Today, I am writing about one of the three essential things of human life, Home Sweet Home.
Whether a person is a newcomer or already a Canadian citizen, everyone desiresto own a house. It is far more expensive to buy a house in big cities like Toronto/GTA and considering the importance of fulfilling the dream of owning a property, I am sharing detailed information regarding what might be helpful for many to take the right decision.
First things first, you must make up your mind to own yourhouse as soon as possible and believe it or not, it could prove to be your one of thewisestdecision taken especially in Canada. Some people might fear taking big mortgage liabilities which span anywhere between 20 to25 years, especially in a country where job security is ostensibly not widespread, but unarguably, in Canada real estate is the only industry which can fetch you higher and faster returns. To create wealthyou need to build up your equity and renting will not help you build your equity, the humongous monthly rent you pay goes in thin air and whereas in monthly mortgage repayments you'repaying a largerportion of the principal amount and creating equity gradually.
One of the other important reasons to buy a houseas soon as possible is to have a peaceful retirement. Mostly all newcomers on a permanent resident status fall in the agebracket of 25-35 years and students between 18-30 years. Even if you buy your house at age of 35, you will end up paying your mortgage up until 60 years of age (may be earlier if you pay extra money every month). Hence, the earlier the better.
Now that you have made up your mind, the first question that arises is:
Do you qualify for the Mortgage?
For mortgage qualification the first and foremost is your work profile, it’s way more easy if one has a permanent full time job or should have been working on a contractfor more than 18 months. Important point to be noted here is that for a self-employed person or a new entrepreneur, most of the top Canadian banks are wary of giving a mortgage, unless one could prove that they have an established profitable business for more than 3 years with year on year improving profit track record as well as the industry of business qualifies to be a stable one.
Roughly in a family set up, if both the partners are working on a permanentfull time job, they could be eligible for 4.5 to 5.0 times of the their annual combined family income, another point to be noted here is that different banks count different things as income for example, some banks do consider you child care benefit as a source of income. Do ask you mortgage advisor this question, most likely your realtor could introduce you to one. Get a basicidea of how much mortgage loan could you obtain, based on your current income, credit score and down payment availability. It will help you identify your budget and help you start hunting for a property in that range.
Next important question, the Down payment!An average 3 Bedroom townhousein GTA could cost you anywhere between $600,000 to $700,000, semi-detached house $700,000 + and detached house $800,000+. To own a $700,000 house you need 20% down payment which is $140,000 if you cannot afford it then you may go for lower down payment like 10%.
Anything less than a 20% down payment will incur insurance cost which is provided by a third party CMHC (CanadianMortgage & housing corporation). Please refer to the below given chart for premiums based on loan amount.
Another very important aspect to qualify for a mortgageloan is the credit score. To build up credit score start using a credit card from the day you land in Canada and always pay back full amount outstanding oncredit card every month. It is better to have an unsecuredcredit card too, you could get these from any retail stores like Walmart or Canadian tire which will certainly help to better your credit score. Use credit cards wisely and do not overspend (read ‘exhaust the limit’) otherwise it can reversely affect your score, in any case if you pay the minimum bill, get charged with massive interest.
Limit yourself to get the credit score checked. More than 5 hits will affect your credit adversely so limit yourself buying mobiles on 2 year contracts and always ask while buying anything, whether any purchase will hard hit your credit score.
Places to always ask whether a credit hit is required:
- Opening a Bank account (you can deny for credit check for personal account but for business account it's compulsory)
- When you register to buy credit card.
- Cell Phone on contract
- Easy Finance while purchasing any appliances/camera/furniture or any other goods.
- When you buy a Car on Finance.
Once you are qualified for a mortgage, what’s next?
Should I be taking services of a real estate agent to buy a house or not?
My suggestion is a definite YES, but before you officially sign up with any real estate agent, be sure to look for an agent who speaks your language and knows well about your culture and the kind of taste you could have for a house. It is very difficult to change your agent once you sign up with someone on paper. Also consider this person to be experienced, one who gives you the right kind of advice, as in Canada the buyer is not required to pay any commission to real estate agent, it is only from the seller that your realtor gets paid. Hence, it is important that this person remains honest in his/her endeavours for your house hunting.
Even before you sign up with an agent, My suggestion would be to go andstart looking at open houses(use realtor.caor zolo.com to see houselistings). You do not need an agentto see an openhouse. Open houses will help you identify what is the exact criteria for buying your dream house, some of which are listed below:
- Number of Bedrooms 3/4/5?
- Number of Washrooms 3/4/5?
- Basement finished or unfinished?
- If the basementis finished, is it a legal basement or not?
- Age of the house as old houses will have higher maintenance costs.
- Nearby schools and their ratings, if you have small children.
- Neighbourhood and community
- Grocery stores, banks and other important stores nearby
- How far is the bus stop or subway station or go station from house?
- Transportation time to your work place?
- Property Tax?
Once you like a house and it falls in your budget, what’s next?
Your realtor’s experience will now come into picture as he/she may guide you with the best price of the houseto make an offer. Some research is required based on the price of recently sold nearby houses, market trend and house condition. Once you both agree on one price, realtor would build an offer document and will send you to sign.
Things to take care before you send an offer:
- Check to see if you want to make a conditional offer or a firm offer.*
- Check to see what is the initial deposit amount mentioned and whether you have the funds ready.
- Double check if the offered price in words and numerals match.
- Check all the dates such as offer acceptance date and deal closing date.
Sometimes in a few listings, there arises a bid war, where you need to be physically present at the house on the day of offer presentation. In such cases you will be kept ina dark spot by the seller’s agent at that time, and might be asked to increase your offer amount on a pretext that you offer could get accepted if it gets close to seller’s expectations. Although the seller’s agent is obliged to reply to you or your agent the same day regarding your offer.
Be prepared for some initial disappointments because the first few offers might get rejected due to various reasons such low price, firmoffer vs conditional offer. Try your best to get a pre-approved mortgage, in which case you can give a firmoffer with a veryhigh possibility of getting it accepted.
Wish you all the best for house hunting.
Leave your questions in the comments section, will try to answer them as soon as I can.