13 Most Commonly Asked Questions By Homebuyers

13 Most Commonly Asked Questions By Homebuyers

First Time Home Buying

13 Most Commonly Asked Questions By Homebuyers

Buying a house can be exciting and overwhelming at the same time. You probably have some questions but are afraid to ask. I hope that it will be answered in here but if not, please contact me. I will be happy to answer them.

13Do I need an agent to purchase a home?

 

No. You don’t need an agent to purchase a home but the question is, why wouldn’t you? The seller pays for the commission and it is factored into the purchase price. Buying a house involves so many complex documents and negotiations. If you are not buying a house everyday, it is best to consult a knowledgeable professional who has the experience (not just any agent).

 

12Do I need to have a home inspection even if it’s brand new?Who pays for it?

 

Definitely. The buyer pays for it and it costs from $350 & up, plus taxes,  depending on the size.

11Does it come with appliances and furnitures?

 

It depends. Most homes for sale come with the appliances but some homes do not. It is important to check this with your agent. Furnitures usually do not come with the purchase so you have to budget for it. The same goes with the light fixtures and window coverings. In the end, anything is negotiable but focus on what’s important. Will it break the deal if you don’t get the curtains or the BBQ in the backyard? After all, you are buying the house, not the decor.

10Can I back out of a deal if I changed my mind?

 

If you are not buying a newly-built home directly from a builder, and you have accepted to terms with the seller, you cannot back out from the purchase after the contingency period (conditional period) is over because it is a legally binding contract. There is “no cooling period” in buying a real estate, so to speak. Doing so, will mean losing out on your deposit money and a potential legal action from the seller  and the brokerage representing you to claim their losses.  

9If the deal fell thru, can I get my deposit back right away?

 

It depends. If the deal fell thru because a condition was not met from the agreement, through no fault of yours, and both parties agreed, a mutual release has to be signed by you and the sellers and the brokerage. The mutual release will detail how the deposit will be released. The deposit holder (usually the selling agent’s brokerage) will return the deposit as soon as it clears usually within a few business days after they received a completely signed release. If a buyer and seller cannot agree on how the deposit will be released, the court will decide.

8Why should I get pre-approved before I look for homes?

 

A pre-approved buyer means they are serious in their purchase. They know their limit ad they buy within it. 

If you start looking at houses, chances are, you will fall in love with one, sooner or later. If that happens and you don’t know your limit, you might be looking at the wrong price and you will lose out on it.

7How much do I need for closing costs?

The minimum amount is 1.5% of the purchase price (2% or more is recommended). For example, if you’re buying a $500,000 home, you need to have at least $7,500 in your pocket at closing time. This amount goes towards paying the following: 

-legal fees and disbursements

-land transfer tax

-PST on Mortgage Default Insurance (also known as CMHC, Genworth or Canada Guaranty fee)

-adjustments (costs paid by seller that is beyond closing date such as property tax, condo fees, equipment rentals, etc)

-appraisal fee

-inspection fee

Your lawyer would be able to give you a much tighter figure. This is in addition to the down payment of the house.

6 Can I sign multiple Buyer Rep Agreement so many agents can help me look for homes?

Unless you’re prepared to compensate all of them, it is advisable to go with only one you trust. All registered agents will be able to see all the homes in the MLS® and can represent you in any home purchase including for sale by owners (FSBOs) and builders. 

5 How much does it cost to hire an agent to help me buy a home?

 

An agent’s compensation (commission) is usually paid by the seller and is factored into the purchase price. This is done thru Cooperation. The Buyer Representation Agreement (BRA) authorizes the agent to deal with the selling agent and seller on your behalf.  If the seller is a private seller (FSBOs) and do not want to deal with agent (to save on commission), it is extremely important to discuss this with your agent before putting an offer, as this may be one of the rare occasions when you have to compensate the agent.

4 What is a Buyer Representation Agreement (BRA)? Why do I need to sign one?

A Buyer Representation Agreement authorizes the agent to work on your behalf to search for homes and represent you when it’s time to put an offer and negotiate on your behalf.  This document details how they are to be compensated when they bought you “A” home in the specified location for a period of time. When you have completed your purchase and you already closed, this terminates as well. As you see, this is not FOREVER. This document is a binding legal document between you and the brokerage (the company where your agent works). By signing a BRA, you are being represented properly for free (see # 5).

3 Why do I need to put a deposit and how much do I need?

 

A deposit or earnest money is a sign of good faith that you are serious in acquiring that property.  Depending on the agreement, deposit can be herewith (comes with the offer), upon acceptance (within 24 hours of both parties’ acceptance of the agreement) or as otherwise described in this Agreement. This amount goes towards the down payment of your purchased property and can be as little or as much, depending on the property and location. Typical value is about 5%. Sellers and their agents prefer higher amounts in bidding situation.

2 What is a CMHC fee? Why do I need to pay for it?

 

A CMHC fee (or it can be a Genworth or Canada Guaranty as well) is a default mortgage insurance. Buying a home with down payment that is below 20% is made possible by paying an insurance fee to the CMHC (Canada Mortgage Housing Corporation) or to the other insurers as mentioned previously and is dependent on who the lender is using. The fees start at 4% for a minimum down payment and can be added to the mortgage but will be factored in the GDS/TDS ratio calculation. The PST on the fee (8% of the fee) will have to be paid as closing cost and cannot be added to the mortgage.

1What is a the minimum down payment to buy a home?

 

For a residential home with a purchase price of $500,000 and below, the minimum down payment is 5%. Any amount higher than $500,000 will be at least 10%. For example, if you’re purchasing a house worth $600,000, the down payment will be $35,000 (5% for the $500,000 and 10% for the amount over $500,000).

This amount must be in your account for 90 days and can come from RRSP, TFSA, investments, savings and chequing accounts. Gifted funds from immediate family can also be considered as a down payment.

If your down payment is coming from the proceeds of the sale of your house, the fully executed agreement needs to accompany the supporting documents for the down payment.

 

Buying a house can be exciting and overwhelming at the same time. You probably have some questions but are afraid to ask. I hope that it will be answered in here but if not, please contact me. I will be happy to answer them.

 

Buying a home is a serious and legally binding commitment. Only offer on a house that you intend to buy. 

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5 Things That Affect Your Credit Score

5 Things That Affect Your Credit Score

First Time Home Buying

5 Things That Affect Your Credit Score

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    5 Things That Affect Your Credit Score

    It is important to obtain an up-to-date credit report to verify that you are in a suitable position to buy a home.

    Credit scores range between 300 and 900, with scores above 680 (nowadays, 720) considered desirable for obtaining a mortgage. Credit scores are calculated using information in your credit report , including your payment history; the amount of debt you have; and the length of your credit history. Credit scores help lenders, and other creditors determine if you’re suitable to get a loan. There are a lot of factors that can affect your score and some are written below. When it comes to determining if a lender will extend a loan is dependent on these factors and over-all history, not just the score.

    The main factors involved in calculating a credit score are:

    Your payment history (35%)
    Your used credit vs. your available credit (30%)
    The length of your credit history (15%)
    Public records (10%)
    Number of inquiries into your credit file (10%)

    1. Your payment history. Did you pay your credit card obligations on time? If they were late, then how late? Did you miss a payment? How many times? Bankruptcy filing, consumer proposal, liens, and collection activity also impact your history. Your credit history will also detail how many of your credit accounts are delinquent (not paid on time or missed) in relation to all of your accounts on file. For example, if you have 10 credit accounts (known as “tradelines” in the credit industry), and you’ve had a late payment in 5 of those accounts, that ratio may impact your credit score.

    2. Your used credit vs. your available credit. How much you owe? If you owe a great deal of money on numerous accounts, it can indicate that you are overextended. However, it’s a good thing if you have a good proportion of balances to total credit limits. For example, if your credit limit is $10,000, how much of this have you used up? When you used up more than 50% of your limit, your score begins to decline.

    3. The length of your credit history. In general, the longer you have had accounts opened, the better. In general, lenders want to see that you have a handle on your financing and debt repayment over a long period of time.  New credit, either installment payments or new credit cards, are considered more risky, even if you pay them promptly.

    4. Public records. Those who have a prior history of bankruptcy, or have had collection issues or other derogatory public records may be considered risky. The presence of these events may have a significant negative impact on a credit score.

    5. Number of inquiries into your credit file. Every time a new financial account is to be created with an institution or company for the purpose of saving or borrowing, an inquiry is being made to your account. If you are applying for a car loan or car lease, a deferred loan (“Don’t Pay Until … loans”), most likely than not, an inquiry will be sent to check your file. This is called “hard hit” and affects your score. These requests are logged on and goes to your inquiry history. So, if you’re shopping for a car loan and you went to 5 lenders, there will be 5 “hard hits” in that short period of time. From time to time, institutions make a “soft” inquiry on your file to offer you a loan or pre-approved credit cards. These, as well as your personal inquiry do not affect your score.

    Generally, it’s desirable to have more than one type of credit — installment loans, credit cards, and a mortgage, for example. If you pay all of them promptly, it will show that you are a responsible and low-risk borrower and the chance of extending you a mortgage is higher. If you always pay your goods or services using your debit card, and you have no credit lines, chances are, when it’s time to getting a mortgage, you will not have a “credit history” and this can cause your application to get denied. If you are thinking of buying a home and need help re-building your credit, contact us with Subject: Help Rebuild My Credit.

    5 Ways To Decorate with Colour On A Budget

    5 Ways To Decorate with Colour On A Budget

    First Time Home Buying, Listing, Selling

    5 Ways To Decorate with Colour On A Budget

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      5 Ways To Decorate with Colour On A Budget

      Sometimes, selling a home is inevitable and most of the times this happens when the money is tight. Here’s 5 tips to decorate your home to sell when you’re on a tight budget.

      1. Paint. Buy a contractor’s paint (yes, the big bucket from the home improvement store) and don’t skip on the primer especially when you are painting over a dark colour (red, black, green, navy blue… well, you get the picture). Although nowadays, you can buy a primer and paint combo, I still personally use a separate stain-blocking primer (my favourite is KILZ) if painting over a dark surface. If you’re painting over a neutral colour then a primer-paint combo will do. This will cut your painting time in half although you will pay a little extra for this specialty paint. The key to painting like a pro is in the preparation of the walls. Paint will only help increase the value of your home if it’s done properly. A sloppy painting is worse than leaving it as-is. Try to use a neutral colour, not necessarily white or beige, although those work nicely too. There’s a lot of sample swatch of paints you can get for free at your paint store. If you’re going for a warm tone BEHR’s Navajo white is a favourite. If you’re going for a cool tone, try a grey or greige shade like the BEHR’s Wheat Bread or Benjamin Moore’s Revere Pewter. Use an eggshell or satin sheen for living or dining room. There’s a paint to use specifically for kitchen or bathroom. Painting your home in one colour makes it bigger, cleaner and more harmonious to look at.

       

      First-Time Home Buyer Program

      First-Time Home Buyer Program

      First Time Home Buying

      First-Time Home Buyer Program

      The Government of Canada has two programs to assist first-time home buyers –  the First-Time Home Buyers’ Tax Credit (HBTC), and the Home Buyers’ Plan (HBP). In addition to these federal programs, the Ontario Government offers land transfer tax refunds to first-time home buyers. As well, mortgage loan insurance is available from the Canada Mortgage and Housing Corporation.

      First-Time Home Buyers’ Tax Credit (HBTC) 

      The First-time Home Buyers’ Tax Credit exists to assist first-time home buyers with the costs associated with the purchase of a home, such as legal fees, disbursements and land transfer taxes. The HBTC is a $5,000 non-refundable income tax credit amount on a qualifying home acquired after January 27, 2009. For an eligible individual, the maximum credit amount is $750. You are considered eligible if:  1) you or your spouse or common-law partner acquired a qualifying home; and 2) you did not live in another home owned by you or your spouse or common-law partner in the year of acquisition or in any of the four preceding years. 

      Home Buyers’ Plan (HBP)  

      The Home Buyers’ Plan allows first-time home buyers to withdraw up to $25,000 from their RRSPs on a tax deferred basis to use toward the purchase of a home in Canada. To qualify as a first-time home buyer, purchasers must not have lived in a home owned by themselves or their spouses or common-law partners in the preceding four-year period outlined by CRA. If both you and your spouse or common-law partner qualify under the Plan, you can each withdraw up to $25,000 from your RRSPs for a total of $50,000.

       

      Before you are entitled to withdraw the money from your RRSP, you must have entered into a written agreement to purchase or build a home that you intend to occupy as your principal residence. The purchase of a cottage or a commercial property, for example, would not qualify for this program because they are not a principal residence. 

      Money can be withdrawn from your RRSP provided it has been in your RRSP for at least 90 days. If you have signed an Agreement of Purchase and Sale and you have at least 90 days until your closing, you can open an RRSP and make a contribution, receive the tax deferred benefit and then withdraw the same money and put it toward the purchase of your home. 

      Money withdrawn under this federal program must be paid back to your RRSP within 15 years. People generally deposit one fifteenth of the amount withdrawn back to the RRSP over each of the following 15 years. If you do not pay the full amount back to your RRSP within 15 years, the amount outstanding will be subject to tax when you file your income tax return in the following year.