Buying a home is one of the most exciting and stressful moments in our lives. It is a monumental moment that we will never forget and when you have finally decided to purchase, there are a number of things to consider. Things you should know before buying, what to know during the purchase process, and what to know after you’ve bought the home. So let’s get started on some pointers to help you out as you navigate these waters.
In the beginning phase, you are looking for a variety of homes that fit the mould that you have envisioned in your mind. Make sure you do your research on the following items so you understand what’s important. Having a credible realtor is a huge benefit when searching for your dream home.
This is one of the most important rules to follow when purchasing a home. “Location, location, location” is the mantra in real estate. The reason is for resale value. Many people want to believe that the home they purchase will be their forever home, but time will show you that your life and your needs change over time and you may need to adapt to those requirements. (ie. You have children and no longer fit your home).
Whether you purchase in a rural area, small town, or urban area, this will impact the cost of the home and the resale ability.
It’s also important for your ease of access for personal reasons. Ie. Where you work. Where your daycare/school is. Where your family lives.
Before you get too deep into searching for a home, you’ll want to go to a financial institution to find out how much you can reasonably afford. The bank will use your assets and liabilities along with your income information to find out how much borrowing power you have and what value of home you can realistically afford. They will then tell you your “pre-approved limit.” Now you know your budget and can start looking at homes in your price range.
- Type of Construction
The year built, heating type, foundation, framing material, etc. are important factors to note in how the home was built. You do not want to buy a house that could possibly fall apart shortly after purchasing it due to years of depreciation or poor workmanship (unless your plans are for demolition).
This is where you will want to hire a certified building inspector. They will inspect the integrity of the home and will point out any potential threats or issues in the home, such as moisture/mold issues, poor foundation, unsafe fireplace, outdated furnace, or a roof that has hit its life expectancy. If the home has issues, you can use these factors to negotiate a fair price on the home, or if they are too major to fix, this inspection has saved you the headache of buying a home with serious issues. Most realtors have inspectors handy for your use.
- Lot Setbacks & Surveyors Certificate
When a house is built, there are general construction rules that are in place to make sure the home is built to building code and to the regulations set out by the municipality. In most areas, you are required to have building permits and documentation indicating you’ve followed their bylaws when the home was built. Finding out this information can prevent headaches if the detached garage or fence was built across your property line or on your neighbours property. Civic disputes can cause frustrations between neighbours and will cause financial hardship if you have to tear down buildings or fences to meet the building bylaws. Again, the realtor is your friend here and will help make sure the home is built to the guidelines of the municipality.
I’ve found my house! Now what?
After you’ve found the perfect house, in the perfect location, you can start the purchasing process. With the help of your realtor, you can make an offer to buy the home, and if seller accepts, you can start on these next steps.
- Financial Requirements
After the offer is accepted, there will be a timeline for your meet the list of requirements to close the sale. This means you need to obtain financial approval for the house you’ve made an offer on. The financial institution will likely do an appraisal of the home to see what the value of the home is and if the offer you made is appropriate or not. If it is, and it fits within your budget, they will hopefully approve your loan. A down payment is generally required and can vary between 5-25% of the home value. You may have access to CMHC, which will insure your loan and allow you to have a lower down payment. (However, they charge a large fee for this service that is amortized in your mortgage payments).
Rule of thumb – the bank will want to make sure that the loan payments and debt load you carry are no higher than 40% of your monthly income. That way you can still survive and don’t become “mortgage broke.”
- Insurance Requirements
At this point, the financial institution has approved your purchase to buy the home. Now you need to make sure the home is actually insurable. This is where you need to find a reliable insurance broker (us!) to help get you insured. Insurance companies have set criteria that need to be met when insuring a home. If the home is in too rough of shape, too old, has unsafe heating or construction, the home may not be insurable.
Our online insurance provider – Mello Insurance – is a quick & easy way to see if your home will be able to be insured or not. In under 10 minutes you’ll know if you can easily insure your home or if it does not meet the basic standards. If that is the case, you may need to contact one of our brokers to do a more thorough investigation to find a solution on how to insure the home (if there is one). For example, if the home has a freestanding wood stove in the living room. Most insurance companies will require it to be inspected by the broker, or sometimes from a certified WETT inspector. Mello’s algorithm cannot quote a home that has this type of heating risk prior to it being inspected, therefore would require broker intervention. If the wood stove later passes inspection, the home would then be insurable.If the house is a bit older (1960 or older), insurance companies typically require updates to be done to your plumbing, heating, roofing, windows & electrical to obtain Guaranteed Replacement Cost. This is important when buying an insurance policy, as you want to make sure if your home burns down, you have coverage to rebuild your home to the way it was prior to the loss with new/similar material. Once the insurance requirements are met, your lawyer and financial institution will require confirmation of insurance in order to finalize the mortgage.
YAY! I’m in my new house. What else is there to worry about?
Very exciting, you are now a proud new homeowner. Now that the searching and purchasing process is over, you have the responsibility to maintain and look after this home. Here are some basics that you’ll need to know.
- Taxes & Utilities
These are now your responsibility. You are required to pay the annual property taxes, power, heat, internet/phone, insurance, mortgage and other monthly expenses that come with owning a property. Make sure you research what those average costs can be, because they can start to add up. Depending on the location, your property taxes alone could be $300-$500 per month.
Insurance is there to cover you for any sudden and accidental insured peril. They are not a maintenance policy. This can sometimes generate confusion. For example, if your asphalt shingles are 25 years old and need to be replaced, but a hail storm comes along and damages your roof. The insurance company may pay you for some damages, but the settlement might be minimal as the life expectancy of the roof has reached its limit. This may also cause a problem if the roof is missing shingles and you do nothing to repair the roof, and it begins to leak, the insurance company may notice you have not properly maintained your property and could limit/exclude coverage because the roof was not maintained.
Make sure you are doing your part as a homeowner to prevent damage or loss to your home. (Snow removal, cut trees and lawn, clean eavestroughs and furnace filters, install security systems, sump pumps, etc.) By doing these things, it will help build a strong relationship with your insurance provider and if you unfortunately do have a claim outside your control, you will want to have a strong relationship with your insurer.
- Community & Neighbourhood
Living in a community requires a certain relationship with those surrounding you. You will want to build strong relationships with those in your community. If you leave on a winter vacation, you will need to have someone checking on your house. No better than your next door neighbour. By attending, helping, and supporting your community, you add security and protection to your home and your family. These qualities are priceless.
There are lots of things to think about when buying a home. I hope this breakdown provides insight and some guidance as you navigate through these exciting times. Thanks for reading!