So you’re looking to purchase your first home? Congratulations! For many people owning a home has many benefits and is often considered a huge goal — something many work very hard to achieve. Although fairly straight forward, buying a home isn’t something that should be rushed into. Take a minute to sift through this first time home buyer guide to learn the basic steps of purchasing a home in British Columbia:
The Big Question: is Buying a Home Right for Me?
Purchasing a home for the first time can be a bit of a roller coaster; you’ll find the perfect one, only to have the lender disapprove or to have someone outbid you. A home isn’t always a great financial investment – if I’m being honest – so it is wise to understand what you are getting into before you make one of the largest financial decisions of your life. However, most home-owners enjoy the financial gain that occurs over many years as the market – although cyclical – always rises over the long run. To many buyers the pros of owning a home far outweigh the financial burdens; many are very happy they’re not paying someone else’s mortgage, are free to renovate and have pets as they please. However, there are a few things that you should consider before house hunting:
Costs of Purchasing
Purchasing a home in British Columbia isn’t just limited to the cost of the house and the down payment. A general rule of thumb is to budget an additional 3% of the purchase price for closing costs. You can read more about the costs of buying a house here.
Costs of Living
On top of your mortgage payments, the cost of living should include your life insurance, home insurance, utility bills, and so forth. You should also have a backup fund just in case. For example, things to consider would be heating bills increasing during the winter months.
Costs of Maintaining
Unexpected accidents are something every home owner needs to prepare for. It’s not out of the ordinary for your lonely and anxious dog to chew hole through your wall while you’re out for the night, or give a little too much gas when reversing into a garage door. Repairs like this will have to be addressed and are not always covered by home-owners insurance.
Costs of Buying a Home
There’s a lot to keep track of when it comes to additional fees and services. As a first time buyer you should be aware of the costs associated with purchasing a home from the beginning, as you will need to budget accordingly — you can’t add taxes or lawyer fees onto your mortgage loan. This money will have to be set aside from the start. It’s usually wise to budget 3% of the purchase price for closing costs and to have as a buffer.
Mortgage Costs
This includes your down payment, costs associated with applying for a mortgage, mortgage default insurance, and appraisal costs. In addition, and always a wise decision, your lender may require that you also have life insurance and home owner’s insurance.
Lawyer (& Notary Fees)
Lawyers do not just come in to play during disputes and settlements regarding real estate. They will be responsible for reviewing documents and contracts, dealing with discrepancies, giving valuable advice, and handing the adjustments and closing for your home. Plan accordingly and choose a lawyer prior to entering in to a contract.
Inspections and Contractors
Depending on the type and size of property – such as a condo or a character home – a building inspection can range from $275-$500+ which is definitely affordable considering the average home in the South Island region is over half a million dollars. You should always inspect any property you are looking to purchase.
Taxes
If you’re a first time home-buyer purchasing a home under $500,000 there’s some good news: you won’t have to pay any property transfer taxes! However, if you are purchasing a new build there are no exemptions for GST in British Columbia, even for first time home-buyers. Speaking of tax depending on whether or not the seller has already paid for the annual property taxes you may have to reimburse the seller on closing.
Utilities & Moving Costs
Don’t forget about utilities. Your current provider may charge fees for transferring your services to your new home. Make sure to plan ahead of time so your house and services will be turn-key ready for you on possession day. Are you hiring movers or doing it yourself? Speaking of which, finding out what items you want to bring with you would be a good idea, as packing materials can be expensive! If you find that something isn’t worth keeping (it adds up!) you might find that now is a good time to get rid of it.
Personalization
It’s almost a given: you’re going to want to personalize your new place. Whether it be knocking down walls, adding a new backsplash, or just a simple coat of paint it would definitely be a good idea to have a piggy bank set aside for improvements. If you’ve exceeded your budget on the home, it might take you years before you have enough extra money to spend on personalization, leaving you feeling like you’re living in someone else’s house.
Want to Know More About Costs? Click to Read More:
Buying a Home: the Step-by-Step Process
How do you start the process of purchasing a home? Do you start booking showings or do you start by seeking financing? If you answered “booking showings” it turns out this guide is for you. For all parties and professionals involved in the transaction – from buyers to sellers, realtors and lawyers – it is imperitive a buyer understands the procedure in chronlogical order. Here is a simple list for the first time buyer. For a more detailed list, click here
Establishing the Funds
Considering you are borrowing (potentially) hundreds of thousands of dollars, your credit rating and current debts have a lot to do with determining your eligibility for a loan. You’ll have to determine how much money you’ll need for a down payment and how much you qualify for, which is something your mortgage specialist can do for you when establishing a borrowing plan. From here you’ll choose a lender to work with and will be able to start the process.
Choosing a Realtor
Finding someone from the beginning who will educate you, guide you, and work diligently for you is definitely a strong asset to have on your team when purchasing a house for the first time. Although certain aspects of our jobs are related to sales, a Realtor should really be seen as an advisor rather than a salesperson. It helps to choose the right one; it’s really a game of match-maker to be honest.
The Brainstorming
Now that you’ve determined your eligibility for a loan and have a trusted Realtor on your side it’s time to figure out what to start looking for. Notice how this step is placed after seeking financing? There’s no point dreaming about the white picket fenced house until after you realize you can afford it. From here you should sit down with your list of wants and needs and determine a plan for the future. Are you planning on having children? Some condo’s don’t allow occupants under a certain age, for example.
Booking Showings
After you’ve come across a listing that seems perfect it would be a very good suggestion to research the property as much as you can. Your Realtor will work diligently to help answer your questions. If something comes up that looks interesting, it would be a good idea to do a drive by to feel out the neighbourhood. If the majority of your boxes start getting ticked and you start to get a fuzzy feeling, now would be a good time to book a showing!
Writing the Offer
After you’ve narrowed down the search and found the one, it’s time to write an offer. This is a legally binding contract and should be carefully thought over before submitting to the seller. Your Realtor will help you draft an offer, which will include your conditions and any fundamental terms for the transaction to complete. Everything from the price to the completion dates are all extremely important when negotiating a an offer. It helps to be aware of strategies beforehand and what to expect in the current market.
Acceptance and Closing
If your offer is accepted and consists of any subjects you will have to work diligently to remove them, as they are time sensitive. You will usually have a week (or two) to remove these subjects which means it would be wise to have a few lawyers, building inspectors, insurance brokers, etc, in mind ahead of time in case they are busy. Once your subjects are removed your lawyer will review the documents and start preparing the paperwork for closing, which includes the title, adjustments, and so forth. Possession is usually the day after completion, so you’ll soon be unlocking the door to your new home!