First Time Buyer Information

Interesting First Time Buyer Storey

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CBC MARKETPLACE: YOUR HOME » REAL ESTATE
Dealing with a real estate agent

Caius, Elisa and baby Simona Tenche have outgrown their downtown condo.

After two years of marriage, and now with a baby in tow, Caius and Elisa Tenche have outgrown their downtown condo.

The condo is relatively small, about 750 square feet. “That was great when I was single,” says Caius. “It got a little cozy when Elisa moved in, and now it’s really cozy with Simona here.”

The Tenche’s figure they can afford a house in the $500,000 mark – these days in Toronto, that’s a pretty average price tag for an average-sized home.

Finding an agent

Don’t choose an agent based on their sales record alone – it’s more important that you trust the agent and can develop a good working relationship.

Caius and Elisa Tenche are a do-it-yourself, hands-on couple – but they decide they need an agent. Doesn’t everyone?

“Maybe I’m wrong, I don’t know,” says Caius, “but I thought that you have to have an agent in order to buy a house… There are a lot of homes that you find on MLS, but you can’t just go in and ring on their doorbell and say ‘Hi! I saw you’re home on MLS; can I come in and have a look at it?’”

“I would like to use the agent as our backup, as our researcher to do the down and dirty work for us,” adds Elisa.

The couple has high expectations when they hook up with an agent, Zoia Negrea.

And what does Zoia get for her time and expertise? A typical commission from the sale of a home is five per cent.

Elisa and Caius begin their search by touring the MLS website, trying to get a sense of the properties that might be available in their price range.

If Caius and Elisa buy a house for $500,000 dollars, the commission would be $25,000. Zoia and her broker would make 2.5 per cent. The other half would go to the agent selling the house.

On their first day out, Caius and Elisa are excited. They’re looking forward to checking out houses with their agent, Zoia.

“Let’s see what she’s selected,” Caius says. “I’m really curious to find out how well she understands what our requirements are, what our needs are.”

After Zoia and the couple meet, they head to the first stop – a typical semi-detached house in Toronto. Neither Caius nor Elisa are smitten.

Still, they have high hopes. When their agent suggests the couple is a bit unrealistic in what they think they can buy on their budget, Caius disagrees.

Luck isn't with the Tenches on their first time out house hunting with their agent - none of the houses they see spark their interest.

“A half million dollars is not a limited budget,” Caius insists. But he reluctantly nods in agreement when Zoia returns with: “Well, for what’s happening now in the Toronto market…”

The couple tours another seven houses. None of them spark their interest, and the pressure is building.

“Do you think we should put in an offer at that place on Pape?” Caius asks Elisa.

“I don’t know. It’s driving me nuts right now,” she says with a frustrated sigh.

“Do you think we should look at it again?”

“Are we settling?” she says with a shake of her head. “Is there something else? Is that the one? Isn’t it the one? It didn’t grab me right on, and they say when you find the home you want to buy, you’ll know.”

Caius begins to question the couple's budget - are they unrealistic with the amount they want to spend?

“It’s really hard to find the home that we’re looking for in our price range” Caius says matter-of-factly. “I don’t even know if it’s possible, frankly.”

The couple ends their first day stressed out and home-hungry.

Caius and Elisa decide they need to spend some time familiarizing themselves with other neighbourhoods.

They head out for several weekends on their own, hopping from one open house to another. But they still have no luck finding their perfect home.

Tips for choosing an agent

Don’t choose your agent based on their sales record alone – it’s more important that you trust the agent and can develop a good working relationship.

Annual spending related to the resale housing industry between 2002 and 2004: $10.8-billion.

If your agent immediately shows you listings besides his own or those of his broker, you know you've got an agent that has your best interests at heart. (Or conversely, if your agent only shows you his own listings of those of his broker, you know you're not getting the best service.)

Be just as judicious in choosing a buyer’s agent as a seller’s agent. If you go to see a house and notice something you feel is problematic and your agent doesn't point it to you, you may want to find yourself a new agent.

After a few unsuccessful months of searching on their own, Caius and Elisa meet an agent, Donna Murray, at an open house. The house didn’t suit their needs, but Donna seemed to have a good sense of what the couple is looking for.

“She was one of the nicest agents we’ve run into,” says Caius. “She’s made us feel hopeful about the ability to find a house in the area we want in the area we want in our price range.”

“I think agents in general should prepare the buyer, or the seller, for how the market works,” says Elisa.

Caius and Elisa have also become convinced that their original price range was a little unrealistic. They’ve decided to bite off a bigger mortgage, adding another $100,000 to the price their willing to pay for their dream home.

Today, they’re still searching – it’s been several months and they still haven’t found what they’re looking for– but they’re quick to add that the experience has made them much more savvy when it comes to the real estate business.

“I think agents in general should prepare the buyer, or the seller, for how the market works,” says Elisa. “I think if we would have been told some of this information upfront then we would have been where we are today maybe sooner,” adds Caius.

But Caius admits he has to take some of the blame for how long it’s taken for the couple to find a house: “I’m apparently picky - I’ve been told I’m picky. So I've put together a ‘Caius Home Approval Check List’ to bring along from now on

First Time Buyer Information

If you're considering buying your first home you may be wondering where to start. The fact that you're on this web site shows that you're inclined to use Internet for research for new home buyers information, most likely for London or St Thomas, Ontario, Canada or the Middlesex and Elgin counties area.

However a word of caution! The Internet can be a wonderful tool, however it has become heavily commercialized and therefore as a result of this the results one gets for complex inquiries can result in conflicting and overwhelming information. Inquiries on a search engine for key words such as first-time home buyer package, new home information , first-time buyer information etc. are good examples of overwhelming or conflicting information.

Keeping in mind the source of your information is always the most basic way of determining if there's a bias in information. The adage that free advice is usually worth what you pay for it may often apply.

For example, I have been on internet forums for real estate where the question was asked "Is it normal for a realtor to offer a buyer a rebate ?" The people who answered this question were realtors for the most part. Their answers suggested that only a desperate or new agent would offer rebates. Even the moderator of the form jumped in to the discussion to make his opinion known that real estate agents work hard and deserve all the commission they can get and basically suggesting that such was not a good idea and a poor way to find a good agent.

Although I agree that most real estate agents work far harder and longer hours than most people suspect or quite frankly care and as such do deserve for the most part all of the commission the marketplace will bear( likely this would apply to you as well). Real estate and technology is changing at an ever accelerating rate and there is always the other side of the argument .

To read a recent article I wrote that explains why I offer real estate buyers rebates click here.

To help you with some basic information and to help you to get to know me I'm putting together some free information and links

to help get you started on your first home buying journey.

Table of contents

1, Answers to some frequently asked questions

2. Glossary of common real estate terms

3. Diagram of the financing process

4. Canada mortgage and housing(CMHC) premiums and fees

5. Land transfer tax information

6. Estimated buyer cost worksheet

7. House hunting worksheet

8 Much more to come , so check back for updates and additions ! As always feel free to e-mail or call and I'll answer any real estate related questions you may have .

Before You Buy

Get the Right Information

Whether you are about to buy your first home, or are planning to make a move to your next home, it is critical that you inform yourself about the factors involved.

1. Get pre-approved for a mortgage before you go looking for a home Pre-approval is easy, and can give you complete peace-of-mind when shopping for your home. Your local lending institution can provide you with written pre-approval for you at no cost and no obligation, and it can all be done quite easily over-the-phone. More than just a verbal approval from your lending institution, a written pre-approval is as good as money in the bank. It entails a completed credit application, and a certificate which guarantees you a mortgage to the specified level when you find the home you're looking for. Contact The Lee Jenkins Mortgage Team and get pre-approved today!

2. Know what you can afford When you discuss mortgage pre-approval with your mortgage broker, find out what level you qualify for, but also pre-assess for yourself what monthly dollar amount you feel comfortable committing to. Your situation may give you a pre-approval amount that is higher (or lower) than the amount of money you would want to pay out each month. Determine what this monthly amount is, and what value of home this translates into at today's rates, you won't waste time looking at homes that are not in your price range.

3. Determine the Mortgage best suited for you There are a number of questions you should be asking yourself before you commit to a certain type of mortgage. How long do you think you will own this home? What direction are interest rates going in, and how quickly? Is your income expected to change (up or down) in the near term, impacting how much money you can afford to pay to your mortgage? The answers to these and other questions will help you determine the most appropriate mortgage you should be seeking

4. Make sure you understand what prepayment privileges and payment frequency options are available to you More frequent payments (for example weekly or biweekly) can literally shave years off your mortgage. This will significantly lessen the amount of interest that you will be charged over the term. For the same reason, authorized pre-payment of a certain percentage of your mort-gage, or an increase in the amount you pay monthly, will have also have a major impact on the number of years you will have to pay and could shorten your payment term considerably. These two payment options can cut years off your mortgage, and save you thousands of dollars in interest. However, not every mortgage has these prepayment privileges built in, so make sure you ask the proper questions.

5. Ask if your mortgage is both portable and/or assumable A portable mortgage is one that you can carry with you when you buy your next home and avoid paying any discharge penalties. This means that you will be able to take advantage of your current mortgage rate and term. You will also be able to avoid any high discharge penalties for paying the mortgage out prior to the end of the term. An assumable mortgage is one that the buyer for your home can take over when you move to your next home. This can be a very powerful tool at the negotiating table making it much easier and more desirable for a buyer to buy your home, and again saves you any discharge penalties.

There are many hidden costs and fees in buying a house. They may include lawyer’s fees or notary’s fees, and taxes. There are also costs to maintain a house, and costs for utilities, insurance...

Your best bet is to be prepared for the costs - and budget in advance. Make sure you know exactly what your costs will be - and be honest with yourself about whether you can afford it - before you buy.

Increase in Canadian home prices in the past decade: 50 per cent.

There are some costs and fees that you may allow some wiggle room, though you'll have to negotiate, negotiate, negotiate! Those costs include:

The down payment:This is the portion of the home price that is not financed by your mortgage loan. The buyer must pay the down payment from his/her own funds or other eligible sources before securing a mortgage. The down payment generally ranges from five per cent to 25 per cent of the purchase price but can be more.

Depending on the circumstances of your offer, you may be able to propose paying the minimum five per cent down payment. Remember though, the less you put down, the more you pay interest!

Negotiating a lower down payment isn't a real saving - it just defers the amount you pay upfront.
Mortgage payment: This is a regularly scheduled payment to your mortgage provider that is usually blended to include both principal and interest.

While you won't be able to negotiate the amount of your full mortgage (that's fixed to your home purchase price), you should be able to negotiate the amount paid on each installment.

Remember though, the more you pay, the less your interest penalties! Like lowering your down payment, decreasing your mortgage payment isn't a real saving - it just defers the amount you owe until a later date (and you'll pay an interest penalty in the long run).

There are plenty of fixed costs, which you won't be able to budge, such as:

Mortgage: A mortgage is a security for a loan on the property you own. It is repaid in regular mortgage payments, which are usually blended payments. This means that the payment includes the principal (amount borrowed) plus the interest (the charge for borrowing money). The payment may also include a portion of the property taxes.
Property taxes: Taxes charged by the municipality where the home is located based on the value of the home. While you may be able to challenge the amount your new home is assessed at (which determines the amount in taxes you pay), there's no guarantee you'll win that challenge.

Prepare yourself for the closing costs

When you find your perfect home and your offer has been accepted, you may think you're through with things. Think again. There are a number of costs that may come with the closing of the deal, according to the Canadian Mortgage and Housing Corporation, the government of Canada's national housing agency. Some closing costs include:

Mortgage Loan Insurance Application Fee and Premium. If your down payment is less than 25 per cent of the home price, you may be required to purchase mortgage loan insurance. To get this insurance, you may be asked to pay the required application fee. Your lender may add the mortgage insurance premium to your mortgage or ask you to pay it in full upon closing.

Appraisal Fee. Your mortgage lender may require that the property be appraised at your expense. An appraisal is an estimate of the value of the home. The cost is usually between $250 and $350 and must be paid when you contract for those services.

Deposit. This is part of your down payment and must be paid when you make an Offer to Purchase. The cost varies depending on the area, but it may be up to 5 per cent of the purchase price. If you wish to make a down payment of 5 per cent and you give a deposit of 5 per cent, then your down payment is considered to be made.

Estoppel Certificate Fee . This applies if you are buying a condominium or strata unit and could cost up to $100. or more !

A home inspection is a report on the condition of the home and may cost over $200, depending on the complexities of the inspection.

Home Inspection Fee. Remember that this may be a condition of your Offer to Purchase. A home inspection is a report on the condition of the home and will typically cost between $200 and $300, depending on the complexities of the inspection. For example, it may be more costly to inspect a home that has large square footage, one that is expensive or one where contaminants such as pyrite, radon gas or urea-formaldehyde are suspected.

Land Registration Fees (sometimes called a Land Transfer Tax, Deed Registration Fee, Tariff or Property Purchases Tax).You may have to pay this provincial or municipal charge upon closing in some provinces. The cost is a percentage of the property's purchase price and may vary. Check with your lawyer/notary to see what the current rates are.

Prepaid Property Taxes and/or Utility Bills. To reimburse the vendor for pre-paid costs such as property taxes, filling the oil tank, etc.

Property Insurance. The mortgage lender requires this because the home is security for the mortgage. This insurance covers the cost of replacing the structure of your home and its contents. Property insurance must be in place on closing day.

Survey or Certificate of Location Cost. The mortgage lender may ask for an up-to-date survey or certificate of location prior to finalizing the mortgage loan. If the seller does not have one or does not agree to get one, you will have to pay for it yourself. It can cost in the $1,000 to $2,000 range.

Water Quality Inspection. If the home has a well, you will want to have the quality of the water tested to ensure that the water supply is adequate and the water is potable. You can negotiate these costs with the vendor and list them in your Offer to Purchase.

Legal Fees and Disbursements. Must be paid upon closing and cost a minimum of $500 (plus GST/HST).Your lawyer/notary will also bill you direct costs to check on the legal status of your property.

Title Insurance. Your lender or lawyer/notary may suggest title insurance to cover loss caused by defects of title to the property.(Source: Canadian Mortgage and Housing Corporation)

Other costs to prepare for:

Appliances. Check to see what comes with the house, if anything.
Gardening equipment.
Snow-clearing equipment.
Window treatments. Check to see what comes with the house.
Decorating materials. Paint, wallpaper, flooring and tools for redecorating.
Hand tools. You will need some basic hand tools for your new home.
Dehumidifier. May be required to control moisture levels, especially in older homes.
Moving Expenses.
Renovations or Repairs.
Service Hook-Up Fees. Charged for utilities. You may be required to pay a deposit for utilities such as telephone and heating services.
Condominium Fees. You may have to make the initial payment for these monthly fees.
(Source: Canadian Mortgage and Housing Corporation)

GLOSSARY of Real Estate Terms

AMORTIZATION:
Repayment of a mortgage in equal installments, usually monthly, of principal and interest, rather than interest-only payments.
ASSUMPTION OF MORTGAGE:

A buyer's agreement to assume the liability under an existing note that is secured by a mortgage or deed of trust. The lender must approve the buyer in order to release the original borrower (usually the seller) from liability.

BALLOON PAYMENT:
A lump sum payment due at the end of some mortgages or other long-term loan.
CAP:
The limit on how much an interest rate or monthly payment can change, either at each adjustment or over the life of the mortgage.
CLOSING DATE:
The date on which the sale of a property becomes final.
COLLATERAL:
Assets pledged as security in a loan. [^{,or example, real estate serves as collateral in a mortgage.CONDOMINIUM: A form of real estate ownership where the owner receives title to a particular unit and has a proportionate interest in certain common areas. The unit itself is generally a separately owned space whose interior surfaces (wall, floors and ceilings) serves as its boundaries.CONTINGENCY: A condition that must be satisfied before a contract is binding. For instance, an agreement for purchase and sale may be contingent upon the buyer obtaining financing.CONVENTIONAL MORTGAGE: A first mortgage outside the conditions of the National Housing Act granted by an institutional lender such as a bank, mortgage, loan, or trust company wherein the amount of the loan does not exceed 75% of the approved lending value of the property.COOPERATIVE: A form of multiple ownership in which a corporation or business trust entity hold title to a property and grants occupancy rights to shareholders by means of proprietary leases or similar arrangements.DEFAULT: Failure to pay an outstanding debt.DEPOSIT: The portion of the down payment delivered to the vendor by the purchaser with a written offer as evidence of good faith. Also known as earnest money.DISCHARGE: To repay a mortgage in full,EQUITY: Equity is the difference between the selling price and any charges against the property and appraised/ market value.FEE SIMPLE: An estate in which the owner has unrestricted power to dispose of the property as desired, including leaving by will or inheritance. It is the greatest interest a person can have in real estate.GROSS DEBT SERVICE RATIO: The gross annual income required to cover payments associated with housing (mortgage principal and interest, taxes, secondary financing, heating, and 50% of condo fees, if applicable). Expressed as a percentage.HIGH RATIO MORTGAGE: A mortgage loan that exceeds the normal limit of a conventional first mortgage, in regard to the ratio of the loan amount to the property's lending value; the higher loan is made possible by a mortgage insurance plan.HOME WARRANTY PLAN: Protection against failure of mechanical systems within the property. Usually includes plumbing, heating systems and installed appliances.INTEREST: The charge for the use of money supplied by a lender.}More Questiond please feel free to call me to dicuss !!

^{^{Jim Straughan
Sales Representative
Res. Phone (519) 641-4355}}

Getting Started Tips and Strategies for Rookie First Time Home Buyers

Interesting First Time Buyer Storey

First Time Buyer Information