How to buy a house

What do you want?

Start by listing your needs:

Living needs (i.e. how many rooms);

Family size;
What you bring with you from your old home;
Proximity to schools, shops and other services;
The amount of the deposit you can afford; and,
Price range.

It�s important to be realistic when thinking about a down payment and to set a
price range. You don't want to end up with something you can't afford. It's a good
idea to chat with a real estate sales professional.

What is it over there?

The market offers both resale and new homes. However, as this document deals with
the resale of homes, we will focus on them. (If you are interested in a new house,
talk to your seller).

Resale homes are more likely to be in established neighborhoods, close to amenities

and to have mature trees and gardens.

Remember, however, that a resale house has been inhabited. It has been exposed to
the elements for a number of years. The house may have experienced some shrinking
and subsidence.

Fast service with the MLS� system

Most agents have their MLS� systems on a computer. By sitting in front of a

keyboard, the real estate agent can enter your needs, the choice of neighborhoods
and the price range and immediately propose a list of suitable properties. Some
computer systems are more extensive than others. Some even show a photograph of the
house, with interior views. MLS� catalogs, which provide additional information
about each property, as well as its photograph, are also common. Computer systems
and catalogs are updated regularly.

As we said earlier, you can also view MLS� listing announcements via the national
website, mls.ca (you can access them about aboutmls.html). It presents maps of the
region, color photographs of the properties available and has e-mail links to the
list of real estate agents, as well as their profiles.

Visit a house

When you visit a house, consider these points:

What type of wiring does the house have?

Does the electrical panel use fuses or circuit breakers?
What type of heating system does it use?
What about the roof and the foundations?
And the plumbing?
What about electrical outlets?
Different electrical devices and tools use different types.

There are also other things to consider. If you do not have the time or do not feel
comfortable doing so, home inspection services are available for a reasonable fee.
Make an offer

In the offer, you are:

say how much you are willing to pay;

suggest a closing date;
propose a set of conditions; and,
indicating when the offer expires.

At this time, you will present a deposit, along with your offer. A proper deposit
will show your good faith to the seller. The seller's agent is required by law to
bring all offers to the attention of the seller.

Once your offer has been accepted and all the conditions have been met, the offer
becomes binding on both sides. If you move away from the agreement at this point,
you risk losing your deposit. You can also be sued for damages. Therefore, be sure
to understand and accept all of the terms of the offer before signing.

Conditions

Most offers have certain conditions, which must be met before the end of the sale.
Some common types of conditions are:

You get an appropriate mortgage (include the amount, interest rates and any other
numbers you think are important)
You are selling your current home (the seller may continue to search for a buyer,
but will give you the right of first refusal)
The seller providing an ongoing investigation, or "real estate report," showing the
location of the house on the seller's property and that there is no encroachment
The seller holding the title deed (your lawyer will check this when performing a
title search to see if there are any liens on the property, easements, rights of
way or height restrictions)
If there is a septic tank, the seller must have a health inspection certificate,
stating that the system meets local standards
If you still have doubts about the safety and construction of the house, you may
want to make the purchase subject to inspection by a qualified engineer.
All inclusions (we talked about this earlier - basically what's left and what's
going on)

The seller can counter your offer by modifying the conditions, the price or both.
Look at the counter offer in terms of what you are looking for in a new house: how
does it fit in? And of course you can always counter the counter offer.

The mortgage

A quick way to see how much you can afford is to use the Gross Debt Service (GDS)
formula. Here, the principal, interest and taxes (PIT) of your mortgage must not
exceed 30% of your gross income. Increasingly, financial institutions will
integrate energy costs into the PIT formula, increasing the general GDS rule from
30 to 32%.

You can do it backwards: multiply the monthly payment on principal, interest and
taxes (including condo maintenance fees) by 40. So if your monthly payment for
these items is $ 1,000 , you will need a gross annual income of at least $ 40,000.
Discuss your mortgage limit and the different types of mortgages with your seller
before you seriously start looking for a new home.

There are several types of mortgages:

Pre-approved mortgages:

Pre-approval means that you, as the buyer, qualify in advance for an X dollar
mortgage, subject to the lender's approval by the lender. Many financial
institutions offer pre-approved mortgages, and your interest rate is guaranteed not
to increase for a period of time.

Conventional mortgages:

Most banks and trust companies offer standard loans using the property as
collateral and require you to make a mixed monthly payment including principal and
interest. Conventional mortgages require at least 20 percent of the purchase price
as a down payment.

High Ratio Mortgages:

If your down payment is less than 20%, you may still be eligible for a mortgage,
but you will need mortgage insurance. The Canada Mortgage and Housing Corporation
(CMHC), a federal Crown corporation, and GE Capital Mortgage Insurance Company, a
private corporation, offer insurance for high ratio mortgages.

Seller takeover mortgages:

The seller subscribes part of the purchase, as a loan to be reimbursed by the

buyer. These are often used as second mortgages, to fill in the gaps or to make the
property more attractive to the buyer. In some provinces, the seller can also
transfer the mortgage to the buyer.

Open and closed mortgages:

Open mortgages allow you to make additional payments on principal, thereby reducing
your borrowing costs. Because of this flexibility, interest rates on open mortgages
are slightly higher. Closed mortgages have no flexibility; you must wait until the
end of the term to pay your mortgage. However, the interest rates on these
mortgages are generally lower. In the middle, do partially open mortgages have some
of the characteristics of open and closed mortgages?

Just as there are a range of types of mortgages, there is also a range of repayment
schedules. In addition to the traditional monthly payment plan, there are now semi-
monthly, biweekly and even weekly payment schedules. The accelerated repayment
options further speed up the process, paying off the mortgage faster and spending
less on interest charges. You can also choose a shorter amortization period or a
mortgage �life�. It increases your monthly payments in the short term, but saves
you in the long term on the interest you pay.

These additional expenses

You should plan for some additional expenses. In some provinces, you may have to
pay a land transfer tax (a property sales tax). You may also have to pay:

Mortgage broker fees (up to 1% on capital);

Assessment fees;
Survey costs (if the seller could not offer an ongoing investigation); and,
A high ratio mortgage insurance premium.

You also face a possible interest adjustment. Mortgages are normally calculated
from the first of each month: if your closing date is the same as the start of your
mortgage, there will be no adjustment. However, if your closing date is July and
you move in on June 15, the past 15 days are the interest adjustment period. Your
lender will expect you to cover the cost of interest during this period.

You will also have to reimburse the seller for the unused portion of property taxes
or prepaid utility bills. In addition, you must also pay legal fees and, if
applicable, real estate agent fees. Be prepared to provide your lender with proof
that you have insured your new home ... it will also cost you.

Closing

Before the house can officially change hands, there are still a few things to do.
Here's what to expect on or before the closing day:

Your lawyer and the seller's lawyer will arrange the transfer of the seller's title
to you.
The mortgage money will be transferred to your attorney's trust account and then to
the seller
Your lawyer will bill you for all additional costs - land transfer tax and any
pending legal fees

At this time, be sure to:

check with your lawyer that everything is in accordance with the offer to purchase
make a pre-possession visit with the agent. Is everything in good condition? Did
everything you want there?

Once you are satisfied and the keys to the front door are in your hands, there is
nothing more to say except ...

Welcome to the house.

In addition to what is written here, there are good sources of information on how
to buy / sell a home from provincial real estate associations and financial
institutions.

The comments on this site are for informational purposes only and do not constitute
legal advice. Procedures and laws vary from region to region.

Source: Canadian Real Estate Association