The following has been prepared to assist First-Time Home Buyers with some practical information about the "Buying Process". It outlines steps that you and your REALTOR® will follow during your search for your ideal home.
As a First-Time Home Buyer, I believe the single most important thing that you need to do is find a qualified and knowledgeable REALTOR® with an approach and personality that you can work with and rely upon.
Buying doesn't need to be a stressful experience. I've helped a great number of Buyers from different parts of the world and different walks of life find their ideal home. I believe in providing my clients with the best possible information and personal insight to help them make informed real estate decisions. Give me a call and put my no-nonsense approach to work for you. You'll be glad you did!
Once you’ve made the decision about with whom you wish to work, follow these important steps to make your home-buying experience enjoyable, rewarding and panic-free!
Purchasing a home involves one-time costs as well as ongoing monthly expenses. The largest one-time cost is the down payment. It usually represents between 5 to 20% of the total price of the property.
In addition to the actual purchase price, there are a number of other expenses that you should prepare to pay for. These are listed below:
Typical One-Time Expenses
- Mortgage Application and Appraisal Fee - paid at time of application
- Property Inspection - paid at time of inspection
- Legal Fees - paid on completion
- Legal Disbursements - paid on completion
- Property Survey - paid on completion if a current survey is not available from the Seller
- Property Transfer tax (PTT) - paid on completion
- Mortgage Interest Adjustment - paid on completion
- Fuel / Electric / Municipal Tax Adjustments - paid on completion
- Mortgage Insurance and Fees - paid on completion (if applicable)
- Home and Property Insurance - paid on completion and on-going
- Moving expenses - paid on date of move
Typical On-going Monthly Expenses
Expenses include such home-ownership costs as:
- Mortgage Payments,
- Maintenance and General Repairs,
- Home Insurance,
- Maintenance Fees (Strata Properties),
- Property Taxes, and
- Utilities
See “Affordability Worksheet” below to help you estimate the approximate purchase price of a home that you can afford. Click on the Mortgage Affordability Link below to fill out an inter-active spreadsheet and determine how much of a mortgage amount you can afford.
Step 1
Calculate Your Gross Debt Service Ratio (GDS)
A rule of thumb states that your monthly housing expenses (Principal, Interest and Taxes) should not exceed 30% of your Gross Family Income (Income before personal income taxes).
Calculate your Gross Debt Service Ratio
Total Monthly Income before Tax $ _____________________
Multiply by the Maximum GDS Ratio (30%) multiply by .30
This is the Maximum amount available for
your mortgage payment (principal and interest)
and property taxes and 50% of Condo Fees
(if applicable) =$ _____________________
Step 2
Calculate Your Total Debt Service Ratio (TDS)
Your “TDS” takes into account monthly housing expenses plus other debts and loans you may have. A rule of thumb is that TDS must not exceed 40% of your total gross family income before taxes.
Calculate your Total Debt Service Ratio
Total Monthly Income before tax $ _______________________
Multiply by the Maximum TDS Ratio (40%) multiply by .40
Subtract your regular monthly expenses
(including credit cards, car payments,
personal loans, etc.) -($ ______________________)
This is the Maximum amount available for
your mortgage payment (principal and interest)
and property taxes and 50% of Condo Fees
(if applicable) =$ _______________________
Step 3
Calculate the amount available to apply to your monthly mortgage payment. This figure will be used to calculate how much of a mortgage loan you qualify for.
Calculation
Input the lower of your GDS or TDS value $ _____________________
Subtract estimated property tax -($ _____________________)
This is the amount used to calculate mortgage
Eligibility amount =$ ______________________
Step 4
Determine the purchase price you can afford. Using the Mortgage Eligibility figure calculated in Step 3, find the closest matching number in column A below.
The corresponding value in column B below is the approximate eligible mortgage amount.
In column C below, record the down payment amount that you have available.
In column D below, add the values from Column C and column D together. This value equals the approximate price of the home that you can afford.
Note: You can also customize a Mortgage Rate % which more accurately reflects current interest rate values.
A B C D
Monthly Payment Mortgage Amount Down Payment House Price
$269 $30,000 +$ ___________ =$ ___________
$358 $40,000
$448 $50,000
$537 $60,000
$626 $70,000
$716 $80,000
$805 $90,000
$895 $100,000
$984 $110,000
$1,074 $120,000
$1,163 $130,000
$1,253 $140,000
$1,342 $150,000
$1,432 $160,000
$1,521 $170,000
$1,610 $180,000
$1,700 $190,000
$1,789 $200,000
Notes:
- All amounts are approximate. Columns A and B are based on an interest rate of 10%. When rates are higher, you would be eligible for a smaller mortgage. When rates are lower, you would be eligible for a larger mortgage.
- Monthly Mortgage Payment figure includes principal and interest payment per month based on interest rate of 10% and 25 Year amortization
- For high-ratio mortgages you will need to add the cost of mortgage insurance premiums.
As your REALTOR®, I would be pleased to keep you informed of current interest rates and refer you to a Mortgage Specialist who will help you determine the best financing terms and options that are right for your circumstances.
The real estate market is dynamic. It's always changing. The following is designed to help you to understand how market conditions can affect your position as a Buyer.
Based on a number of factors including supply and demand, and interest rates prices rise and fall, and the market is typically categorized as a “Sellers’ Market”, a “Buyers’ Market” or a “Balanced Market”.
As your REALTOR®, I would be pleased to explain our current market conditions and their impact on your Buying decision with you in detail.
Buyer’s Market
The supply of homes on the market exceeds demand. High inventory of homes for sale. Few Buyers relative to available inventory. Homes take longer to sell. Prices decline.
This provides Buyers with more time to look for a home, more negotiation leverage.
Seller’s Market
The number of Buyers looking for homes exceeds the inventory of homes available for sale. Smaller inventory of homes. Many Buyers. Homes sell quickly. Competing offers. Prices Rise.
This puts pressure on Buyers to make quick decisions, potentially pay more for the property and have less room to negotiate.
Balanced Market
The number of homes for sale is equal to the demand or number of Buyers. Demand equals supply. Sellers accept reasonable offers. Homes sell within a reasonable amount of time. Prices are stable.
This provides Buyers with a more relaxed atmosphere within which to operate and choose from a reasonable number of homes.
Having a pre-approved mortgage will give you the confidence of knowing exactly what you can afford to spend on a home before you start house hunting. You will also be protected against interest rate increases while you look for your new home.
Your mortgage specialist will answer your questions and help you determine which financing terms and options are right for you. We work as a Team with your mortgage specialist to help you find the right home and select the best possible financing option. Place your cursor on the Properties Tab and then click on Glossary Of Terms for definitions of mortgage terminology.
Once you’ve found the home you want to purchase, there are documents you'll need to finalize your financing, including:
A copy of the real estate listing of the property. If the home is under construction or yet to be built, the mortgage lender will need to see the architect’s or builder’s plans and details on lot size and location.
A copy of the Contract of Purchase and Sale, if this document has been prepared.
Documents to confirm employment, income and source of pre-approval
If you have a Pre-Approved Mortgage, it's a simple matter of finalizing a few details that your mortgage specialist will explain to you.
Price
Depending on local market conditions, your opinion of value and market information provided by your Realtor, the price you offer might be different from the Seller’s asking price.
Deposit
The deposit shows your good faith and will be applied against the purchase of the home when the sale completes. Typically a deposit of 5% to 10% of the offered price is warranted.
Terms
Includes the total price offered and the financing details. You may arrange your own financing or ask to assume the Seller’s mortgage, especially if it has an attractive interest rate.
Conditions Precedent (Subjects)
The offer you make on a property may contain certain subjects that must be satisfied before the offer becomes binding on the parties. These will vary with the property and an individual Buyer’s own circumstance and may include; subject to financing, subject to home inspection, subject to the Buyer selling a property, to name but a few.
Inclusions and Exclusions
A detailed listing of what appliances, fixtures or decorative items, window coverings, mirrors, or accessories and appurtenances that you wish to include in the offer.
Completion Date
Generally the day the title of the property is legally transferred and the transaction of funds finalized.
Possession Date
The day that the Buyer is legally entitled to move in to the property, i.e. take possession of it.
As your REALTOR® I'll provide current market information and an analysis of comparable homes that have recently sold in the area. I'll work with you to draft your offer using an approved Contract of Purchase and Sale document that contains the specific terms and conditions of your offer.
As your REALTOR®, acting as your agent, I will communicate your offer to the Seller or the Seller’s agent, on your behalf. Sometimes there may be more than one offer made on a single property at the same time. As your REALTOR®, I'll guide you through this competing offer process.
Your offer can be Firm or Conditional
Firm offers are usually preferable to the Seller and are used strategically in certain situations. In this instance, the Buyer would make an offer to purchase without any conditions or subjects.
Care must be taken when using this strategy and the Buyer must be certain of their purchase financing and condition of the home.
Conditional or subject offers contain one or more conditions on the purchase of the property that must be satisfied and removed before the property can be sold. These may include a subject to financing, subject to home inspection, subject to the Buyer selling a property, etc.
Acceptance of the Offer
Your Offer will be presented as soon as possible. The Seller may accept the offer, reject it, or submit a counter-offer. The counter-offer may be in reference to the price, the completion date, or any number of variables. The offers can go back and forth until both parties have agreed or one of the parties ends the negotiations.
A legal professional is there to represent your interests and to process the legal documentation required. As your REALTOR® I can provide you with the names of legal professionals who specialize in real estate. Remember that both Lawyers and Notaries can handle the documentation to register your title to the property, but only a lawyer can provide you with legal advice.
Although home inspections are optional, I believe that they are a good investment that can save you multiples of the cost of the inspection by avoiding repairs and an inspection provides peace of mind that you're buyng a home that is in a good state of repair. Hiring a qualified home inspector will give you added confidence that you've made the right decision. Costs of this service vary.
When the inspection has been completed, you may wish to ask for a full written report plus estimated costs for any necessary repairs identified.
The BC provincial government offers proportional exemptions on PTT payable by first-time home Buyers.
Tom Davis | REALTOR®
Personal Real Estate Corporation
Royal LePage Sussex
604 787 1456
This communication is not intended to cause or induce breach of an existing agency agreement
