For the first time home buyer: what to do, how, and when
Buying your first home is exciting, but equally daunting IF you don’t know where to start. Here is a quick checklist that will walk you through the steps we recommend you use as a First Time Home Buyer. For a more in-depth walk through, visit our First Time Home Buyer Guide in our Mortgage Products section.
Step 1: Determine your Net Worth.
The concept of determining one’s Net Worth seems daunting, however, it is very simple. Just add up the value of all your assets (vehicles, rec vehicles, bank account balances, RRSPs, RESPs, GICs, Investment Accounts, etc), and also tally up all of your debts (auto loans, credit card debt, student loans, existing mortgages, etc). Then subtract the value of your debts from the value of your assets. The reason this first step is important is because it will help you figure out exactly what your current financial picture is. The information you collected in the process of determining your Net Worth will also come in handy when trying to get yourself pre-approved for a mortgage.
Step 2: Call a Mortgage Broker.
Once you’ve determined your Net Worth, the next step in the process of purchasing your very first home would be to get yourself pre-approved. A mortgage pre-approval is a simple process that will help you determine a budget. The pre-approval will be obtained with the help of a mortgage broker, who will review your personal information, and conducting a quick interview. To get yourself pre-approved by a qualified mortgage broker at Alberta Mortgage, simply hit the ‘Apply Now’ button at the top of this page. The broker will then conduct the necessary calculations, review your situation, and present you with a set of options to choose from. These options are incredibly important for you as a First Time Home Buyer, since they will most often provide you with a budget, maximum mortgage qualification, and some product options. Your broker will help you understand the differences between the variety of mortgage products available, and be able to answer any questions you may have at this time. It is also possible that you may not qualify for purchasing a home at this time. However, a qualified mortgage broker will provide you with a set of steps to take to get yourself into position to purchase a home in the future. Once you know what you are able to afford (both personally, as well as based on insurance qualifications), you’re now ready to start looking for your new home.
Step 3: Find a Realtor.
Now that you know what you can afford to spend, you can begin the process of searching for a home. With a list of housing and spending related priorities in mind, and a budget you can start to narrow your search with the help of a realtor. A realtor can provide useful information about a property, and/or neighborhood, and also provide you with negotiating expertise once you get to the point of making an offer.
Step 4: Find yourself a Lawyer.
A lawyer’s role in the process of purchasing your first home can be incredibly important. Reviewing property documents, registering the mortgage, handling property taxes, and managing deadlines are all vital parts of purchasing a home, and we’d therefore recommend you take some time to select a lawyer/law office with whom you feel comfortable, and who you feel would be competent in handling this very large transaction.
Step 5: Make an Offer to Purchase.
You just found the home of your dreams, and you are ready to start negotiating with the Seller. With the help of your realtor, you would enter into the process of negotiating any, and all aspects of the purchase; ranging from move in dates, to price, to maintenance and upgrades. You would provide the Seller with a deposit, and an offer. At this time, there are some crucial items that we recommend be included in your offer:
- Buyer’s Condition of the Offer being SUBJECT TO FINANCING. You have been pre-approved, however, the property you have found, and are wanting to purchase hasn’t. Therefore, it is incredibly important to include this Buyer’s Condition. A Subject to Financing Buyer’s Condition allows for your mortgage broker to apply for your mortgage, and secure approval before you become liable to pay for the property. Why does this matter? Let’s say you entered into negotiations, and settled on a price that felt reasonable to you, but was well above what the Market norms. When applying for a mortgage, the mortgage company, and mortgage insurers may come back unwilling to support the Sale Price that you have agreed upon meaning, you could need to come up with a substantially larger down payment than you would have had to if the property was being purchased at the market value. Some properties can also have been flagged by mortgage companies for prior issues (grown ops, structural issues, etc), and become unfinanceable.
- Buyer’s Condition of the Offer being SUBJECT TO A PROPERTY INSPECTION. The home you have found may appear to be perfect upon initial inspection, but it is possible that there could be issues that you don’t see or recognize. Insulation, plumbing, electrical, HVAC, drainage, shingles, etc. There are a multitude of aspects of a home that can go wrong, and it can therefore be important to have a home thoroughly inspected before you become committed to purchasing it.
- Buyer’s Condition of the Offer being SUBJECT TO REVIEW OF THE CONDO DOCUMENTS(if the property is a condo). When purchasing a condo, it is incredibly important to know about the condo’s financial health, and maintenance records. You want to be looking out for upcoming ‘Special Assessments’ or ‘Cash Calls’ that could see you receiving a bill from the condo corporation for anything from painting the exterior, to replacing the roof of the entire building.
Including these Buyer’s Conditions in your Offer will allow for you to recover your deposit, and walk away from the deal if you are unable to obtain financing, unhappy with the property upon inspection, or become concerned after reviewing the condo documents. In addition to the recommended Buyer’s Conditions, you are able to include any other conditions you wish. Once you have submitted your offer to the Seller, and they approve it and sign off on the deal, you are now ready to have your mortgage approved.
Step 6: Get your mortgage approved.
Now that you have a ‘Live Offer’ that has been signed off on by both the Seller and yourself, you are now ready to get your mortgage approved. To get your mortgage approved, you would simply need to provide your mortgage broker with a copy of the Purchase Contract, and Feature Sheet for the home you are purchasing. From there, your Alberta Mortgage broker will work tirelessly to secure your mortgage approval -and provide you with the best home financing product available to you. At this time, you would meet with your mortgage broker to go over the details of your approval, and sign off on the documents. You will likely also be required to provide verification of your income, and down payment. Once you feel satisfied, you would contact your realtor, and advise them to remove your Subject to Financing Buyer’s Condition.
Step 7: Sign the mortgage papers at your Lawyer’s Office.
Once your mortgage broker has finished verifying your income, down payment, and the details of the property you are purchasing. The final mortgage mortgage documents will be signed at your lawyer’s office, and you will also be providing them with any additional funds needed to complete your purchase (down payment, property taxes, legal fees, etc).
Step 8: Move in Day!
You’ve now completed the process of purchasing your first home. You can now relax, and enjoy the next phase of being a First Time Home Buyer: Decorating!
For more information about mortgages, as a first time home buyer, or are purchasing your next home, call, Apply Online, or visit Alberta Mortgage today.