government-issued photo ID

• The contact information of your employer

• Proof of your address

• Proof of your income

• Proof of down payment

• Proof of your savings and investments

• Details of your current debts

• Your credit score

It is a serious offense to misrepresent any information to get approved for a mortgage. Being honest about your income and assets will only benefit you, whereas lying can cause you a lot of problems.

What is a pre-approved mortgage?

A pre-approved mortgage tells you how much you can afford, what your interest rate will be, and how your monthly mortgage payments are going to look. A pre-approved mortgage is not a guarantee of final approval, but it can help you out by narrowing down your search. With this information on hand you can make the most informed choices regarding affordability, the neighborhood and other details of the home both big and small.

Do not feel like you have to spend the entirety of your pre-approved amount. Changes such as loss of income, increased expenses or rising interest rates should always be considered when you have funds left over from the purchasing process.

Down payments of less than 20%

It is possible to buy a home with a down payment that is under 20% of the purchase price. However, to do this you will likely need to acquire mortgage loan insurance. This form of insurance protects banks and other lenders involved in the process against the risk of your mortgage defaulting. Mortgage loan insurance functions in very much the same way as property insurance protects you in the event of a loss.

Find the Right Home

You need to consider the long-term most of all when you are pondering whether or not you wish to buy a home or have one built for you. Here are some questions that you should ask yourself when checking out prospective homes.

• Is the neighborhood a good fit for my and my family’s needs?

• How much room is there in the house and on the land in general?

• What type of home is it? (examples: detached, duplex, row house, condominium)

• Are the commute to work, recreation, and services reasonable?

• What special features does the home possess? Are these features important to you?

• Is this a home you can see yourself being happy in five or ten years?

• Do you prefer a new, resale, or custom-built home?

Types of Home Ownership

The options vary from province to province, but you can generally choose between the following types of ownership in Canada:

Freehold: You own the building as well as the land
Leasehold: You own the building and rent or lease the land
Condominium (or “strata): You own your unit and share common elements
Co-operatives (or co-ops): You buy a share in a building and live in one of the units
For anybody considering a condominium, make sure to review all financial and technical audits for the condo corporation to avoid any unpleasant surprises down the line.

Choosing your Home Buying Team

Experienced professionals can guide you through the buying process, and their knowledge is considered so helpful that most would say that having a real estate lawyer ready to work for you is a must. Take your time and check references before deciding who you involve in this important process. Your home buying team can include but is not necessarily limited to:

• A real estate agent

• A home inspector

• An appraiser

• A land surveyor

• A builder or contractor

• A lawyer or notary, like Francis Lawyers

• Insurance and mortgage brokers

Decide If Home Ownership Is Right For You

Consider the five following questions before you decide whether or not you’re ready to own a home:

– Am I financially stable enough for this?
– Are my financial management skills and discipline up to par to effectively handle a purchase of this size and importance?
– Am I ready to take on all of the costs and responsibilities that come with being a homeowner?
– Can I fit routine and regular home maintenance into my schedule?
– Am I new to Canada?

(There are many resources available for those who have recently settled in Canada)

There are also many pros and cons to evaluate as you consider this hefty choice. Look over the list below for a list of the upsides and downsides to both home ownership and renting a home.

If you’re buying a home

Pros:
– You’ll have the freedom to renovate your home however you see fit.
– Buying a home will help you to build equity in a safe and secure investment.
– If you choose, you can receive income from renters in the future.
Cons:
– You will be responsible for ongoing costs, like property tax and insurance.
– Your monthly payments will increase if interest rates go up.
– Unexpected repairs can be exceptionally costly.

If you choose to rent a home

Pros:
– You will have to deal with far fewer repair costs, as well as less routine maintenance.
– Your monthly upfront costs are significantly lower.
– The commitment behind renting a home is much more short-term than buying.
Cons:
– Your monthly rental payments may increase on an annual basis.
– There’s a possibility that your landlord will not want to renew your lease once it’s expired.
– Basically, you’re paying somebody else’s mortgage.

Maintaining Your Home After the Purchase

It’s very likely that your home will be the biggest investment, both financially and toward your future that you will ever make. You should plan for the responsibilities of home ownership before you move. Below are a few handy tips for new homeowners who haven’t yet got this whole “homeowner thing” down. 

Make your mortgage payments on time

Late or missed payments can impact your credit rating and add extra charges that you will have to pay.

Understand the costs of owning a home

Repair and maintenance costs, snow removal and alarm monitoring are just a few of the many costs that are often associated with home ownership.

Live within your means

Every few months, check to see if you’re spending more than you earn. If that is the case, you should find new ways to save more or spend less money.

Save up for emergency situations

Put aside five percent of your income as an emergency fund so that if unexpected expenses come up, you’ll be prepared.

Protect your home

Create an emergency evacuation plan and check fire extinguishers, smoke alarms, and carbon monoxide detectors regularly.

Finance home improvements

Your lender or broker can help you if your new home needs repairs or renovations. Financing options could be available to you through your mortgage loan.

Additionally, if you implement energy-saving home improvements, you could qualify for a partial refund of your mortgage loan insurance.