At some point we dream about owning a home. Making it a reality is possible but you have to work for it (in most cases). I had followed the Real estate market for more than 5 years before I purchased my house (good chance it was closer to 10). I learned what CMHC is, home insurance, interest rates and what you need before even considering buying a house. And now it’s getting harder to just go out and buy one.
An ideal situation is being debt free, having exceptional credit and a 20%+ down-payment on the house of your dreams. But that’s not always the case. Banks will look at all of those things before considering you for a mortgage. Also, they look at your monthly bank statements (what’s going in each month) some financial corporations ask for a letter of employment, income tax forms, and pay stubs to ensure you’re a safe bet.
Did you know that when you go online to get PRE APPROVED it means absolutely nothing. Until you’ve found the house and put in an offer you cannot get approved for a mortgage, so that house you’re looking to buy can fall through based on financing. You have to work with the bank or a broker to see what the actual amount of your mortgage can be. There are SO MANY THINGS to remember.
Set a budget and shop within in. How much can you actually afford to spend each month and still afford to put food on the table? There are costs to owning a house you may not consider – maintenance and upkeep, insurance, gas, hydro, water and sewage bills and land taxes. And the things that you probably cannot live without – cable, internet, cell phone, food, gas, car insurance etc..
Before I purchased my house I looked at my last two years of tax returns. I subtracted what I needed to survive (rent, food, gas, insurance etc..) and looked at what was remaining. How much could I afford to own a house out of the city? What’s the difference between a $100,000 mortgage and a $200,000 mortgage? After crunching numbers and accounting for interest rates I knew my price range to be comfortable was between $150,000 and $175,000. So that’s what I looked at.
When you find the house that is ‘the one’ you’ll have to consider the following:
- ask the realtor for a few comparable listings that have sold in the area (what did they sell for and do those houses compare to this house?) you do not want to over pay
- unless you have cash to pay the entire house off you will likely have to get a mortgage approved so you will need a ‘condition of financing’ for a week or more to secure the deal
- you will likely want a home inspection and that costs from $300 – $500 and is also a ‘condition’ before sealing the deal
- you will need a lawyer and you will pay lawyer fees. In my case $1500 – $1800 if all goes smoothly
- you have to arrange for house insurance and they will ask you many questions. So know how close the fire department and fire hydrant are in proximity to the house
If you are a first time home buyer in Ontario you do not have to pay Land Transfer taxes up to $2500. And as a home buyer you do not have to worry about realtor fees, that is up to the seller of the house (up to 5% of the purchase price ie: purchase price of $175,000 x 5% = $8750).
Some places require that you pay for a Land Survey. This is a process of staking out property lines for exact measurements. This can cost approximately $1200 – $1500+ and might be required by a bank or financial institution before getting the house approved for a mortgage. If you share a driveway for instance with your neighbour and you do not have written proof that there is a property line that you are both aware of and agree to being shared it may become a red flag by the financial institution and they will request the survey.
I would suggest before you go out shopping for a house to try and save $2500 – $4000 just to get started. Try not to use your downpayment as you will then increase the amount of interest you will end up paying later on.
Owning a house means paying property taxes. The cost of those taxes is based on many things; location, property size, amenities (are you on municipal water and sewer or well and septic) etc.. You can pay them monthly with your mortgage payments or lump sum yearly. It is totally up to you. But you will have to pay more upfront. They take additional payments to ensure you have a reserve when you first purchase the house. So yet again another additional cost. Property taxes also come with a homes assessment of value and this will stay the same for 4 years until a new assessment is required. So if you pay $2100 starting 2016 you will pay that until 2020.
Other things that you may consider to have in a purchase agreement as a condition may be closing date, appliances/furniture, proof of septic / well maintenance. If there is a fireplace you will be required to get a WETT (Wood Energy Technology Transfer) inspection report prior to getting the insurance approved that will also be an additional cost at the buyers expense.
As you can see from above, buying a house will take time. It will cost a little more than you probably expected up front but within a few months it will all straighten itself out. Other things that you will have to remember to do a week before your closing date is to call the hydro and or gas company to have the account changed to your name. If you have rental equipment (furnace, water heater/softener) you will want to change those accounts over. And if you are moving to a small town like myself, you may have to set up a post office box to receive your mail.
Remember to change you drivers license to your new address (you may end up saving money this way). Many companies offer direct deposit and you can essentially live free of paying bills monthly and wasting stamps since it all comes out on it’s own. THIS IS THE BEST! I send out one cheque quarterly for my water tank rental and the rest is done automatically. I just go over my paperless invoice to ensure that it all looks correct. If you notice any issues you can call the company right away.
So you want to buy a house… I think you now have the basic knowledge to go out and do it. Good Luck!
— I am not certified in buying a house. I am a first time home owner and everything above is what I had to go through before getting approved to buy my house and to get done before my closing date. It may vary for the property you want to buy but these are all things you will want to consider —