Purchasing a house comes with lots of information to read and understand. It can feel like learning a new language at some points! But for potential buyers, the first crucial step focuses on money — and exactly how much you need to buy your new home.
Following this checklist and asking yourself these key questions will help you break down the house-buying process and make your path to home ownership easier to understand and plan for. Here are the basic steps to buying a house.
Sep 9, 2021 in Life
Start by figuring out your monthly household income, before taxes. Consider aiming your total home expenses to be around 30 to 35 percent of your monthly income. You’ll also need to come up with a down payment, which should be taken from savings and paid to your mortgage provider in a lump sum.
Next, consider mortgage rates and amortization schedules. A mortgage rate is the percentage of interest you pay on the principal loan (a.k.a. the amount you need to borrow). Rates vary from lender to lender, so it’s worth doing some research before you lock in. The amortization schedule is the number of years you’ll take to pay off the loan plus the interest.
A couple of pro tips: While longer amortization schedules may mean lower monthly payments, choosing a shorter timeline can help you save thousands in interest charges over the lifetime of the debt. Also consider choosing biweekly mortgage payments — making 26 installments in a 52-week period is equivalent to making 13 monthly mortgage payments instead of 12 every year. This pays your principal down faster, so you can save on interest and possibly shave a few years off your debt schedule.
The good news is that the right credit cards can help you earn rewards on purchases to set up services such as moving trucks, internet hookup fees, professional cleaners and even pizza deliveries for busy packing and moving days when you pay with the card. You might choose one that earns you points for example, which may be redeemed for gift cards to spend on goods and services that make your new home comfortable. Explore American Express® Cards to find the one with the best benefits that suit your needs and lifestyle.
Some potential home buyers are eligible for programs that can help reduce costs. Check with federal and provincial legislation in your area to see if you qualify for any of the following.
A traditional mortgage is the route most Canadians take. But they aren’t one-size-fits-all. Here are two sets of options you’ll consider when you’re making your choice. Once you've decided on the first, you'll have to select the second option as well.
A home equity line of credit, also known as a HELOC, is another option that allows people to borrow money against a home’s equity (i.e., the value of your house or condo) and can stand in for a traditional mortgage. For either a traditional mortgage or HELOC, speak to your loan provider and learn all the specifics to ensure you know exactly what your monthly payments will be.
A good credit rating is essential for securing a mortgage and reducing costly mortgage loan insurance fees. Learn how you can build credit, improve your credit history and strengthen your credit savvy.
Agents guide clients on market availability, act as go-betweens on offers and counteroffers, and manage the paperwork involved in all of these transactions. Some agents also assist with home inspections and staging. All agents earn a commission on each home sold.
To find the right agent, a personal referral is a great start. You’ll also want to confirm that this person is up-to-date on market trends, is experienced in buying and selling the kind of home you’re looking for and suits your personal style.
Real estate Lawyers review real estate contracts on your behalf and point out anything that may not be in your best interest. They also examine title records to catch any suspicious legal activity (also called a title search), draft title deeds, prepare the mortgage, close the sale and hand over your keys.
Lawyers subtract their fees, and the real estate agent’s fees, from the proceeds of the sale. They would usually then issue you documentation showing how much money went where. To find the right lawyer, you’ll want a real estate law specialist who is familiar with provincial regulations and is easy to work with.
A home inspector can identify parts of a home that are unsafe or need repairs. By looking at every corner of the property, they can help buyers understand the condition of the home and negotiate a fair price.
A typical home inspection costs about $500, which the buyer pays upfront. (Note: You may need to conduct multiple inspections in your search for a new home.) Sometimes your real estate agent can offer a list of home inspectors. If you find someone independently, they should be prepared to offer excellent references.