There may be nothing as exciting as the purchase of your first home… the great feeling you get when the keys are handed to you and you’re standing in your new living room.
Getting to that point is an adventure. It can be daunting and stressful, but if you follow some simple rules, the whole experience will be a positive one for you. Below we present some tips to make sure that you realize your dreams.
Set Your Goals
Your first task to set your goals. What kind of home do you want? What area? What features (schools, parks, recreational facilities, proximity to work, etc?). What price range can you afford? Answering these questions with the help of your agent will allow you to develop an effective plan for searching out that perfect home.
Your agent can set you up on Property Match so that you receive new listings in your area and price range directly from the Toronto Real Estate Board database. That way you will never miss out on a hot new listing.
Know Your Limits
How much can you afford to pay? The rule of thumb is that your Total Debt Service (TDS) ratio should not exceed 40% of your monthly income. You can work this out by dividing your principal, interest, property tax, heating, half of condo fees and any other monthly financial obligations such as credit card payments, car payments, etc against your gross monthly income and multiplying by 100.
You will also have to factor in closing costs if your offer is successful. These will include some or all of the following: lawyers fees; land transfer tax; survey; home inspection; CMHC fees if you have a high-ratio mortgage; registration fees; compliance letters; title insurance; utility connection charges, etc. Your agent can help you with all of these details.
Nothing is more frustrating than losing an offer on a home because your financing fell through, or that your offer was conditional on getting financing approved. Get pre-approved first through your mortgage manager or mortgage broker so that you can submit an offer confidently. Your agent can help arrange meetings with your choice of different mortgage experts.
This is the fun part. Go to open houses, or get your agent to arrange private showings of the homes you are interested in. Take notes to keep track of the homes you have visited. If you find a home you think is the one, have your agent register an offer. At this point, the listing agent will require a deposit, which varies by area and type of property, but is usually around 5%. The deposit will be held in the listing agent’s trust account until the transaction closes, or is mutually aborted. If interest has accrued on the deposit it will be paid after closing.
Negotiating is a delicate dance whereby everyone wants the best possible outcome for themselves. The vendor wants the best price they can get, while you as the buyer want the best price you can get. There will be offers and counter-offers, and if there are multiple offers on the property, it may start to resemble a feeding frenzy as agents go back and forth between their clients and the vendor.
Again, know what your limit is, and how much you are prepared to go above it, if at all. Your agent will advise whether it’s worth it to sweeten the pot or walk away. Ultimately, however, it’s your decision.
The Winning Offer
Congratulations! Your offer was accepted! Now comes the closing phase, where your lawyer and the vendor’s lawyer transfer title and all the paperwork necessary to put your new property into your name. As stated above you will incur closing costs so make sure those are factored in. On the closing date, the keys will be transferred from the vendor’s lawyer to yours, and you can walk in to your new home and crack open the champagne.