1. Find the right moment
Before buying a primary residence, start by analyzing your financial capacities and professional perspectives. If you are in a precarious or unstable position or you’re thinking about moving somewhere new soon, it may be better to wait. Acquiring real estate is a great financial investment if you’re planning to stick around for the long run.
2. Outline your needs, goals and desires
Determine exactly what you are looking for: number of bedrooms, dimension of the yard, location of shops and schools, privacy and open spaces or proximity to services, etc.
You should also consider your needs over the years to come. Consider if you will have more children (or if your older kids will be leaving the house), stairs in the home if your joints are already bothering you, home maintenance if you live alone, etc.
3. Prepare a financial plan
Your budget should also be part of your initial research. It is essential to establish your financial capacity so you know how much you can afford to pay. As a general rule, experts say that the price of your property must not exceed two and half times your salary.
When it comes time to prepare your budget, don’t forget to account for all the related fees (besides your mortgage): the cost of inspection, notary fees for the transaction, moving, transfer tax, municipal and school taxes, etc. Don’t forget annual maintenance costs.
4. Meet with a financial advisor
Before you get started on your research and visiting houses, ensure that you know and understand all the financing options available to you. It’s important to learn about the different types of mortgage loans, what rates are offered, the difference between fixed- and variable-rate loans, the term, etc. By making an appointment with a mortgage advisor, you can discuss the goals and budget you have in mind. It could help you choose the right loan while respecting your ability to repay it.
In order to determine the maximum amount you are able to borrow, financial institutions will calculate your debt ratio (your available income, less any recurring financial obligations such as a car loan, insurance, etc.). According to financial institutions, your debt ratio should generally not surpass 33 to 39% in order to be approved for a loan.
Understand that, to obtain a mortgage loan, you usually need to be able to provide a downpayment and have a good credit report. If your downpayment is 20% of the property price, you will avoid having to sign up for mortgage insurance with organizations such as the Canada Mortgage and Housing Corporation (CMHC).
5. Get a pre-approved mortgage loan
You’ve found a financial institution with whom you’d like to do business and you now know all of your financing options—it’s time to choose the solution that best suits you and to get your loan pre-approved.
Even before negotiations begin, many brokers or landlords will ask for mortgage pre-approval. Not only does this document demonstrate your ability to pay, it also proves that you are a serious buyer.
6. Search for the ideal property
If you want guidance during your search, get in touch with a real estate broker. They will show you properties that meet your criteria and accompany you throughout the buying process. Their fees are paid by the sellers at the time of the sale (if it takes place).
You can also do the research yourself by searching real estate websites with or without an agent: Centris, DuProprio, LesPacs, Kijiji, etc.
You should also consider looking at repossessed houses. Some brokers specialize in these types of properties. Many of them, seized by their brokers, are available and affordable.
7. On your mark, get set, visit!
Visit as many properties as possible to be sure you make the right choice. When you find a home you like, go back and see it again, familiarize yourself with the neighbourhood, ask the neighbours about the positives and negatives of the area, etc.
8. Present a purchase offer
Once you find that rare gem, present a purchase offer to the sellers. Determine a fair price without hitting your maximum borrowing capacity. This will leave you some wiggle room during negotiations with the owners.
9. Inspect the property
Your home will be a major financial engagement for many years, so it’s important that you ensure the property of your dreams is, underneath appearances, in good shape.
You can call on the services of inspection experts and choose an inspector who is a member of a professional order. A real estate broker will be able to give you good references and can tell you what you should expect to budget for this step.
You should expect some back and forth between you and the owners. It’s rare that sellers accept a first offer, which is why it’s important to start with a lower offer than what you’re willing to pay.
The results of your inspection may allow you to lower your offer. If you find that you will have to do work on the property, you have several options: either the owners carry out the work themselves at their own expense before you move in, or they agree to lower the price according to the estimated cost of the work.
Purchasing a property is an enormous commitment. By following each of these steps, you’ll have the best chance of avoiding any unpleasant surprises and having the most satisfying transaction possible. Once you’ve moved in, you’ll have more time to enjoy your new life as a homeowner.
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