So, it’s time to upgrade your rental apartment and buy your first house. But, where do you start? Where do you get yourself a good mortgage deal? How do you know the house you’re considering is in as perfect a condition as it appears to be?
If only buying a house was as easy as looking up a few and choosing one. Like all things good in life, it takes a little more effort than that. But, don’t worry! We have a handy guide to break it all down for you.
- Determine your financial position: The first, seemingly obvious, question to ask yourself is can I afford a house? Unlike a rental, owning a house comes with some additional bills. In addition to your mortgage payments, expect yourself to be paying property taxes, property insurance, as well as utilities like heating that were previously paid by your landlord or condo. A good financial situation would be paying 32% or less of your gross household income for monthly housing costs. Now that you’re aware of your financial position, you can start to set up a budget for your purchase.
- Prepare a budget: Paying more than you expected to for something never feels good. You don’t want that feeling to cloud your excitement of purchasing a new home. Buying a house will include additional fees that you need to budget for. Some common expenses incurred during the home buying process are:
- Adjustment costs. ($300 – $500) – Reimbursing the previous owner for any utility payments or property taxes that have been paid beyond the closing date.
- Legal fees. ($500 – $1000) – Paperwork done for the transfer of ownership.
- Title insurance. ($300) – Although not required in Alberta, your mortgage provider might require this.
- Property insurance. ($700 – $1000 at closing, and then annually) Your mortgage provider usually requires you to have insurance to cover the replacement value of your home and its contents.
- Moving expenses.
- Utility service charges. ($35 – $50 per utility) Check with your utility providers to find out what your exact moving fees will be.
- Home inspection fee. ($350 – $600)
- Mortgage insurance. (Between 1.25 and 3.15 percent of your mortgage amount) If you have a down payment of less than 20 percent of your mortgage amount, you need to insure your mortgage. This cost can be paid up front or added to your mortgage.
- Get pre-approved for a mortgage: Getting pre-approved for a mortgage will put you in a relatively better position when making an offer on a home. So, how do you get this process started? Mortgage lenders include banks, mortgage companies, insurance companies, loan companies, trust companies, and credit unions. You should talk to several lenders to get what you’re looking for. You can also talk to a mortgage broker. Mortgage brokers find a lender for you and may be able to give you different terms to choose from. You can find a broker on the Mortgage Professionals Canada website. Your mortgage lender will look at your finances to pre-approve you for a mortgage.
With a pre-approval, you can know the maximum amount you may get as well as interest rates you will be charged. A pre-approval does not guarantee that you’ll get a mortgage loan for that amount. The approved mortgage amount will depend on the value of your home and the amount of your down payment.
Psst…by now your wallet might be feeling drained but there is a sliver of relief. First time home buyers get a First-Time Home Buyers’ Tax Credit which reduces your federal tax amount for the purchase year.
- Look up listings online: Now that you have your finances in order, it’s time for the good part. Research houses and neighborhoods within your budget to get a better idea of your likes and dislikes.
- Get yourself a realtor: Getting a realtor will open doors for you. The doors of homes that might not be listed online. A realtor will also know the best places to look to suit your needs. Realtors are generally paid a commission on the sale price by the seller. It is a win-win as you get the expertise without paying for it. You can find one online at realtor.ca or ask family and friends.
- Book a home inspection: You’ve found a house you like. But, is everything as perfect as it looks? The best way to find out is to get a home inspector. A home inspector will make sure everything is in order, so you don’t get any awful surprises after moving in. Your home inspector will check the physical condition of the house which includes roofing, walkways and driveways, retaining walls, patios and decks, structure, electrical, heating, insulation, and plumbing.
- Putting in an offer: When you get the go-ahead from your home inspector, you can make an offer on the house. Your realtor will help with the communication during this step.
- Get your house: You got your dream house. Congratulations! For the possession day, your lawyer will get your mortgage lender to release funds to the sellers for the keys of your new home.
Once you’ve bought your new house in our lovely Edmonton make sure you check out these top tips of things to do after you buy your house! As always it’s a pleasure.
Your Edmonton Home Inspection Team