Buying a home and becoming a homeowner is an exciting time in life that requires you to know a bit about the steps to get into your new home and your responsibilities along the way.
Did you know that more than one-third of Canadian homeowners polled in a Manulife survey shared that they were caught short of funds at least once this past year? About 10% said it happened to them a few times and around 4% percent stated that they were in a financial shortfall almost every month.
Most home buying experiences are unique to the person and the home that they are buying but there are 10 must-know steps in the home purchase process that are common to almost everyone.
Knowing what they are can make you be better prepared for what is the largest transaction in most peoples’ lives.
Step 1. Confirm Your “Readiness”
Homeownership is a very big decision, and it involves a large upfront purchase and ongoing maintenance to preserve the value of the home and property. It also involves knowing what laws and bylaws apply to the land and home that you purchase so that you know what you can and cannot do with them. Some people think that they can do whatever they want on their property, but this is not the reality in today’s highly regulated world.
Property use is regulated by local zoning bylaws and individual land titles often have things like covenants, building schemes, easements and other restrictions on them. In addition to the costs and responsibilities of homeownership, there are risks. For example, in the North Peace region, we get large snowfalls that have the potential to do damage to homes and most people purchase insurance to address the potential risks thereby adding to the ongoing costs.
Knowing and understanding what is involved in the purchase of a home is an essential first step in the home buying process. If you are a first-time buyer check to see if any government plans apply to you (federal or provincial).
Speak with one of our North Peace Savings and Credit Union Advisors as they can certainly assist in this big decision.
Step 2. Know Your Credit Rating
Most likely, you’ll need a mortgage to buy your house. Your credit rating is important and impacts your mortgage interest rate. Your credit history is maintained by at least one of Canada’s two major credit-reporting agencies. They are TransUnion and Equifax Canada. North Peace Savings & Credit Union and other financial lending agencies use the reports generated by these organizations to decide whether or not to give you credit. The poorer your credit the higher your risk and the more you will pay to borrow money. If your rating is low enough you may not even qualify to borrow money. It is very important to know and understand your credit rating and score so that you understand your financial health from the perspectives of the potential lenders.
We can help you better understand these credit scores which range from 300 to 900 in Canada and are produced under names such as Beacon and Credit Score. For example, a score of:
- 300-559 may be considered poor
- 560-659 fair
- 660-724 good
- 725-759 very good
- 760 and above is excellent.
The specific numbers may vary slightly between financial organizations depending on the Credit Agency they use. Higher numbers are better and will provide us with an indication of how well you manage your financial affairs and therefore the likelihood of successfully paying your mortgage payments.
Do you know your credit score, what it means and how to maintain or even improve that number?
One of our North Peace Savings and Credit Union Advisors can certainly review where you are and provide guidance on how you can improve on this important financial score.
Step 3. Get Pre-Approved
Getting pre-approved for a mortgage is very important before you start to shop for a home. That is why it is important that your financial institution works with you so they can work with you on a pre-approval to ensure you know how much you can afford, what type of mortgage you can afford, and also talk about elements such as down payment, closing costs, and any other conditions that would have to be satisfied….all this needs to be done before you go house-hunting.
Understand, however, that a pre-approval is different from a pre-qualification. If a lender only prequalifies you, they are only providing you with an estimate of what you could borrow. It does not mean that you will get that amount.
If you’re pre-approved for a mortgage, that means the financial institution is generally prepared to give you a mortgage after reviewing your financial information. While you are getting pre-approved, and if you are a first-time buyer ask your Financial Advisor if there are any benefits that may apply to you as a first-time buyer.
Step 4. Your Needs, Wants and Goals. What are they?
Thinking about what you need and want is also very important. How does a house purchase fit into your short, medium, and long-term financial goals? What must you have in a home and property to meet the needs of your family? What would you like to have if you can afford to pay for it? Do you really need to have a nice view or is being close to schools a more important need? Taking the time to think through and document your needs and wants will help you decide when you do start looking for a home.
Buying a home can take the form of an emotional experience for some people. After all you will be purchasing your private residence and sanctuary and you will be living in it each day of your life. Have your needs & wants clear so you can narrow down your search; things like location, lifestyle, family & leisure, a yard for children/pets, local amenities, garage/parking and storage. Remember that severe weather winter conditions in our area create slowness in our real estate market and listings. Keep this in mind when planning to buy and move.
At North Peace Savings and Credit Union, our advisors will work on getting to know you, your family, and your financial goals and aspirations and then start developing a financial plan for your future.
Step 5. Get A Real Estate Agent.
The real estate industry is not well understood by too many people. This is borne out by statements such as: I am not willing to commit to a single agent; I am going to interview agents before I hire one; and I do not need the services of a real estate agent. The laws and regulations in BC stipulate that an agent cannot interfere with the professional relationship you have with an agent. In other words, you cannot have more than one agent working for you in the same area. If you choose to “interview” an agent, it is important to remember that they are also interviewing you because they will be committing their time and money to help you so the fit has to be both ways. As well, as a home buyer, you can engage the services of a real estate agent without having to pay anything for their professional services. When you buy a home the agent is paid by the seller through the agent’s agency after the deal completes. Why would you want to do it alone if you can get the help of a professional without having to pay for the services that you receive?
In British Columbia, you can engage the services of a real estate agent as either an unrepresented party or as their client. To understand the difference, think of a professional business relationship like this. As a customer of the agent, they will be selling you a home. As a client, they are doing whatever they can to help you meet your needs in buying a home. The current law that applies to this relationship is referred to as the law of Agency and the current version is explained in a British Columbia Real Estate Council Pamphlet called Disclosure of Representation in Trading Services. As a buyer you are best served by being a client of the agent and the agent should be working exclusively for you as your buyer’s agent.
Step 6. Understand The Market & Start Your Search
Market conditions can and do affect the price that you can expect to pay for a specific home. Competent real estate agents will understand all of the factors that go into the preparation of an offer and they will be able to advise you on things like terms, conditions, price and down payment. Choosing the right agent is important.
When it comes to looking for homes there are many sources of information. Magazines, newspapers, and the internet all can provide information on homes for sale. Choose a general location and look at local Multiple Listing Service (MLS) listings. The home buying process usually involves a process of elimination that starts with choosing a rural or urban area that works for you. The more you can narrow down your search to a specific area or areas, the more time you can spend looking at specific neighbourhoods, homes and the features that they offer.
After you secure the services of a real estate agent, they should be able to create an account for you and send you MLS listings as soon as new listings come on the market to help you in your home search.
Step 7: View Homes & Select Your Top Picks
Viewing homes in person is an absolutely essential step. This is best done after you are preapproved. Why you ask? If you find “the home” and fall in love with it, especially in a fast-moving real estate market you will need to be ready to make an offer on it to have a chance at buying it or risk disappointment and losing out on it.
If you have to sell your existing house, you can make an offer on a home subject to the sale of your current home. This condition may not be something that some sellers are willing to accept in some types of market conditions. Sometimes sellers will ask real estate agents to ensure that buyers who wish to view their homes are both qualified and serious and in some conditions, they will also ask if the buyer has a home to sell before they can buy when they are not prepared to consider offers of that type.
Most buyers will narrow down the homes to a shortlist of their top picks. When you have narrowed the list down to about three homes that could meet your needs it is time to take a second look. Bring a piece of paper and make notes. Jot down what you like and do not like and what you would want to be included in an offer and if there is anything that you would want to be excluded. Once you select the best of the three you should be ready to make an offer.
Step 8. Make an Offer
The real estate offer is where the rubber meets the road. The preparation of an offer requires discussion of price, deposit, and terms and conditions. Most real estate offers will have conditions in them. These are commonly referred to as “subject tos”. The most common address things like title searches, property disclosure statements, financing, inspections and insurance.
The offer has timelines as to when the conditions need to be removed. The investigation may involve other professionals such as home inspectors, septic inspectors, land surveyors, biologists, municipal offices, notaries and lawyers etc. It is important to allow enough time for the condition removal period so that they can be scheduled for the appointments and for them to do their jobs and then for you to receive and review the information and then make a decision.
The removal of conditions in a real estate contract is an extremely important step. Once conditions are removed and a contract becomes unconditional you have purchased the home via a legally binding contract.
Step 9. Complete the Buy
The final step of the process involves contracting a lawyer/notary who will deal with the next step of title and money transfer as well as the signing of final mortgage documents.
Step 10. Arrange to move into your new home!
If you are planning on purchasing a home in the near future, let NPSCU help you through the buying process and discuss mortgage pre-approval. Get started today! Contact an NPSCU Financial Advisor at 1-877-787-0361