Where do I start when looking for a home?

Where do I want to live?

How to choose a place to live.

You should begin by determining what’s important to you and your family (if you aren’t single). Travel times to school and work usually play a big factor in the home buying experience. If you are single, living in the city could prove to be a much better option than living in the suburbs. Due to the fact that there is quite alot more things to do, and see, and people to meet. Then again the busy city life might not be for everybody. Especially if you have been living in a small town for your whole life, and you finally move to the city you might be in for a shock! It could be hard to adapt to your new surroundings. Buyers remorse is not a pleasant experience!

Certain areas have different demographics of people. If you want to be close to a particular community centre, a church, certain ethnic restaurants/stores all should come into play with your moving decision. There are many different ethnic enclaves and pockets where you could feel at home, just like being in your native country, while technically not. Crime rates in certain parts of the GTA could pose a problem. They would be easy to spot due to the more affordable price of real estate in those areas. You can tell by looking at the quality of housing available. As a rule, you get what you pay for. If a price seems too good to be true. 95% of the time there is a reason behind that!

Transportation would be considered a factor in your search. Do you take public transportation? Do you drive your own car to work, or to get around to shop? How close is the nearest major highway? Can my kids walk to school? If not, is there transportation available close by for them? How far will my commute to work be? For some commuting 2 hours one way to work won’t be worth getting a home for 50 thousand cheaper than buying something closer to work. There are quite a lot of factors you should really think of before you make a decision, in buying or selling your home.

The internet is a great resource to search any area to find out what it is all about. Just “Google It” or ask a professional real estate agent in your area like me!

Do I want to live in a condo, a detached, a semi-detached, a town house, or farm house?

This is a very important question to answer. How big of a size of house will you be needing? How many people will be living in the home? How many bedrooms do you need? How many bathrooms do you need? Do you need a finished basement, or a walkout basement? Can you climb stairs to get into your home? You might be elderly or have a disability which will prevent you from that. If not, a condo will be a better option due to the fact that there are elevators to take you up to your floor and apartment. A home with a front yard, a back yard and a driveway requires maintenance. Grass and plants grow in the summer which need to me maintained. And in the winter the walkways and your driveway will have to be snow shoveled and salted.

Alot of people would prefer to live in a condo to not have to deal with maintaining their home. This doesn’t come free of course. The maintenance fee in a condo will include the maintenance of the building and common areas. There would usually be underground parking, a gym, a pool and maybe a party room to host get togethers and celebrations. Keep in mind the larger a house is square footage wise the more area there is to cover for cleaning and vacuuming the inside. 

Do you like your privacy and peace and quiet? A detached home would be ideal, especially one that backs into a ravine, but of course that luxury comes at a premium compared to lets say a condo or a townhouse. There are bungalows, side splits, front splits, back splits, semi detached homes, townhouses, 2 storey homes, gated community estates, lofts, and farm houses. Every type of style of home caters to people with different needs and styles. A professional real estate agent like me will help you to make the right decision in deciding what is right for you!

What can I afford?

Now that you have decided the perfect area that you want to live in, you need to know what you can afford. Affording a house doesn’t just take into account the mortgage payments. Your income, property taxes, utility costs, maintenance costs, any car payments, loans or other debts is all taken into account in the calculations. You don’t want to be house poor, when after your mortgage payment you are struggling to pay for any other bills. I know Toronto real estate prices are high at the moment and there doesn’t seem to be any signs of slowing down. Don’t worry there is hope in finding a home you can afford!

Your down payment is important, if you have less than 20% of the total home value as a down payment you will be required to pay CMHC (Canadian Mortgage and Housing Corporation) insurance. This insurance protects the lender incase you for some reason, are unable to make your mortgage payment. Minimum down payment for lenders is usually 5%. If you are looking for a home that Is more than a million dollars, that minimum is increased to 20%. CMHC sets your debt service ratios. There is a gross debt service ratio, and a total debt service ratio. These ratios are used to calculate the maximum amount of a mortgage lenders will allow. The industry standard for GDS is no more than 32%, and the guideline for TDS is no more than 40%. Lenders are usually strict on these factors but in certain situations it can be increased. It varies from everybody’s financial situation.

Credit ratings are a big factor in your affordability of a home. Your credit score and history shows how responsible you are financially. The lenders will not approve you if you have a bad credit history.

Just remember what you might think you can afford, the lenders might not necessarily agree with you. Best thing to do is to consult a professional mortgage broker. I have many brokers I work with which I could refer you to. In many instances my clients were turned down by a lender, and I had referred them to one of my mortgage brokers and they were able to get approved for a mortgage.

Have I taken into account all the closing costs to buying a house?

Once you have been pre-approved for a mortgage to help you find your dream home.  You then hand over the down payment, you receive your mortgage funds.  You then give all that to the seller and you then get the keys. That’s it right?  Not so fast, there are other costs to consider.  These closing costs and other expenses can impact your offer.

Before the home closes

Once you have found the property, its important to do your due diligence.  You should know everything about the home the good and the bad.

Home Inspection

Before you make an offer, I would recommend getting a licensed home inspector to take a look at the home.  Let’s face it not all of us are contractors and can tell problems with a home.  They will check to see if there are leaks anywhere, structural problems, potential problems that could arise.  There are hundreds of factors they look for and will provide you the piece of mind that the home is in good shape.  Its always recommended to do a home inspection.  Pricing for a home inspection could range from $300-$600.

Property Appraisal

Your mortgage lender may order an appraisal done on the property.  This may vary case by case basis.  Appraisal costs range from $350-$550

Property Survey

A survey might be needed by the lender.  This will show the exact boundaries of the property you wish to purchase.  It will show if there are any easements on the property or a shared driveways for example.  There could be utilities going under your property which could possibly impact the value of your home.  If the seller doesn’t have a current survey one might be ordered to be made.  Of course, this varies on a case by case basis.

Title Insurance

Your lawyer most likely will recommend you to purchase a title insurance policy for your home.  Not only that, in some cases your lender will order you to get one.  This policy will protect you and the lender from title fraud, municipal work orders, zoning violations and other property defects.

Lawyer Fees

Every real estate transaction requires lawyers to finalize the closing.  They search title of the property, they calculate all closing costs, they will determine if there are any tax complications, plus many other factors.

Real Estate Agent Commission

As a buyer in most cases the agents commission will come out of the seller’s pocket, it will not be added to your purchase price.  This is great because my services won’t be of any cost to you, as a buyer.  Remember your best interests and negotiating the best possible price for a home, are my top priorities.

Property Insurance

This is a mandatory insurance every lender will require you to have before they advance any funds to you.  If a fire or flood happens you and the lender need to be covered.

Mortgage life, critical illness, disability or job loss insurance (optional)

Anything can happen and its important to be covered incase of an unexpected event in your life.

Land Transfer Tax

You may be charged a tax on closing day when you buy real estate.  The Price is based on the homes purchase price and other factors.  You might be liable to pay a municipal land transfer tax as well.  First time homebuyers will qualify for a rebate.  Check out the land transfer tax calculator at the top right of the page, or click here.

GST or HST

Newly constructed and substantially renovated homes may be subject to GST or HST. If you pay GST and HST, you may qualify for a new housing rebate.

Property taxes, utilities and condo fees

The seller may have prepaid property taxes, utility bills or condo fees before you take ownership of the property. You reimburse the seller for the portion of the costs from the closing date forward.

Have I been pre-approved for a mortgage so I can actually make an offer on a house?

Learning about the different types of mortgages that are available, and all the different options available is extremely important.  Getting pre-approved should be the first step before house hunting.  What you think you will be approved for might not be what the lenders will give you.  I’ve seen this over and over again.  I can’t stress enough, get pre-approved!  This way you can tell your real estate agent your maximum budget, so you only look at homes you will be able to purchase.  This will make your search more efficient.

 

What is a mortgage pre-approval?

This process enables you to determine the maximum amount a lender will loan you for a mortgage.  It will determine the monthly payments required for the mortgage.  It will determine the interest rate for the duration of the first mortgage term.  Applying for a pre-approval is usually free and it doesn’t commit you to one single lender.  It will guarantee that the interest rate will not change for a specified period of time.  If the rate lowers within that time frame they will usually honor that lower rate.

 

Credit Score

A credit score is a measurement of your financial health.  It shows a lender what risk they are taking to lend you money.  The lower your credit score the higher the rates will be.  With a low credit score you might be only approved for “B” level lenders as apposed to “A” level lenders with more competitive rates. 

 

Down Payment

Your down payment is the lump sum of money you’ll put towards the purchase of your home. In Canada, the minimum down payment you must make is 5% of the home’s purchase price. If you put down less than 20%, you’ll have to buy mortgage default insurance to protect your lender in case you default on your loan.  The size of your down payment affects how much you can borrow. For example, if you wanted to buy a house worth $300,000, you would need at least a $15,000 down payment.

$300,000 x 5% = $15,000

As of February 15th 2016, the minimum down payment is higher for homes sold for $500,000 – $999,999. You now need to put down 5% of the first $500,000, and 10% of any amount over $500,000. For example, a house worth $600,000 would require a down payment of at least $35,000.

($500,000 x 5% = $25,000) + ($100,000 x 10% = $10,000) = $35,000

 

Debt Service Ratios

CMHC sets your debt service ratios.  There is a gross debt service ratio, and a total debt service ratio.  These ratios are used to calculate the maximum amount of a mortgage lenders will allow.  The industry standard for GDS is no more than 32%, and the guideline for TDS is no more than 40%.  Lenders are usually strict on these factors but in certain situations it can be increased.  It varies from everybody’s financial situation.     

Real estate agent in Aurora, Bradford, East Gwillimbury, Newmarket, Richmond Hill, Vaughan, Thornhill, Markham, Toronto and King city.

These are the most important factors to consider before starting your home search.

The following is a search of most active listings of homes for sale, in the area of your choice. Go ahead take a look!

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