First time home purchase.

Leveraging, renting vs owning, making an investment or buying a home?
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Hazel
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First time home purchase.

Post by Hazel » 02 Feb 2016 02:26

We are planing to purchase a house, and my husband and I would probably be going this weekend to check a few house. But since we are purchasing home for the first time, we need advice on what all should be checked before the purchase. Also have been looking for a good mortgage provider for first home buyers. Have heard of The Financial Forum, here in Ontario. Would probably be fixing a meeting with them soon too. Could use some suggestion and advice.

Spudd
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Re: First time home purchase.

Post by Spudd » 02 Feb 2016 16:06

You will want to get a home inspection before you buy. Normally this is done by making an offer conditional on home inspection, once the sellers accept the offer then you have a week or so to get the inspection done. This is really important.

Regarding the mortgage, talk to your bank and a mortgage broker as your first steps. I don't think it really matters who you use, to be honest. We always just went with our own bank because the rates were pretty close to what we could get elsewhere, and it was convenient to have it at the same institution. You will want to make sure you understand the payment options you have. Some banks only let you pay lump sums against the mortgage once a year, for example, while others will let you pay a lump sum at any time as long as you haven't exceeded the yearly limit.

izzy
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Re: First time home purchase.

Post by izzy » 02 Feb 2016 17:11

Spudd wrote:You will want to get a home inspection before you buy. Normally this is done by making an offer conditional on home inspection, once the sellers accept the offer then you have a week or so to get the inspection done. This is really important.

Regarding the mortgage, talk to your bank and a mortgage broker as your first steps. I don't think it really matters who you use, to be honest. We always just went with our own bank because the rates were pretty close to what we could get elsewhere, and it was convenient to have it at the same institution. You will want to make sure you understand the payment options you have. Some banks only let you pay lump sums against the mortgage once a year, for example, while others will let you pay a lump sum at any time as long as you haven't exceeded the yearly limit.
And some Credit Unions have (or used to have)even more liberal repayment terms.We used such a mortgage on our last home purchase many years ago whilst our previous home was on the market and had no problems paying it off when that home sold.If you might be in a position to pay it off early it may be worth checking.
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Pickles
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Re: First time home purchase.

Post by Pickles » 02 Feb 2016 18:37

You should hire a lawyer to review the mortgage offer and sale agreement before you accept either so that you understand all terms.

The offer to purchase should have a clause to permit you to back out if financing cannot be arranged or if the home inspection findings do not meet with your approval. Again, have your lawyer review the offer before you make it.

Your lawyer will search for existing liens or any impediment for you receiving clear title to the house you buy and deal with the other party re: allowances for utilities incurred but not known before the date of the property transfer.
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dougboswell
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Re: First time home purchase.

Post by dougboswell » 05 Feb 2016 10:42

You will need to put an offer in. If you have enough funds a 20% down payment will save you CMHC fees. A home inspection is optional but unless you are knowledgeable in all aspects of construction it is worth your money to have one done. The conditions you need inserted are for financing and the home inspection. Try to get 7 or 8 business days not 5. It takes some lenders up to 2 days to look at your application. I would not have the home inspection done until you have approval for the financing. Depending upon the value of the home and location some lenders may require a formal appraisal as part of the approval process.
Ask me about the do-it-yourself mortgage designed to save you even more money.

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Re: First time home purchase.

Post by dougboswell » 05 Feb 2016 11:01

With respect to a mortgage ask the potential lender how the mortgage will be registered - standard charge or collateral? TD, RBC and National Bank register their mortgages as collateral. If you decide to transfer to a new lender at the end of the term a collateral mortgage will require you to pay for a lawyer as opposed to a cost free switch if it is a standard charge
Ask me about the do-it-yourself mortgage designed to save you even more money.

OhGreatGuru
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Re: First time home purchase.

Post by OhGreatGuru » 05 Feb 2016 14:52

Regarding mortgages:

1. Put down as much as you can afford;
2. Examine your monthly budget and get a mortgage with as short an amortization period as you can afford for monthly payments. The amount of interest you pay over the life of the mortgage goes up exponentially with the amortization period. The lender will usually tell you your mortgage limit based on 30-years. Ask what it is for 15-20-& 25 years.
3. Even closed mortgages usually allow you to pay down a percentage of the principle on anniversary dates. But check pre-payment options to be sure.

dougboswell
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Re: First time home purchase.

Post by dougboswell » 06 Feb 2016 18:31

Regarding amortizations. If your down payment is less than 20% and CMHC insured, the maximum would be 25 years. If it is over 20% down then most lenders let you go either up to 30 or 35 years.
Ask me about the do-it-yourself mortgage designed to save you even more money.

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Re: First time home purchase.

Post by longinvest » 06 Feb 2016 22:29

OhGreatGuru wrote:Regarding mortgages:

1. Put down as much as you can afford;
2. Examine your monthly budget and get a mortgage with as short an amortization period as you can afford for monthly payments. The amount of interest you pay over the life of the mortgage goes up exponentially with the amortization period. The lender will usually tell you your mortgage limit based on 30-years. Ask what it is for 15-20-& 25 years.
3. Even closed mortgages usually allow you to pay down a percentage of the principle on anniversary dates. But check pre-payment options to be sure.
:thumbsup:
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AltaRed
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Re: First time home purchase.

Post by AltaRed » 06 Feb 2016 22:39

:thumbsup: :thumbsup: I never regretted getting my mortgage paid off after 15 years. It can leave a lot of time thereafter to pour money into investment portfolios. OTOH, long amortization mortgages are good for bank shareholders.

BUT don't over-shorten amortizations so much that it doesn't leave much spare capacity to service the debt. A bump up in interest rates could make mortgage servicing an excessive burden. For example, a 25 year amortization may be better fhan 20 years just to provide some flexibility in servicing the debt. You can always apply more cash to principal when you can afford to do it, e.g. on anniversary dates of the mortgage, bi-weekly payments, etc. depending on the terms of your mortgage....and correspondingly, reduce eventual amortization that way.
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seth1987
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Re: First time home purchase.

Post by seth1987 » 10 Aug 2016 16:14

People pretty much covered everything here.

The only thing that wasn't covered is that you should apply for a pre-approval letter from the lender, before you put an offer down.
This lets you know what your max budget will be and saves you a lot of time and hassle.

Some sellers now require buyers to submit a pre-approval letter with the offer.

In a hot market the buyers are basically at the mercy of the sellers and the market. Buying can be a very annoying process in Toronto/Vancouver, so just stay the course and take your time :thumbsup:

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Re: First time home purchase.

Post by gobsmack » 10 Aug 2016 19:08

A couple of things I thought it might be worth adding:

1) Do not use the home inspector your realtor is recommending. If your realtor is sending a lot of business his way, his inspection may be biased because he might be afraid of messing up the deal (conflict of interest). If your realtor puts up a fuss about it, fire him. You should always look for an independent inspector. There are some additional tips here.

2) The NY times has a neat calculator that allows you to compare buying vs renting. I thought it was very useful when I was shopping around.

Just a Guy
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Re: First time home purchase.

Post by Just a Guy » 11 Aug 2016 00:50

Don't fall in love with your home and overlook or downplay the flaws. Think about what it would be like to actually live there with your stuff. Do things fit? Is there enough storage? Are things located in a logical spot/way?

Don't worry about the colours/mess/etc. Things that turn you off can be easily fixed and can save you a bundle. Most people repaint regardless of how good/bad it already is.

Watch out for lipstick on the pig repairs. What looks nice on the surface can be hiding major problems.

Your realtor will probably turn on you to close the sale when you find a house you like. He only gets paid if you buy.

Get a home inspector who knows construction/engineering not a former realtor or guy with a course in how to be an inspector.

Variable rate mortgages are better in a falling or stable interest rate market, fixed is better if the rates are going to rise. Look at all the terms, lowest rates aren't always the best, remember most people break their mortgages. The average Canadian moves ever 7 years. This probably won't be your final house.

Your amortization period and your payments don't have to match. As someone pointed out, getting a longer amortization is a good thing, as long as you set up your payments based on a shorter one. For example, you may have a 25 or 30 year amortization, but set up your payments as if it were a 20 year biweekly rapid (26 payments a year) mortgage. Your mortgage will be paid off in 17.5 years not 25 or 30 but, if you run into problems, you can set the payment terms back up to the amortization max. You can always pay faster than your mortgage amortization, but you can't go longer without getting a new mortgage.

Everything is going to go wrong as you approach closing. The bank will screw up paperwork, timelines will seem to rush in and the realtor/lawyer/bank will freak out. Don't worry about it, it happens all the time and everything will get sorted out. There is too much money on the line for everyone to let the deal fall apart...but people like to make it seem like it will.

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