This is one of the most exciting and stressful moments in our lives. It is one of those pivotal moments that we never forget. When you have made up your mind to buy a home and are now shopping for your first home, there are a number of things to consider. This is the “STUFF” you should know before buying, what to know during the purchase process, and what to do after you’ve bought the home. Here are some pointers to help you out as you navigate these uncharted waters.
In the beginning, you will be browsing through a variety of homes that fit the “Pinterest Perfect” vision that you have set out in your head. While style, looks and functionality are important. Make sure you do your research on the following items as well as they have incredible value. 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 being, RESALE VALUE. Many people want to believe that the home they purchase will be their forever home, but time will show you that; a) your life and your needs change over time and b) you will need to adapt to those requirements. (ie. You have children and no longer fit your home, your job moves you away).
Whether you purchase in a rural area, small town or urban area, these areas will each impact the cost of the home and the resale ability.
It’s also important to pay attention to the “ease of access.” Ie. Where you work. Where your daycare/school is. Where your family lives. What type of public transportation is nearby.
Before you get too deep into nailing down the exact home, you’ll want to go to a financial institution beforehand and find out how much you can reasonably afford. The bank will require a list of your assets and liabilities (personal wealth statement), along with your income information and 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.
- Quality of Construction
The year built, heating type, foundation & framing material, etc. These major factors in how the home was built is very important. You do not want to buy a house that can fall apart shortly after purchasing 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, a roof that has hit its life expectancy. If the home has issues, you can use these factors to negotiate a fairer 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.
Most financial institutions will request an appraisal of the property as well prior to purchasing. This will also indicate the value of the home and if the sale value matches what the bank thinks it is actually worth.
- 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. Requesting this information can prevent headaches in the event that 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 likely cause financial hardship if you have to tear down buildings or fences to be compliant with 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 dream 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 you to meet the sale requirements. What this means is you will need to obtain financial approval, OFFICIALLY, for the house you’ve made an offer on. This is when 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 request. 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. (They charge a fairly substantial fee for this service, however, it is amortized within your mortgage payments).
Rule of thumb – the bank will want to make sure that your loan payments and combined debt you carry is no higher than 40% of your monthly income. That way you can still survive if the interest rate goes up 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.
Mello Insurance is a quick & easy way to quote and buy your home insurance. 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 woodstove 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 house is a bit older (1960 or older), insurance companies typically require updates to be done to your plumbing, heating, roofing, windows & electrical in order 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. If the home requirements are more complicated (older home, rare heating, farm or commercial business exposure), our sister company, BLOCK’S AGENCIES, can help you out.
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. “With great power, comes great responsibility!” – and that responsibility is to maintain and look after this amazing home. So what does that look like?
- 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. However, 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 by and damages your roof. The insurance company may pay you for some of the hail damage, but the settlement might be minimal as the life expectancy of the roof has already been reached. Another example, if the roof is missing shingles and you do nothing to repair the roof, and it rains and begins to leak, the insurance company may notice, upon inspection, that 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, this strong relationship with your insurer will be a huge benefit.
- Community & Neighborhood
Living in a community requires a certain relationship with those surrounding you. You will want to cultivate good 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, then your next door neighbor. 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!