Step#1
Determine your affordability
Generally, in order to do an affordability assessment, a lender will review how much you earn and how much you spend on bills and other regular payments.
There are some ways to boost your borrowing power.
-Pay off debts, when assessing your mortgage application lenders calculate how much money you owe already
– Improve your credit rating.
-Organize your accounts.
– Get a pay rise
– Reduce expenses
– Extend the loan term
Most lenders usually see a two-year history of the second part-time job before they will count it toward total income for mortgage qualifying. Also, they will want to see the applicant has worked two jobs simultaneously for two years.
An immediate family member may give you the money for a down payment. An immediate family member can be a parent, child, brother, sister, grandparent, or guardian.
If you’ve just started a new job, you have been told by your bank that you’ll have to wait until you’re no longer in a probation period before you can get a home loan.
The mortgage stress test requires banks to check that a borrower can still make their payment at a higher rate that’s higher than they pay. Here’s how it works. This means that your income should be high enough, and your existing debt low enough, to be able to pay down your mortgage at that higher rate.
Step#2
Get prequalified and preapproved for your mortgage
The best time to get preapproved is just before you start looking for homes. By verifying how much you are qualified to borrow pre approval helps you decide what you can afford. However, you may not want to spend as much on a home as the amount you can borrow.
1.Get your credit score. Know where you stand before meet to a lender
2.Check your credit history
3.Calculate your debt to income ratio
4.Gather income, financial account, and personal information
5.Reach out more than one lender.
Inquiries for pre-approved offers do not affect your credit score unless you actually follow through and apply. A pre-approval basically means that the lender thinks you have a good chance of being approved based on the information in your credit report, but it is not a guarantee.
60 to 90 days
660 to 724 (Good) – This places you in good standing and you have a better chance to be approved for a home loan with lower interest rates than those with average credit scores. 725 to 759 (Very Good) and 760 and up are considered excellent.
The main difference is a bank mortgage officer represents only the products their institution offers, while a mortgage broker is an negotiator who works with multiple lenders and is paid a referral fee by the lenders.
Finding a deal, or the desire to get the best rate is the main reason people use a broker.
Most mortgages have the option to allow payments to be made on a weekly or bi-weekly basis. This option can save you money as you can expect to pay off your mortgage about 4 years sooner. This can save you significantly over the life of your mortgage.
Paying extra amounts on your mortgage can cause a big interest in saving over time. When we select a mortgage company, privilege payments options are something that we look for. A 15% privilege payment will allow you to pay off up to $15,000 per year on a $100,000 mortgage. It is good to know that the privilege payment also is flexible to allow you to pay smaller payments on the mortgage and as often as you wish. An extra $1000 periodically paid on a mortgage can cause you to become mortgage-free faster.
As mentioned above, when you put a 20% down payment on your purchase you can avoid the CMHC premium, More importantly, the larger the down payment, the lower the amount of interest you will pay over the life of your mortgage. It is important to note that it may not be wise to force yourself to increase your down payment and end up borrowing on credit cards or a line of credit at a higher interest rate.
Step#3
Finding a house
Single-family (Detached)
It’s a house that is not attached to another house in any way. It sits on its own property and is totally separate from other houses.
Having more space in detached properties allows you to create more storage for your possessions, and to dedicate part of your home for your hobbies. Detached homes make a great investment property because there is a wide range of potential buyers and their value increases over time.
Semi-Detached houses
A semi-detached house is a single-family duplex dwelling house that shares one common wall with the next house. The name differentiate this style of house from detached houses, with no shared walls, and terraced houses, with a shared wall on both sides.
Overall, semi-detached homes are more accessible than detached homes. These properties have smaller backyards, meaning that the yard work will take less maintenance time in a semi-detached house. Also, maintenance expenses for your side are lower in comparison.
Townhouse
A townhouse is like a row home sharing one or two walls. They are usually 2 or 3 stories tall. A townhouse is more like a single-family house except for being attached to another unit either on one or both sides.
Investing in townhouses to use as a rental property is absolutely a great idea when you look at the costs. If you have a limited budget, then investing in townhomes is a good idea.
Bungalow
A bungalow is a small, square, single-story home with a front porch. The single floor is raised up with front steps leading up to the porch. Often there’s a single dormer window built into a pitched roof in the attic. These types of homes started being built in North America in the early 1900s. These days, bungalows aren’t too common given the penchant for much larger homes. Moreover, with computer-aided design, simple designs are no longer necessary to keep costs lower.
Benefits of buying Bungalows :
- Convenient for Seniors. The one-story layout of a bungalow makes it the perfect living situation for seniors.
- Accommodate Mobility Limitations.
- Kid-Friendly Living.
- Open-Plan Design.
- Flexible for more Additions.
- High-Demand for Resell.
Ranch-Style
A ranch-style house is also a single-story house but has a larger, rectangular footprint (compared to a bungalow). The ranch house is a derivative of the wide Spanish hacienda. Ranchers grew in popularity in the 1950s as huge tracts of land were turned into suburbs with larger plots than the typical urban plots. This type of house has plenty of open spaces outside given they require larger-than-normal lots.
In-law suite houses
An in-law suite is a separate unit built into a single-family house. Often it’s in the basement, but not always. It is, however, part of the single-family structure as opposed to being a separate structure. A separate structure available for rent and/or guests fall under different terms such as carriage house or laneway house.
– Check the distance from your work and also available transportation options.
– Check the school ratings in your desired neighborhood. Even if you don’t have a child it’s an important factor in terms of selling the house.
– Check the neighborhood demography. Demographic data refers to economic information expressed statistically, also including employment, education, income, marriage rates, birth and death rates, and more factors.
When you make an offer, in most cases you will be required to submit a deposit that the seller will hold in trust as good-faith money. It’s usually 5% of the total purchase price.
If the home is truly asking for more than what it is worth, then start looking at the price you consider acceptable. While 5% to 10% is often deemed a reasonable discount. Some people have offered up to 25% less and seen their offer accepted.
The condition of financing typically gives the buyer several days to arrange satisfactory financing for their purchase. The condition on an inspection gives the purchaser an opportunity to hire a home inspector to ensure there are no major problems with the home.
When the seller accepts your offer, the deal is finalized. If you back out, you might lose your deposit. A conditional offer is when you include at least one condition that must be satisfied in order for the deal to be finalized.
Step#4
Home inspection
Typically, purchase offers are contingent on a home inspection of the property to check for signs of structural damage or things that may need fixing. Your real estate agent usually will help you arrange an inspection.
A home inspector will look at a house’s HVAC system, interior plumbing, and electrical systems, roof, attic, floors, windows and doors, foundation, basement, and structural components, then provide a written report with results.
The interior and exterior of the home will be inspected, including any accessible under-floor or roof cavity areas. If pests are present and active, inspection reports help determine what treatment should be taken.
State laws, including seller disclosure laws, are the only instance where a seller is obligated to pay for repairs after a home inspection. For everything else, it’s up to the negotiations between the buyer and seller, and who pays for what depends on what is decided after the inspection report comes in.
Potential red flags that can arise during a property home inspection include evidence of water damage, structural defects, problems with the plumbing or electrical systems, as well as mold and pest infestations. The existence of one or more of these issues could be a dealbreaker for some buyers.
One of the most costly repairs to a home is correcting foundation problems. The foundation of a home is arguably the most important part of a home. A home with a problematic foundation can cost a homeowner thousands of dollars to correct a problem.
When looking at homes, it’s important to be aware of the foundation. If the home has an unfinished basement it can be easy to see if there is any cracking in the foundation. Minor cracking may only be a sign of settling in the home, however, large cracks can be a sign of structural problems with the foundation.
If a home doesn’t have a basement or has a finished basement that doesn’t allow for you to look at the foundation, another way to tell if a home is possibly experiencing structural problems is by looking at the door frames throughout the home. If the door frames seem not to be square or the doors seem to have difficulty closing, it’s possible there could be some problems with the structure of the home.
The best way to determine whether a home has a foundation or structural problems is by hiring a structural engineer to conduct an inspection on the home. There are many home inspectors who can determine whether a home seems to be experiencing some problems, however, it’s unlikely they will be 100% certain whether there are problems or not.
Many buyers hire the first inspector they find. But don’t settle for less. Carefully research every home inspector and consider several factors:
- Qualifications, certifications and training
- Knowledge of building codes
- Number of years inspecting homes
- Referrals and references
Related work experience
Types of issues could be discovered during inspection
One of the most costly repairs to a home is correcting foundation problems. The foundation of a home is arguably the most important part of a home. A home with a problematic foundation can cost a homeowner thousands of dollars to correct a problem.
When looking at homes, it’s important to be aware of the foundation. If the home has an unfinished basement it can be easy to see if there is any cracking in the foundation. Minor cracking may only be a sign of settling in the home, however, large cracks can be a sign of structural problems with the foundation.
If a home doesn’t have a basement or has a finished basement that doesn’t allow for you to look at the foundation, another way to tell if a home is possibly experiencing structural problems is by looking at the door frames throughout the home. If the door frames seem not to be square or the doors seem to have difficulty closing, it’s possible there could be some problems with the structure of the home.
The best way to determine whether a home has a foundation or structural problems is by hiring a structural engineer to conduct an inspection on the home. There are many home inspectors who can determine whether a home seems to be experiencing some problems, however, it’s unlikely they will be 100% certain whether there are problems or not.
One of the best ways to prepare a home on a budget for sale is freshly painting. Painting a room is a fairly inexpensive way to make a room feel clean and fresh. This is one of the biggest recommendations that Realtors will give to home owners prior to listing their home for sale
When looking at homes, a room with only one wall or small portion of the ceiling that has been freshly painted should be a red flag. Why would a seller only paint a small part of the ceiling? Or only one wall? It’s possible the seller is trying to cover up a problem, which should be a cause for concern.
Depending on the age of a home, it’s possible there are issues with the electrical systems. Inadequate or electrical issues need to be viewed as a red flag for a buyer. Many older homes still have older electrical panels with fuses and even some homes still have knob and tube wiring, which can cause significant problems.
It’s understood most home buyers are not professional electricians, however, simple things such as turning on light switches, checking for flickering lights, and checking outlets are all good ways to tell if the electrical seems to be working properly. Most home inspectors will inspect the electrical panel and test the outlets to ensure the electrical systems are not a safety concern.
Two of the most common home inspection findings are issues with the electrical riser cable as well as improper wiring throughout a home.
Water in a home is something that almost every home buyer will be terrified of. Most water problems in a home are directly related to poor drainage or grading.
Poor drainage is something that isn’t always easily detected. An obvious sign of poor drainage is pooling water. If the yard of a home has mini lakes, it likely has poor drainage, which can lead to water problems inside the home. Other signs of poor drainage can include overflowing gutters, migrating mulch in the flower beds, water stains on basement walls, and cracking in the foundation.
Proper grading can make a huge difference when it comes to water problems. It’s common sense that a negative grade resulting in standing water on the foundation can create water problems. It’s important that the overall grading is sloping away from the homes foundation and that water is being run-off away from the homes foundation.
Similar to water problems, mold problems should raise red flags when buying a home. Mold can lead to major health problems, especially for young children. Mold problems are not always easily discovered, however, if a home you look at has mold problems, you need to consider whether the home is the right fit or not. There are many considerations that need to be taken into account to help determine whether buying a home with mold is the correct decision or not.
Mold remediation can be completed on a home, however, it can be costly. Like many of these red flags, most home inspectors can help discover mold problems in a home. The most common areas for mold in a home are basements and attics. There are companies that can perform mold tests to determine whether for certain a home has mold or not.
Step#5
Closing
At closing, you will sign all the paperwork required to complete the purchase, including your loan documents. Once the check is delivered to the seller, you are ready to move into your new home.
Closing costs include land transfer tax, title insurance, property valuation fees, home inspection fees, and legal fees.
Ontario land transfer tax has a $2 million tax bracket.
Purchase price of home | Marginal Tax Rate |
First $55,000 | 0.5% |
55,000-250,000 | 1.0% |
250,000.01-400,000 | 1.5% |
400,000.01-2,000,000 | 2.0% |
Over 2,000,000 | 2.5% |
- You must be at least 18 years old.
- You must occupy the home as their principal residence within nine months of the date of transfer.
- You can’t have ever owned an eligible home, anywhere in the world, at any time.
- If you have a spouse, the spouse cannot have an eligible home, anywhere in the world, while you are in a marriage contract.
Buyers of houses and condos in Ontario pay land transfer tax when they purchase a property. Sellers never pay. Your lawyer will arrange for land transfer taxes to be paid when the deed to the new home is transferred in your name.
An insurance policy that protects the homeowners, against challenges to the ownership of your home or from problems related to the title to their home.
The policy provides coverage against losses due to title defects, even if the defects existed before buyers purchased their home.
The buyer pays a one-time premium for this service at closing. The policy is good for as long as the buyer or their heirs own the home.
The cost varies widely depending on the location, type, and value of the transaction.
A real estate lawyer works to protect his or her clients when they purchase or sell a home, helping to ensure that the transaction is completed well, regardless of which side of the deal they are on. There are many facets of purchase or sale that real estate lawyers deal with on your behalf so you can rest assured it will go smoothly.
A real estate lawyer reviews a wide range of legal documents on behalf of their clients, including the Agreement of Purchase or Agreement of Sale. These items detail the negotiations involved and range from an irrevocability deadline and completion date to matters of Harmonized Sales Tax and a title search.
Real estate lawyers are also responsible for ensuring that no claims are listed against the home you purchase, as well as checking that property taxes are up-to-date and that you (their client) have a valid title upon closing. Some of their other roles include calculating the land transfer tax due, drawing up the applicable mortgage documents, exchanging legal documents and keys with the seller’s real estate lawyer, plus closing the transaction while ensuring all financial and legal conditions are met.