Congratulations – you’ve decided to take the plunge and join the wonderful world of homeownership! For many people, buying a home will be one of life’s biggest decisions, and for most, it will be one of the most significant financial obligations they will undertake. Fortunately, the stress of buying your first home can be alleviated by understanding the basics of the process.
First Things First: Plan Ahead!
Before you can buy a home, you need to know how much home you can afford. Many banks offer calculators which allow you to estimate how much financing you may be eligible for and how a home purchase would fit within your budget.
Most home purchases also require a down payment of at least 5 to 10 percent of the purchase price.
Knowing your overall financial picture, your credit score, and reducing other debt (especially any debt that carries a high-interest rate) can help put you in a better position to purchase your first home.
Your First Mortgage
Unless you have the (very) good fortune of enough cash on hand to buy a house without borrowing, you will need a mortgage from a bank or other financial institution. A mortgage is a specific type of loan where the property the loan is used to purchase serves as the collateral. This means if you default on the loan, the bank can foreclose on your property (i.e. take ownership of it) to recover any outstanding money owed.
It is worth shopping around with different types of lenders or considering using a mortgage broker to get a sense of the different options available.
Help for First-Time Home Buyers
As a first-time homebuyer, you may qualify for special programs intended to encourage homeownership by reducing purchasing costs.
Most notably, the First-Time Home Buyer Incentive can assist you by offering 5 or 10 percent of the home’s purchase price to put toward a down payment. This “boost” to your down payment can help lower your mortgage carrying costs.
Other programs available to first time home buyers include:
- The Land Transfer Tax Refund, where eligible first-time buyers can receive a rebate of up to $4,000 on the Provincial Land Transfer Tax;
- The Home Buyers Plan – a federal program that allows a tax-free withdrawal of up to $35,000 from an RRSP towards a home purchase;
- The Home Buyers’ amount – a federal income tax deduction of $5,000 from your taxable income if your purchase meets the criteria of a qualifying home; or
- A rebate on GST/HST paid if your purchase is an eligible newly built or newly renovated property.
A real estate lawyer can also advise you of your potential eligibility for other programs and support.
Choosing A Home
While you technically don’t need a real estate agent, most people choose to use one. If you do decide to use a real estate agent, be sure to find a good fit rather than just taking the first one that comes along.
You also need to think about the type of home you are looking for. Finding the perfect home on your first try doesn’t always happen, so consider the tradeoffs involved. Even if you are not buying your “forever home”, you are getting onto the property ladder and building equity, which will make it easier to “move up” later on.
Consider important factors such as:
- The minimum number of bedrooms you need
- The location, both in terms of nearby amenities and commuting distance to work or other places you will frequent
- Requirements for common spaces
- If you need a garage or large yard
- Whether you are looking for something move-in ready or are willing and able to undertake renovations.
Making An Offer
Once you’ve found a place you like that is within your budget, you are ready to consider making an offer. Market conditions will inevitably dictate home much room for negotiation there is on price, but be prepared for some back and forth.
There are several costs associated with a home sale and include things like appraisal fees and document filing fees, among others. These fees are usually covered by the buyer, although there is some flexibility and may be worth negotiating.
Even when an offer to buy is accepted, it’s not quite over yet! Offers to buy are usually conditional on several things, without which the deal can still fall through. Some potential conditions include:
- Approved financing: Securing financing means you have to get approval from your lender. Often, a buyer will have secured financing in advance as pre-approval can make the process smoother.
- Home appraisal: A home appraisal is conducted by a qualified appraiser who estimates the value of the house. An appraisal gives confidence to buyers that they know the true value of what they are buying and also ensures property taxes are determined fairly.
- Home inspection: A home inspection is conducted by a licensed inspector to ensure there are no serious problems with the property. Note that in a seller’s market, some sellers may not agree to this term.
- Clear title: The title refers to the legal ownership of the property, which must be “clear” before it can be transferred. Doing a title search is often handled by your real estate lawyer. Examples of a title that isn’t clear include properties where there are active disputes over ownership or claims registered against the property, such as a lien.
There may be other criteria if this is negotiated as part of the agreement of purchase and sale.
Contact Tierney Stauffer LLP in Ottawa for Experienced Real Estate Advice
There’s no getting around it: buying a home means a lot of paperwork! For peace of mind, it’s worth ensuring you have the help of an experienced real estate lawyer who can help guide you through this important transaction.
The real estate law team at Tierney Stauffer LLP has extensive experience helping clients through real estate transactions and ensures nothing is overlooked. We also advocate for clients in litigation and alternative dispute resolution processes when real estate deals have gone awry. We represent clients in Ottawa, Cornwall, Arnprior, Kingston, and North Bay. To set up a consultation and discuss how we can help you, contact us online or call 1-888-799-8057.