First Time Home Buyers Guide

 

 

Home Buying Process 

First step: Speak with a qualified mortgage broker to review your financials and determine your mortgage options and purchase price limit.

After consulting with a mortgage broker and determining your purchase price range, we start your home search. 

Keeping in mind that you need to have your down-payment money ready at a Canadian bank account. 

When you find a property that you would like to purchase, we will prepare the “offer”. This includes a few forms that we will fill out and send them to you to sign either electronically or in person.

“Agreement of purchase and sale” is the form that we usually refer to as the “offer”. In this form the buyer offers to purchase the property from the seller, at such and such price, with a specific amount of “deposit” paid within 24 hours from the time of acceptance of the offer.

The buyer also specifies the “closing date” or “completion date” which is the date that the buyer is going to pay the remaining balance of the full price and get the keys. In most cases completion date is 1 month, 2 months or 3 months later than the offer date. 

In the offer form, the buyer will give the seller a time limit (irrevocable time) to decide on accepting or countering the offer. For example, we send the offer at 9 am today and we give the seller time until 8 pm tonight to review and respond to our offer.

Also, any conditions that the buyer may have, will be mentioned on the last page of this offer (Schedule A). For example, this offer is conditional upon the buyer arranging a mortgage within the next 5 business days. Or, conditional upon the buyer arranging home inspection within the next 5 business days. 

Next step, the seller either accepts your offer, or counters the offer with a few changes. The seller then gives the buyer a time limit to respond to their counter-offer. 

Deposit: Once an offer or counter-offer is accepted, the buyer must provide a certified cheque for the deposit amount (usually around 5% of the total price), payable to the seller’s brokerage within 24 hours from the time of acceptance. 

The deposit is part of your 10% or 20% down-payment money. There will be a receipt for the deposit, that your mortgage broker will need a copy of it as proof of the paid deposit.

We then email all the necessary documents to your mortgage broker/ mortgage specialist.

They will take 5 business days to finalize your mortgage approval and give you the go-ahead to proceed with your purchase.

Also in this 5 day period, you will contact a home inspector (we can recommend one if you prefer) and we will arrange for a time to inspect the property. This normally takes 2 to 3 hours depending on the property.

Before the end of the 5 day period, we sign a document and send it to the sellers, in which we confirm that we have fulfilled our mortgage approval and property inspection and would like to proceed with purchase. 

What if there were issues at home inspection? Every house will have some issues, there is no such thing as a perfect house. If the issues are more than expected but you still would like to proceed with purchasing the house, we communicate the issues with the sellers and negotiate the outcome. 

Is the deposit refundable? If there was a problem with the mortgage approval during these five days, or if the inspection report showed major issues with the house, then you can walk away from the deal and everything gets cancelled. Your deposit in that case will be fully refunded and we move on to search for another home. 

If everything goes well and you firm up the deal within the 5 days, we send all necessary documents to your real estate lawyer. 

Your real estate lawyer will review the title on property and make sure that there are no liens or issues with the subject property from the legal perspective. 

During the time between offer and closing date, you will need to contact home insurance companies and purchase home insurance effective from the date of closing (the date on which you get the keys to the house). You will also need to contact the utility companies for gas, electricity, and water. 

On closing date, the seller’s lawyer, after receiving the balance amount for the purchase from your lawyer, will release the code for the keys to your lawyer. Your lawyer will then contact you to let you know that you can collect the keys to your new home. 

Some first-time buyers may be unsure of how the realtors get paid. The buyer does not pay the realtor fees. It is all paid by the seller as per their contract when they put their home for sale with their realtor. When a seller signs an agreement to list their home with a realtor, there are specific notes on the contract, that outlines the way the seller brokerage and the buyer’s brokerage will be compensated. So, you as a buyer would not be paying any commission to your brokerage. 

 

As a buyer, you must be prepared for closing costs:

Land Transfer Tax: 
For a $800,000 property, the buyer must pay a land transfer tax of approximately $12,475. Here is the link to Land Transfer Tax Calculator: https://www.gtasimcoehomes.ca/landtransfertaxcalculator

First time buyers get a $4000 rebate on their land transfer tax. Your real estate lawyer will include that in the calculation of the amount that you will have to pay for land transfer tax through your lawyer.

Lawyer Fees and Title Insurance:

Contact a few real estate lawyers and inquire about their service fees.

Mortgage Broker Fees:
Depends on your financials. In some cases mortgage brokers fees are paid by the lending institution that approves your mortgage. In other cases buyer may be required to pay a fee.

Property Appraisal if requested by the lender:

Normally between $350 to $500

Home inspection:

Approximately $500

 

For your monthly home-ownership expenses, you must be prepared to pay the following:

Monthly mortgage payments

Property tax - for example, for entry level homes in the price range of $700,000 to $800,000 property taxes are normally between $3900 to 4800 a year

 

Property Insurance normally between $130 to $250 per month

Utilities (Gas, Water, Hydro) between $250 to $500 per month depending on the size of home and the usage of utilities

 

If you are a Non-Resident there is a 25% tax:

If you are not a citizen or permanent resident, you will pay an additional 25% of the purchase price. This can be refunded in certain conditions. Speak with your lawyer for details.

 

As always, we are are here to help you at every step of the way. Contact us if you have any questions about the home buying process as a first time home buyer.