Buying your first home is a very exciting time. To ensure the buying process is successful here are a few things to consider.
Making a down payment.
A down payment is very important when purchasing a home. A typical down payment is anywhere from 5% to 20% of the value of the home. For example, if you found a home and the agreed purchase price was $300,000, you would need a minimum of $15,000 available to put towards the purchase of the home.
There are a variety of ways to generate a down payment; either you have saved the money, you can talk to a financial adviser about using RSPs or you can receive a financial "gift". Please discuss these options with your mortgage broker or lender to ensure a successful mortgaging process.
Providing a deposit on your Offer to Purchase.
When you submit an Offer to Purchase on a home, you will have to include a deposit along with it. Providing a deposit lets the seller know you are serious about wanting to buy the house. The deposit essentially holds the property for you while you service the terms and conditions you've written in the Offer to Purchase. If your conditions are not satisfied, your deposit is returned to you. If you proceed with the purchase of the home, the deposit is applied to the down payment portion of the sale price.
Writing an Offer to Purchase for a home.
An Offer to Purchase is the legal aspect of putting an offer on a home that you wish to purchase. There are three main components to the offer: the sum of money you will be paying, the conditions to your offer and the date on which you are requesting to take possession of the home.
For demonstration purposes only, this will give you an idea of what an Offer to Purchase looks like. Keep in mind that your real estate agent will be there to walk you through and explain the process to you, as well as answer any questions you may have.
Name of Buyer: Joe Smith
Name of Seller: Sally Green
Address: 123 That Street, Saskatoon, Saskatchewan S0S 0S0
The Buyer offers to purchase the property for the Seller for the SUM (Purchase Price) of: Three Hundred Thousand Dollars
$300,000.00 Purchase Price to be paid as follows:
$5,000.00 Deposit by cheque or cash
$285,000.00 by new mortgage (plus mortgage fee, if required) to be arranged at the Buyers's expense
$10,000.00 balance of cash
This Offer to Purchase is subject to the following conditions:
1) The Buyer obtaining approval of a mortgage on the above mentioned property on/before "X" day of "X" month, 20XX.
2) The Buyer obtaining and approving a house inspection by "X" date. The cost of the house inspection is the responsibility of the Buyer.
Offer to Purchase is accepted. Now you must satisfy and remove the conditions.
When you wrote the Offer to Purchase, you added conditions with an expiry date. Typically you will ask for five business days to have the conditions for the sale satisfied: final mortgage approval and, in this instance, you asked for a house inspection. It is your responsibility to not only coordinate a time to have a certified house inspector come in to inspect the home but it is also your responsibility to pay for the inspection. House inspections typically start at $400 and additional charges may be applied depending on the circumstances such as the location and size of the home.
While your mortgage is in the final stages for approval and you are not providing a 20% downpayment, an additional fee will be applied to your mortgage. CMHC, Canada Mortgage and Housing Corporation, will insure the mortgage. If for some reason the house falls into a foreclosure situation, the CMHC insurance will protect the lender from serious financial loss. CHMC fees are based on a percentage ranging from 0.50% to 4.75% of the total mortgaged amount and are blended into your mortgage payments. Your lender or mortgage broker can help explain this process to you.
Your lender or mortgage broker will also require you to purchase house insurance. House insurance is designed to cover the physical house, additional outbuildings like a detached garage and sheds, contents within the home, additional living expenses in the event of damage to your home as well as cover you for personal liability. If you are buying a condominium, condominium insurance covers the interior unit space, personal contents and additional improvements you have purchased and installed. There are a variety of insurance brokers so it's a good idea to get a quote from a few different brokers as each will vary in price.
Your mortgage has been approved, you are satisfied with your house inspection and have purchased the appropriate house or condominium insurance.
Approximately ten to fourteen days prior to possession of your new home, you will have to meet with a real estate lawyer to finish the purchasing process. Aside from the standard lawyer fees required to prepare documents to complete the transaction, additional fees will be incurred. The cost of a land title transfer is $3 per $1000 of the purchase price. On top of that, registration of title, title search and a tax search will also be billed to you. While your lawyer fees will not be substantial, it is definitely worth noting for the purpose of budgeting for when you will be ready to make the purchase.
Typically possession happens around noon on the day of possession, or when the seller's lawyer has given the go ahead. Some people opt to move themselves to save money; however, if you have several expensive items to move, it is best to hire a professional moving company. Not only will they save you the hassle of the physical move but they also have insurance in case any of your expensive items are damaged in the moving process.
If you are looking for more information about buying a home in Saskatoon or want to discuss your real estate needs, feel free to contact us any time.