Costs and Considerations when Buying a Home
Mid pleasures and palaces though we may roam,
Be it ever so humble, there's no place like home
- John
Howard Payne (1791 - 1852)
In the excitement of beginning a search for a home, it is important that you consider all of the elements that make a home truly right for you. It is a complex and personal process. An unsuitable choice can be costly in many ways - you could lose money, waste time and effort relocating, or even put your family's health in danger. The following are some things to consider when identifying your ideal home and planning a successful purchase.
Choosing a Neighbourhood
Remember that you can renovate a house but neighbourhoods
take years to change and there's no guarantee they'll change for the better! On
the other hand, if you really love a certain part of town but it's out of your
price range you may want to consider buying a less-than-perfect home then doing
renovations. They can be quite expensive so try to make improvements that will
be reflected in the value when you sell. These renovations have been found to
have the greatest payback: kitchen 70%, bathroom 68%, interior painting 65%,
exterior painting 62%.
Tips on choosing a suitable
neighbourhood:
- When you find a locale you like, walk around it. See what it's like from street level.
- Are the people friendly?
- Are there stores and recreation facilities nearby?
- Contact the local school board if you have children. (see my links page for school board information) Do local schools provide good education opportunities? If applicable are there private/religious schools?
Figure out what you can afford:
Consider how much you currently need to live on and how much
you actually have leftover every month. People have a tendency to create
budgets that look nothing like reality - when we should have $400 left over,
for some reason we only have half that.
Consider these basic costs of buying a
new home:
- Most homes require a down payment of several thousand dollars.
- Monthly mortgage payments can be 1/3 of the average person's annual net income.
- You may want to pay for a home inspection. Consider more than just the structure. Ask the inspector to check for asbestos, radon, animal infestation and lead.
- Moving costs can be from a couple hundred to several thousand dollars depending on the distance of your move and the quantity of belongings.
Financing
The sort of home you can afford depends on several things:
- How much you have saved
- How much you earn
- Past earnings
- Your credit rating
The past has a way of haunting new homebuyers. If you are
concerned about your credit rating you can usually get a free copy of your
rating report from your local credit bureau. Normally all that is required is a
couple pieces of photo identification. Remember, a few late payments or
disputed bills can taint your record. Try to pay everything on time and do not
have more than two credit cards. A bad credit rating can spell trouble getting
a mortgage or you end up paying more for your mortgage as a form of insurance
to the lender.
Pre-Qualification
This refers to documents from a bank or other lender indicating that you have
the financing to back up your offer on a house. Pre-qualification is free and
most lenders are happy to sit down with prospective buyers and figure how much
they can afford. Having an accurate idea of price range will save time in the
bidding process. If there are several people making offers on your dream home,
being pre-qualified can make your offer more attractive since financing is not
in question. It is important to note, however, that lending institutions will
base their final decision about a mortgage on ability of the buyer to service
the debt as well as the property. Most lenders state that the two components go
hand in hand - the buyer with the ability to repay a mortgage and the property
as security in the event of default on payment.
By taking all these points into consideration, you can worry less about the
process of buying and get busy finding your ideal home!
Tips on Buying a New Home
Home buying is an important personal decision and a big financial investment. You want to find the home that's right for you and the builder who provides the best value and service. Here are some tips to help make the buying process enjoyable and successful.
Do Your Research
Know what you want, what's available and how the buying process works before you start thinking seriously about signing a contract. Browse through newspapers and magazines. Consult with family, friends and co-workers. Attend a seminar for first-time home buyers. Check the Internet. Visit model homes and talk with builders and their sales agents.
Pre-arrange your mortgage
If you are like most of us, you will borrow funds to finance your home purchase. Talk to your lender about mortgages early in the process. Knowing in advance how much you can spend comfortably and getting pre-approval for a mortgage means you can proceed from "just looking" to a signed contract with confidence.
Check the builder's qualifications
There are many reputable builders who provide exceptional service and build great homes - both lowrise and highrise. As you talk with builders or their salespeople, ask questions: How long has the company been in business? Is it a member of the local home builders association? Will the builder give you references of previous new home projects? What after-sales service is offered? Does the builder offer an independent third-party warranty and, if so, what does it cover? "Personal fit" is also important: Does the builder or salesperson listen to you, understand your needs, and offer useful advice?
Check the home carefully
Whether a builder has a model home, a sales office or sells directly from plans, you'll have an opportunity to look closely at the quality of the home and what's included. The builder's specifications list will detail the construction materials and finishing products. Ask to see a description and samples of the standard features included in the base price of the house, along with the description and cost of options the builder offers. When viewing a model home, don't hesitate to try out windows, open drawers, look into every nook and cranny, and inspect the home's mechanical system.
Understand the total cost of buying
Get detailed prices and estimates on everything involved in buying a home. Your builder and lender can advise you on the costs of securing a mortgage, taxes and so on. Ask your lawyer to give you a detailed breakdown of closing costs. Call movers for estimates. Determine if you need to buy new appliance, window coverings or furnishings.
Consult with a lawyer
Before you hire a lawyer, it's a good idea to ask for a detailed estimate of fees for service.
Be realistic
Quality, solidity, good products, service - these are the things that add up to real value for the long term. Your objective is to find the home that provides the best overall value within your budget. A professional builder will work with you to find the right balance of features that will work well for you.
For more information on new homes or renovations visit the Canadian Home Builders Association website athttp://chba.ca/
Some Steps to Follow and Questions to Ask when buying a New Home
1. Visit your financial institution and ask to be pre-approved for a mortgage - this will help you know how much you can afford and consequently focus your search for your "new" home;
2. Make a list of "wants" versus "needs";
3. Visit display suites, compare asking prices and selling prices, and check out local amenities and the neighbourhood;
4. Do not be lured by a beautiful brochure, a comfortable floor plan, or the new finishing. All of these appeal to buyers' emotions. Despite public perception, a new home is not automatically guaranteed to be well built nor perfect. It is essential to research the builder.
5. Some important questions to ask:
- How long has the builder been in business?
- What are the names and addresses of the homes and projects the builder has constructed?
- Ask
for references &/or home owners who have purchased from this builder:
- Are they happy with their home?
- Have they experienced any problems?
- Would they buy another home from this builder?
- What is the builder's after sale service policy?
- What responsibility will the builder assume for the subcontractor?
- Does the builder belong to a professional organization such as the Canadian Home Builders' Association or the Urban Development Institute?
- Does the builder and the trades in their employ have any formal training?
- Is the builder registered with the New Home Warranty Program?
- Is the home enrolled with the New Home Warranty Program?
6. Inquire as to the availability and applicability of the New Home Warranty Program.
7. Hire a lawyer (or Notary) to represent your interest and to review all documents on your behalf.
Home Renovation Value Tool
Want to get an idea how much value specific renovations can
add to your home? Try this renovation Calculator!
http://component.aicanada.ca/e/resourcecenter_renova.cfm