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homeBuying

your first

We are grateful to Judith A. Leonelli, the owner/broker of a real estatefirm in Mendon, Massachusetts, for her expert help in the developmentof this booklet. Ms. Leonelli has been working in the field of real estatefor 21 years as a licensed real estate broker, member of the NationalAssociation of Realtors, residential specialist, relocation specialist, andcertified buyer representative.

The information in this booklet has been adapted for Canadian readersfrom the original U.S. version.

© 2006 Ceridian Corporation. All rights reserved.

2 Your first home

4 Preparing to buy

12 Mortgage basics

24 Determining your price range

32 Assessing your financial and life goals

39 Your home search

62 Making an offer and closing the sale

72 Settling in

Contents

Your firsthome

If you’ve decided to buy your first home, you probably have adizzying number of questions on your mind. Am I really financiallyready for this step? How much do I need for a down payment? Whatkind of mortgage should I look for? What happens at a closing?

You may feel intimidated by the amount of work a buyer needs todo. You may worry about finding the right home at a price you canafford or about finding the professionals to work with you—yourreal estate agent, lawyer, inspector, and financing agent. And youmay feel confused about what steps to take and in what order.

This booklet was designed to help take the stress out of buying ahome. It will take you step-by-step through the home-buyingprocess. From understanding mortgages, attending open houses,making a bid, negotiating a purchase and sale agreement, andclosing the transaction—when the home finally and officiallybecomes your own—it will help you navigate the process withunderstanding and confidence.

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Talking to friends and family about your decision to buyMost of the time, friends and family are happy when you’re able to buy a home of your own.But what if you’re single and your family thinks you shouldn’t buy until you’re married? Orfriends say you’re too young to make such a big investment?

If your family or friends are less than supportive, remind yourself of the reasons you havedecided to buy so you can discuss them confidently. Let your parents or friends know that you’vedone your research and understand the benefits and obligations of home ownership. It can go along way to reduce friction and ease everyone’s minds.

If you’re meeting resistance because you’re single and family members think you shouldn’t buyunless you’re married, remind them of your earning power and that you’re building equity aswell as financial independence.

Preparing to buy

Once you’ve decided that you’re ready to buy a home,

you’re probably eager to start shopping for one right away.

But before you even look at a single real estate listing, you

need to assess your current financial situation so you can

figure out how much you can afford to spend on a home.

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Your current financial situation

Start by looking at your short-term expenses and spending habits,any long-term debt you may be carrying (such as credit card debt orstudent loans), and any savings you may have. You need to knowhow much you can afford to pay every month toward a mortgageand what you can afford as a down payment. What you find outabout your current financial situation will be the same informationthat mortgage lenders consider when deciding how much they willlend you, so it’s a good idea to be familiar with it before you beginshopping for a mortgage so you’ll have realistic expectations.

The process of evaluating your current financial situation will alsohelp you think about ways to trim your spending in order to save fora down payment and ways to reduce your long-term debt, whichcan help you get financing.

Your short-term expenses and spending habits

To figure out where your money is going and what you might beable to pay each month toward a mortgage, track your spending.You can use the following worksheet to record what you spend in amonth. You should include major monthly expenses like rent, heat,and food, as well as smaller items like coffee, laundry, gas, andhealth club dues. Keeping track for several months will give you aneven better idea of where your money goes, but one month can giveyou a starting point.

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MONTHLY INCOME

Gross salary/wages

Deductions

Income tax

CPP

Employment Insurance

Pension

Other deductions

NET PAY AFTER DEDUCTIONS

Other income

Bonuses, tips

Commissions

Self-employment income

Interest, dividends

Capital gains expected

Child support, alimony

Gifts

Other

TOTAL OTHER INCOME AFTER TAXES

TOTAL NET MONTHLY INCOME

Income and expenses worksheet

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MONTHLY EXPENSES

Monthly total Annual total

Home expenses

Mortgage or rent

Second mortgage/home equity loan

Home insurance

Real estate taxes

Repairs and improvements

Utilities: Oil/gas

Electricity

Water/sewage

Telephone

Transportation

Car loan payments

Car repairs

Car insurance

Bus or train fare

Gas

Tolls/parking

License/registration/excise tax

Food/clothing

Groceries/household goods

Clothing

Medical/insurance

Life, disability insurance

Medical/dental insurance

Medical/dental/pharmacy expenses

Dental, eye care, glasses

TOTAL EXPENSES THIS PAGE

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MONTHLY EXPENSES (CONT’D)


TOTAL FROM LAST PAGE

Children

Child care

Education/tuition

Child support

Lessons/camp/sitters

Allowance/misc.

Education

Tuition, fees

Books, supplies

Household

Furniture, housewares

Cleaning

Garden, lawn, trash, snow

Fun/health/hobbies

Eating out

Work/school lunches

Movies, videos, music

Cable TV

Books, magazines, newspapers

Computers, electronic equipment

Beer, liquor, cigarettes

Lottery tickets

Vacations, recreation, travel

Photos/film/developing

Sports, exercise

Hobbies

TOTAL EXPENSES THIS PAGE

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MONTHLY EXPENSES (CONT’D)


TOTAL FROM LAST PAGE

Personal care

Dry cleaning, tailor, laundry

Hair care, makeup

Massage, body work

Debt repayment

Credit cards

Student loans

Other

Other

Donations, contributions

Gifts (birthdays, holidays, etc.)

Savings for retirement/college

Postage

Pet care

Professional services (lawyer, tax, etc.)

Dues, membership fees

Other

TOTAL MONTHLY EXPENSES

Monthly income total from page 6

NET MONTHLY CASH FLOW

(Income minus expenses)

Check with your credit card company to see if it offers an annualreport summarizing your categories of spending or look into purchas-ing a software program to help you organize and track your spending.

Once you have an idea of how you spend your money, look for areaswhere you can cut back on spending and increase your savings. Forexample, you might want to consider brewing your own coffeeinstead of buying a cup on your way to work each morning. Youcould save thirty to forty dollars a month if coffee is a daily habit.Downgrade your television cable service or cancel it altogether. Shopfor less expensive calling plans. Every little bit helps.

Long-term debt

Mortgage lenders will look at your sources of income and your long-term debt when they assess your eligibility for financing. Your long-term debt might include school loans, credit card debt, or carpayments. Take a close look at the agreements and other documentsthat relate to your long-term debt. How close are you to paying anyof it off? Are there any penalties for paying your debt off early?

Ways to reduce long-term debtIn addition to freeing up money for your monthly mortgage pay-ment, reducing long-term debt can make you eligible for a largerloan.

If you have a large amount of high-interest debt, pay it off first. Formany people, this means credit card debt. You may think that bysaving money in a savings account, you’re being wise. But eventhough getting into the habit of saving is a good idea, letting moneysit in an account returning only 2 percent interest when you couldbe reducing a balance costing you 18 percent interest (as credit cardsoften do) is not. Put your long-term debt in order from highest tolowest annual percentage rate and work on paying off those highinterest balances first.

Consolidate your high-interest debt on one lower-interest card. Ifyou shop around, you can often find credit cards offering a tempo-rary low rate for balance transfers, and sometimes the low rate continues for the duration the balance is carried. Be sure to find out

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if the low rate is temporary; rates can increase substantially after theinitial low rate expires. And don’t transfer balances too often. It canreflect badly on your credit report.

Use your debit card instead of a credit card. Most financial institu-tions offer debit cards. This way you spend money that you actuallyhave in your account instead of taking on debt, which you do with acredit card.

No single plan is right for everyoneOnly you can decide what kind of long-term financial planning makessense for your individual situation. Paying off debt before saving for abig purchase may sound logical, but when that big purchase is a homeyou also have to factor in the financial benefits of building equity.There may be other sensible strategies, too, depending on yourfinancial situation. It can be helpful to talk with a financial adviserabout what’s right for you.

Savings

In addition to reviewing how much you have in any existing savings,chequing, or other money market accounts, you will need to thinkabout how much you can afford to save on a regular basis toward adown payment on your home. Although you may be able to secure amortgage with 5% down payment, if you can buy a home withmore money down, you’ll be better off because you’ll build equityfaster, you’ll likely get a lower interest rate, and your monthlypayments will be lower. Since the amount you have for the downpayment will affect your mortgage payments and interest rate, it’simportant to estimate it as accurately as you can.

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There are many different types of mortgages. The type of

mortgage you are eligible for will depend on your current

financial situation and your long-term financial goals.

Shopping around for the best deal can save you thousands

of dollars. To make sure you find the mortgage that’s right

for you, it’s important to understand how a lender

determines the amount you can pay each month. It’s also

important to understand the differences between fixed-rate

and adjustable-rate mortgages, the relative advantages and

disadvantages of 15- and 30-year mortgages, and what a

lender will look at when deciding whether you’re eligible for

the mortgage you may want.










disadvantages of short and longer term amortizations, and

what a lender will look at when deciding whether you’re

eligible for the mortgage you may want.

Mortgage basics

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Estimating your mortgage

Mortgage lenders use a debt-to-income ratio, or “qualifying ratio,”as a guideline to calculate what a borrower can afford to pay eachmonth. A qualifying ratio is the maximum percentage your monthlyhousing costs can be in relation to your gross monthly income.Lenders usually use a second qualifying ratio if you have long-termdebt payments—this ratio signifies the maximum percentage thatyour monthly housing costs plus long-term debt expenses can be ofyour gross monthly income. Regardless of the kind of mortgage youobtain, the lender is likely to use a qualifying ratio to determinewhether you are eligible for financing.

To estimate the size of the mortgage for which you may qualify, youneed to look at the following:

• The percentage of your gross monthly income that you would need tospend on “housing costs.” Housing costs, which are usually combinedinto one monthly payment, include the monthly mortgage principal(the money you borrowed), the interest on that principal, propertytaxes, and heat. Generally, this should not exceed 32% of your grossincome.

• The percentage of your gross monthly income that you would need tospend on housing costs plus monthly long-term debt payments, such ascar payments, college loan payments, or other bank loans, and creditcard debt. Long-term debt usually includes any expense that extendsover a period of a year or more. Your “Total Debt Service” shouldnot exceed 40% of your gross income.

Keep in mind these limits are maximum amounts. You will generallybe more financially secure will lower ratios.

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Fixed-rate versus adjustable-rate mortgages

Fixed-rate mortgages

With a “fixed-rate” mortgage, the interest rate on your loan neverchanges. You pay the same amount every month for the life of theloan. One advantage of a fixed-rate mortgage is the emotional secu-rity of knowing what your monthly payment will be. Although younever experience the pleasure of watching your monthly paymentdecrease, you also never experience the disappointment of watchingyour monthly payment go up.

Adjustable-rate mortgages

The interest rates on adjustable-rate mortgages are variable, whichmeans they change from time to time, usually in relation to aninterest-rate index. If you have an adjustable-rate mortgage, you canexpect your required monthly payments to go up and down.

Why would you choose an adjustable-rate mortgage? The immediateadvantage is that they are usually offered at a lower initial interestrate than the rate at which fixed-rate mortgages are offered—oftenup to three percentage points lower. This can be appealing if youwant lower initial monthly payments. It also means that somehomebuyers may be eligible for a bigger loan, because lenderssometimes qualify borrowers on the basis of their income and thefirst year’s payments (which would be lower than the payments on afixed-rate loan).

If interest rates remain steady or go down, adjustable-rate mortgagescan be less expensive than fixed-rate mortgages. However, if interestrates go up, monthly payments go up, too. With an adjustable-ratemortgage, a lower initial rate means more risk because if rates rise,your payments will also go up. Overall, with a longer-term mort-gage, you are paying a ‘premium’ for the security of knowing yourrates will not fluctuate during the term. You must review your budg-et and cash flow needs and decide which route is the best for you.Your lender can calculate what your highest monthly paymentwould be. If you can easily cover the highest possible monthly pay-ment while paying for other necessary expenses, then an adjustable-rate mortgage might be something to consider.

Combination fixed-rate/adjustable-rate loans It’s possible to get a loanthat is a combination of a fixed-rate and adjustable-rate mortgage.Mortgages like these, which are sometimes called hybrid loans or splitmortgages, can make sense for homebuyers planning to stay in theirhomes for an average of, but no more than, 5 to 10 years. Ordinarilythese loans will start out as a fixed-rate loan for a specified number ofyears, then convert to an adjustable-rate loan for the remainder of thelife of the loan. Hybrid loans usually offer a fixed-rate interest ratelower than that of a long-term fixed-rate mortgage, but higher than atraditional adjustable-rate mortgage loan.

If you are considering a hybrid loan, try to evaluate how long youexpect to own your home. Will you move before the initial interestrate changes to an adjustable rate? If the answer is yes, then youstand to save money on the lower initial interest rate of a hybrid. Ifthe answer is no, then you may consider a fixed-rate mortgage asafer bet.

Choosing a fixed-rate or adjustable-rate mortgage

Think about the following questions if you are trying to decidebetween a fixed-rate mortgage and an adjustable-rate mortgage:

• If interest rates go up, is your income likely to increase enough tocover higher mortgage payments?

• Will you be taking on other sizable debts in the near future, such asa loan for a car or school tuition?

• How long do you plan to own this home? (If you plan to sell soon,you may not need to worry about where interest rates will go yearsfrom now. But if you plan to own the home for a long time, futureinterest rates will be very important.)

It’s important to know how any adjustable-rate mortgage you areconsidering compares with a fixed-rate mortgage. Check withvarious lenders and make a complete list comparing features andbenefits of their mortgage offerings.

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Other Considerations

The term of your mortgage

Whatever mortgage you choose, you will need to decide on theamortization period that works best for you. Amortization refers tothe period of time over which you will repay the loan. Typically, thismeans choosing between a 15-year to 25-year amortization mortgage,although other options are available. Each has its own benefits anddrawbacks. Longer periods equal lower monthly payments. Thedownside to this is that the payments are spread out over a longertime, and you will pay more interest. Shorter amortization means theloan will be paid off sooner, but will require higher payments.

As you can see from the chart following, paying off a mortgage in 15years can save you a lot of money in interest—on this $200,000mortgage it saves you $81,527. So if you can afford to make the pay-ments on a 15-year mortgage, is there a reason you would opt for a25-year mortgage? The answer depends on your other financial goals.For the example below, what would you do with the extra $400 amonth (the difference between the monthly payments on the 15- and25-year mortgages)? Would you use some of it to prepay your mort-gage? Would it go directly into a savings account for your retirement?

25-YEAR 15 -YEARAMORTIZATION AMORTIZATION@ 6% @ 6%

Monthly payment $1,280 $1,680

Balance at 5 years $179,673 $151,807

at 10 years $152,356 $87,040

at 15 years $115,644 $0

at 20 years $66,306 $0

at 25 years $0 $0

Total interest paid $183,884 $102,357

Total interest saved (15 vs. 25) = $81,527

Outstanding balances on a $200,000 mortgage

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If you’re the kind of person who could benefit from the type offorced savings an RRSP or group pension plan can offer, for instance,and saving for retirement is one of your goals, then taking a 25-yearmortgage might be a smart option. It might work especially well foryou if you can save for retirement and prepay a portion of yourmortgage.

Some homeowners just want the option of paying less each month.The decision is up to you, but be sure to explore each option carefully.And ask your mortgage lender any questions you may have until youfeel confident that you can make a decision that’s right for you.

Prepayment

Whether you decide on a fixed-rate or an adjustable-rate mortgage,if you are able to pay more than the required amount on yourmortgage every month you can save yourself a considerable amountof money. In general, the longer you take to repay a loan, the moreyou’ll pay in interest.

Be sure to check with your mortgage lender and read your loandocuments carefully before you sign them to see if there are penaltiesfor prepayment. Some lenders won’t penalize you for prepaying yourmortgage when you refinance or sell your home as long as you usethe same lender for your new mortgage. Even so, it’s best to avoid aloan with a prepayment penalty.

Refinancing

If you choose a fixed-rate mortgage but interest rates drop, andyou’re not planning to sell your home in the next 18 months, youmay want to look into refinancing. Keep in mind though, thatrefinancing can mean paying additional costs and fees, as well asadditional interest charges.

If you do think about refinancing, call your mortgage lender and askif they agree that it makes sense for you to refinance. Lenders cansometimes fold costs of the refinancing into the amount of the loanso you don’t have to come up with up-front cash. And with thelower interest rate, the money you save versus the money you spend

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to refinance can make it worthwhile. You can also avoid closing costsentirely by accepting a slightly higher interest rate than you wouldbe eligible for by paying fees at closing.

Looking for a mortgage lender

Banks, credit unions, insurance companies and trust companies alloffer mortgages. It pays to shop around for the best rates. You mayfind good rates from smaller banks and credit unions. The largebanks whose names you are probably familiar with tend to offer theleast competitive rates. When looking for lenders, you can do muchof your research online, but also ask your real estate agent for referralsand check your local newspaper or yellow pages to see who your locallenders are. It’s also a good idea to check out potential lenders withthe Better Business Bureau.

Mortgage brokers

Mortgage brokers, who do not make loans themselves, act as interme-diaries and shop around to help you find a loan that fits your needs. A broker can be especially helpful if you have a bad credit rating orlow savings and you’re concerned that your bank may turn you down.Brokers make their money by buying mortgages wholesale fromlenders and marking them up slightly before selling to you (typicallyby .5 to 2 percent of the borrowed amount). Their fee may be in theform of points paid at closing, as an add-on to the interest rate, orboth. If you’re interested in hiring a mortgage broker, find out howmuch commission he or she receives and don’t be afraid to negotiate.

“Some mortgage lenders give you different mortgage payment options.

For example, I opted to pay my mortgage in two payments each month

instead of one. Some lenders charge a fee for this option, but mine

doesn’t. I’m still paying the same amount each month, but because I’m

paying more frequently I end up saving a lot in interest.”

–homebuyer

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Online lenders

Another option is to deal directly with an online lender. With nocommissions to pay or facilities to keep up, online lenders tend tohave fewer expenses than banks or mortgage brokers, and may passsome of those savings along to you. Consider using an online lenderif you know exactly what kind of mortgage you want, your creditrating is good, and you are comfortable doing business online.However, there are some drawbacks to online lenders:

• Lenders may pay to be listed on mortgage sites so may not representthe best deals available.

• An online lender may not understand the local real estate market.

• Sellers may be reluctant to commit to a buyer who is using anonline lender.

If you prefer the reassurance of face-to-face visits and a personalphone number to call, an online lender may not be the best choicefor you. Many local lenders offer the convenience of online applica-tions, but also have an office in the community.

Choosing a mortgage lender

Finding the right mortgage lender is much the same as finding agood real estate agent. You want to find someone you’re comfortablewith and feel you can trust.

• Ask friends, family members, or co-workers for recommendations.

• Search Internet sites to find mortgage lenders who offer the best rates.The real estate sections of many Sunday newspapers also list lendersand their current interest rates but these may be outdated by thetime you see them.

• Do some legwork. Visit a few lenders and see what kinds of mortgagesthey can offer you. An easy way to compare is to request the sametype of loan from several lenders and see what each offers you. Theiranswers to your questions will help you with your decision.

• Don’t be afraid to negotiate. There is nothing inappropriate aboutasking your lender to waive or reduce some of the closing costs or toreduce the number of points you need to pay.

The following questions will help you choose a lender:

• How do I qualify for a loan? The qualifying guidelines may relate toyour income, your employment, your credit history, and more.Before you get too deep into the process, it’s good to know what alender is looking for.

• What is the minimum down payment? Generally, the more moneyyou put down, the lower your monthly payments will be. A downpayment of 20 percent of the purchase price is typical. If you haveless to put down, look for lenders who offer no- or low-down-payment loans.

• How long will it take to process my mortgage application? Expect it totake about 30 days to process your application. However, this willdepend on how quickly the lender can get the property appraised,get a credit report, and verify the information on your application,such as your employment and your financial assets. A shorterprocessing time is preferable because you need to have your loan inhand by closing day.

• Can I lock in the interest rate? Many lenders will allow you to “lockin” the interest rate they quote you for a period of time, often for 60 days without charge. Generally, lenders will offer lower rates forshorter lock-in periods. Locking your rate protects you against risinginterest rates. But it can also work against you if the interest rategoes down. However, many lenders will allow you to re-lock onetime only at a lower rate if the interest rate drops. Find out if thereis a fee for locking in the rate and how long the rate lock lasts.

• Is there a penalty for paying off my loan early? Some lenders penalizeyou for paying off your loan balance faster. The penalty may be apercent of the outstanding balance on your loan. If your loan carriesa prepayment penalty, ask how large it is and whether your lenderwill drop the penalty after you have held the mortgage for a certainnumber of years.

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• Will you come to my home to go over the paperwork or will I be expect-ed to come to your office? Being able to meet with your lender or broker when and where you want can be a huge time-saver duringwhat may be a very hectic and demanding time.

• Will you sell my mortgage to another company? Most lenders sell theirloans on the secondary market because they don’t have the reservesto hold mortgages permanently. It’s good to know beforehandwhether in the future you will be dealing with the company thatinitially issued your mortgage.

Finally, seriously consider hiring a lawyer experienced in real estateto look over your mortgage terms. A real estate mortgage is a verycomplicated transaction. A good lawyer can look out for yourinterests and make sure you are getting the best deal. You can usethe same lawyer to review the purchase and sale agreement andhandle the closing when you find the house you want to buy.

Qualifying for a mortgage

Once you’ve decided what kind of mortgage will work best for you,it’s time to work on the application process. It will help if youunderstand what lenders are looking for in applicants and whatterms like “pre-approval” and “pre-qualification” mean.

What counts when you’re applying for a mortgage?

Lenders look to factors like these when they evaluate yourapplication:

• Credit history. Free reports are available from each of the two main credit bureaus: TransUnion (www.tuc.ca), and Equifax(www.equifax.ca.) Examine your credit report carefully and let thecredit bureau know immediately if there are inaccuracies. Bad creditcould cause you delays or denials in the mortgage process.

• Money saved. This includes investments, chequing accounts, andsavings accounts.

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• Your income, including its stability and potential. Lenders want toknow what you can afford, and also that you’re going to continue tobe able to afford it.

• Bills, debts, and expenses. This includes credit card debt, outstandingeducational loans and car loans, and any other regular expense.

• Your net worth. Net worth is the sum of all your assets minus yourliabilities.

Pre-qualification and pre-approval

Two processes can help you get ready to bid on a home:prequalification and pre-approval. Here are the differences:

• Pre-qualification usually takes place based on an informal conversa-tion with a lender. The lender asks you for information about yourincome and savings, and tells you the amount and kind of mortgagefor which she thinks you might qualify. The lender doesn’t requireverification of the information you provide. If you pre-qualify, thelender isn’t under any obligation to provide you with a loan for thatamount. Lenders don’t usually charge for pre-qualification. Manylenders will allow you to pre-qualify online. This can be a conven-ient way to estimate the amount and type of mortgage you mayqualify for and can guide you toward a realistic price range to focusyour home search.

• Pre-approval is a more detailed and time-consuming process. Thelender verifies your financial information and also considers factorssuch as the likelihood that you will continue to be employed. If youare pre-approved, the lender guarantees you a loan of a certainamount at a certain interest rate. This guarantee applies only to thelender who has pre-approved you. Because some lenders charge forpre-approval, it is important to ask up front about any charges. Apre-approval doesn’t require you to work with a particular lender,but the lender may expect you to. If the lender quotes you a higherinterest rate or lower loan amount than you expected, don’t be afraidto ask for an explanation or to go somewhere else to see if you canget a better deal.

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The real estate agent you work with will probably ask if you are pre-approved for a mortgage and, if so, for how much. This will help theagent know what price range homes to show to you. Knowing thatyou are pre-approved by your lender means more to a seller thanknowing that you are pre-qualified. In fact, many sellers are advisedup front not to accept bids from buyers who haven’t been pre-approved.

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Determiningyour pricerange You know how much a mortgage lender will approve based

on your income, assets, debts, and credit history. But can

you comfortably carry that amount of debt? How much you

can afford to spend and how much you’re eligible to borrow

can be two very different things. Even if a lender has

approved you for a $200,000 loan, the debt may be too

much given all the other costs of buying a home and your

other financial and life goals. Try not to get carried away by

the loan amount your lender quotes you. Instead of thinking

about the great home you can buy with the money, keep in

mind how your mortgage will fit with your other expenses

and how it will affect your savings goals.

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When you’re deciding how much to borrow, it’s important to do themath before you start looking at properties. Take a look at yourfinances, all the costs that will be associated with a home purchase,your short-term and long-term goals, and your comfort level withdebt. Your financial prep work will lead you to the right mortgageand guide you toward a realistic price range within which to focusyour house hunting.

The costs of buying a home

Many of the costs associated with buying your first home are“upfront” costs—costs that you pay one time when you participatein the transaction of buying your home. These usually include adown payment, closing costs, and other fees. Your other major costis the monthly mortgage payment you will make to the bank orother financial institution that holds the mortgage on your home. Ifyou are thinking about buying a condominium or co-op, you needto factor in the monthly fees associated with that kind of ownership,too. You also need to keep maintenance costs in mind. The costs ofreplacing a roof or furnace, paving a driveway, or fixing a leaky pipecan come as a surprise if you’re used to renting.

Up-front costs

For most people, the down payment is the biggest up-front expenserelated to buying a home. But there are other up-front costs toconsider. They include inspection costs, and a variety of closingcosts, including the fees you may need to pay to a real estate agentand lawyer.

The down paymentFor a “conventional” mortgage, you require 25% or more of thepurchase price for a down payment. Most lenders also offer “high-ratio” insured mortgages. These require down payment of between 5to 25 percent of the price of the home you want to buy. High-ratiomortgages are insured by the Canada Mortgage and HousingCorporation (CMHC) or by other privately operated mortgageinsurers. (This insurance is in place to protect the lender against

possible default when there is a smaller amount of equity in thehome. Do not confuse this type of insurance with mortgage lifeinsurance.)

Legal feesLegal fees vary depending on where you live and how much legalwork will be needed to complete your purchase. Ask your lawyerahead of time to provide you with an estimate.

Inspection feesYou can expect to pay between $200 and $900 to have your homeinspected, with the average cost around $350. You may need to payadditional amounts for inspections for things like radon, lead, andtermites. These inspection fees will vary with the type, size, and ageof the property and the region of the country where it’s located. Youshould be able to negotiate a lower sale price if the inspection revealsthe home needs a significant repair.

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Buying real estate with live-in partnersIf you’re unmarried and thinking about buying real estate with a live-in partner—a significantother, relative, or friend—it’s important to get advice from a lawyer familiar with residential realestate partnerships before you put an offer on a home. Your lawyer can help you create adocument that lets you and your live-in partner or partners clarify details such as:

• the appropriate legal form of joint ownership

• who is responsible for what portions of the down payment, closing costs, and mortgagepayments

• any limits or spending requirements related to home maintenance and appliance purchases

• how any profits from a sale would be divided

A lawyer will also help you prepare for the unexpected—for example, what would happen ifyour relationship ends, one of you takes work elsewhere and needs to move, or one of you dies?

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Broker feesBroker fees are negotiable and commission based. If a sale isn’t made,your broker (or real estate agent) doesn’t get paid. The broker’s com-mission is paid by the seller, though some people hire a “buyers’agent” and may pay the commission themselves. Commission ratesvary, but usually range from 4 to 7 percent of the sales price of ahome. Commissions are often folded into the total sale price of ahome, depending on what kind of broker or agent you use. If you areusing a buyer’s agent, be sure to find out ahead of time about his orher commission and when and how it will be paid.

Closing costsBuyers ordinarily need to pay certain costs and fees at the closing of a real estate purchase. Some are required by provincial and locallaws while others are required by the institution that provides yourfinancing. In general, closing costs can add an average of 3 to 5 per-cent of the price of the home to your total costs.

Closing costs can include any or all the following:

• property tax

• appraisal fees

• survey charges

• contract registration

• land transfer tax

• provincial fees

• water and sewage fees

• private mortgage insurance

• homeowner’s insurance

• legal fees

• GST (on new homes, rebates are available on GST)

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Banks are required to tell you ahead of time what they estimateclosing costs will be. Take a close look at the statement of theseclosing costs, and be sure to ask your lender to explain any estimatesthat seem high or inflated to you or any expenses you don’tunderstand.

Hidden costs of home buying

When you’re budgeting for your home purchase, be sure to factor inthe many hidden costs of buying a home.

Moving costsWill you be hiring movers? Leasing a truck? If you don’t have a lotof furniture, you may be able to borrow a friend’s truck and recruitvolunteers to help you move. Treating your friends to pizza at theend of the day will be a lot less expensive than paying a movingcompany to do the work for you. Just be sure to let your friendsknow that you’ll repay the favour should they ever need your help.

Time off from workYou will likely need to take time away from work during the home-buying process. Will you be losing income while you’re at the clos-ing or on moving day? See if you can time your move to a regularday off or use vacation days if necessary.

RepairsIf you buy a fixer-upper, be sure to factor in the cost of any neces-sary repairs. Cosmetic work and remodelling may be able to waituntil you have rebuilt your savings, but some repairs may have to bedone right away, such as replacing a leaky roof.

FurnishingsUnless you’re coming to your first home fully equipped withfurniture and appliances, you will probably have to purchase someessentials. The cost of furnishing a new home can be extremely high,so you’ll probably want to buy used or ask friends and family todonate their unwanted items. Shop at thrift stores and search theclassified ads of your local newspaper or online sites for good dealson used furniture and appliances.

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ReserveIt’s important to plan for a financial emergency. If you or your partnerloses your job, you will still need to pay your mortgage and othercosts. Make sure you have enough money in your savings account tocover at least six months of mortgage payments and other costs.

Monthly mortgage paymentsTo fully understand what owning your own home is likely to cost,you need to estimate your monthly mortgage payment. The amountof your loan, the interest rate, and type of mortgage you receive willaffect your monthly payments. It’s also important to understand thetax advantages of making mortgage payments.

What are interest rates?The interest on your mortgage will affect how much you can spendon a home. Interest rates rise and fall with the economy. As a generalrule, interest rates are low when the economy is slow, and they tendto rise when the economy picks up. When interest rates are low, yourmortgage payments will be lower, and you will have more money tospend on a home. The same is true in reverse when interest rates arehigh. A housing bubble, which occurs when the price of homesincreases sharply by the expectation that prices will continue to rise,may be further fuelled by low interest rates. Conversely, a rise ininterest rates may coincide with a drop in both demand and prices.

Because it’s difficult to predict what interest rates will do, it’s unrealis-tic to try to time your purchase to a drop in interest rates. You canlock in an interest rate for a brief period, but most lenders will do thisonly if you have already made an offer on a home and have had itappraised. If you take out a fixed-rate mortgage at a high interest rateand in a few years rates drop, then you might consider refinancingyour home loan at the lower rate. When you refinance, you will payclosing costs. Therefore, it only makes sense to refinance if you plan tostay in the home long enough to recoup the cost of refinancing.

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Estimating your mortgage paymentsHow do you know if you can afford a home with an asking price of$250,000? You can use the chart on the following page to determinewhat your monthly mortgage payment would be.

First, choose an interest rate from the chart. Then multiply the sizeof your mortgage in thousands by the figure in the MortgageAmortization column. For example, if you assume a 6% interest rateon a 25 year mortgage of $200,000 (assuming you made a $50,000down payment on the $250,000 home), your monthly paymentswould be $1,288. (Multiply 200 by 6.44.) For that same interestrate with a 15-year amortization the monthly payments would be$1,688. (Multiply 200 by 8.44.)

4.00% 10.12 7.40 6.06 5.28

4.50% 10.36 7.65 6.33 5.56

5.00% 10.61 7.91 6.60 5.85

5.50% 10.85 8.17 6.88 6.14

6.00% 11.10 8.44 7.16 6.44

6.50% 11.35 8.71 7.46 6.75

7.00% 11.61 8.99 7.75 7.07

7.50% 11.87 9.27 8.06 7.39

8.00% 12.13 9.56 8.36 7.72

8.50% 12.40 9.85 8.68 8.05

9.00% 12.67 10.14 9.00 8.39

9.50% 12.94 10.44 9.32 8.74

10.00% 13.22 10.75 9.65 9.09

MORTGAGE AMORTIZATION (YEARS)INTEREST

RATE 10 15 20 25

If you’re renting an apartment or a house right now, what you payeach month for rent will give you some idea of what you can affordto pay for monthly mortgage payments. But you need to factor intotal costs of owning your own home before you can have a clearunderstanding of what you will actually pay each month if you havea mortgage. (Keep in mind the above table does not include propertytaxes or utilities.)

Many Web sites offer online mortgage calculators to help youdetermine how much you can afford. Go to your favourite searchengine and search for “mortgage calculator,” or go to the CMHCsite (www.cmhc.ca) and check their selection of calculators andchecklists.

Condominium and co-op fees

If you’re considering a condo or co-op, find out if you will need topay extra fees such as homeowners’ association dues and maintenancefees, or if you will need to buy additional insurance. Condominiumassociations, for example, often include homeowners’ insurance intheir fees, but encourage additional insurance to cover personalbelongings and the inside of the unit, including interior walls, built-ins, fixtures, and appliances.

Maintenance costs

Estimating maintenance costs can be difficult, but it’s a good idea toassume that at some point you will have to fix a leaky roof, repair thegarage door, or replace the furnace. And don’t assume that mainte-nance costs only apply to single-family or multifamily homes. Somecondo associations may also charge all property owners additionalfees to help cover the costs of large renovations, repairs, or mainte-nance projects anywhere within the association. When estimatinghow much you can afford for monthly mortgage payments, makesure you leave yourself enough room to pay for emergency repairs.

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Assessing yourfinancial andlife goals

Now that you know how much home ownership could cost

you every month, you can examine how owning a home—

and the debt you incur—will affect your long-term and

short-term financial and life goals. This information can help

you make a better decision about what price range you

should be considering.

Assessing your financial situation

Writing down your financial goals can help clarify your thinking.For example, is one of your goals to save for retirement? Is payingoff credit card debt or education loans important to you? Do youneed to buy a new car soon? Are you saving for a wedding? Howwill your monthly mortgage payments affect your financial plans?

Categorize your financial goals into one-year goals, three- to five-year goals, ten-year goals, and so on. Try describing your financialgoals on the following worksheet. It can help you keep yourpriorities in mind.

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TIME FRAME

Goal 1

Goal 2

Goal 3

Goal 4

Financial goals worksheet

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TIME FRAME

Goal 5

Goal 6

Goal 7

Goal 8

Goal 9

Financial goals worksheet (continued)

Assessing other life goals

It’s important to think about other life goals, too. For example, doyou plan to move any time soon? Most financial experts agree thatin order to get a return on your investment, it’s best to own yourhome for a minimum of three to five years before you sell it. Areyou planning to start a family? To have more children? Do you hopeto have room for an older relative to live with you?

When looking at your goals, think ahead to their possible financialimpact. Buying a home may figure prominently in some of yourplans, but if you choose the wrong size, location, or price, yourhome may actually make it harder for you to reach your goals. Forexample, if you plan to start a family will you or your partner reduceyour working hours or leave your job to be home with the children?A house that seems affordable now may become a financial burden ifyour household income changes. Conversely, if you buy a home thatjust meets your needs now, you may find it to be too small in a fewyears. If the housing market is strong, you’ll probably be able totrade up to a roomier home. If the market is soft with no signs ofpicking up, you might want to investigate ways to spend a littlemore on a home you can live in comfortably for many years, espe-cially if you expect your household income will rise.

As with the financial goals worksheet, include a time frame for eachgoal (one-year, three- to five-year, ten-year, and so on) and describehem on the following worksheet. Note how your progress towardeach goal may affect your income.

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TIME FRAME

Goal 1

Goal 2

Goal 3

Goal 4

Goal 5

Goal 6

Goal 7

Goal 8

Goal 9

Life goals worksheet

If your cash is limited

Even if you’re low on cash, buying a home may not be an unrealisticgoal. You might want to:

• Consider low-down-payment loans. As mentioned previously, CMHCand other private mortgage insurance is available for “high-ratio”mortgages. To protect themselves against you possibly defaulting onyour mortgage, your lender will require you to buy mortgage insur-ance until you have 25 percent equity in your home.

• Look for a less expensive home. If you have your eye on a $300,000home, but only have $15,000 (or 5 percent) saved for a downpayment, consider lowering your expectations and looking for alower-priced home. Instead of scraping together more money tomake a 25 percent down payment or buying the mortgage insuranceyou’ll need for a down payment of less than 25 percent, rethinkwhat you really need in your first home. If you find a home for$200,000, for example, you need to save another $35,000 tocontribute to the 25 percent down payment. This may seem steep,but you will be saving mortgage insurance and interest costs in thelong run.

• Think about asking your family for help. Sometimes parents, grand-parents, or other relatives of first-time homebuyers are in a positionto contribute to a down payment or closing costs for a first home. Insome cases it can benefit them financially, too.

• Access retirement accounts. First-time homebuyers are allowed to makepenalty-free withdrawals from their RRSP for a first-time homepurchase—up to a maximum of $20,000. But be aware that eventhough the withdrawals are tax free, you must repay the amountsover a period of no more than 15 years. If you fail to make therequired payments, the amount will be taxable to you for the yearthe payment is missed.

Further details are available at the Canada Revenue Agency (CRA)Web site: www.cra-arc.gc.ca/tax/individuals/topics/rrsp/hbp/menu-e.html

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• Make an aggressive savings plan. Look for ways to cut down onspending and save more money. Think about setting up a directdeposit from your paycheque into your savings account. Talk with a financial adviser about short-term investing options like mutualfunds.

• Negotiate the best possible deal on your loan. Your loan officer ormortgage broker may have some room to negotiate on the terms ofyour loan. Loans usually have built in “overages”—the differencebetween the lowest price of the mortgage and what you agree to pay.The lender or broker gets to keep this. Ask for a breakdown of all ofyour loan costs including fees and interest rates. Then ask yourlender or broker to waive or reduce some of the fees or costs. If youdo this, make sure your lender doesn’t raise other fees or costs.

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Your home search

Once you have an understanding of what you can afford to

pay and how mortgages generally work, you’ll know your

price range. Now it’s time to evaluate the current housing

market and begin your search for the right home. You will

want to look through newspaper and online real estate

listings. Visit a variety of neighbourhoods and imagine

yourself living there. Finally, choose a real estate agent who

will help you through the process.

Home ownership and the current housing market

The real estate market may be strong, weak, or somewhere in themiddle depending on where you are looking. If homes sell quicklyand for top prices, the real estate market is strong, or “hot.” Ifhomes linger on the market for months before being sold—or don’tsell at all—then the market is weak, or “soft.” The housing marketin your area will not only dictate how much you pay for a home andwhat kind of selection you have to choose from, it could affect yourfuture plans. The real estate market follows the rules of supply anddemand. Fewer homes for sale generally mean the ones that do goon the market will fetch higher prices. In a soft market, there aremore homes for sale than there are buyers. You’ll have a widerselection of homes to choose from and the asking prices will belower than in a tight housing market. This is good news for you as afirst-time buyer since you don’t have to worry about selling a homebefore buying a new one. You may be able to get a good deal. Justkeep in mind that a soft market may work against you if you plan tosell your home within a few years, either to trade up to a largerhome or because you expect to relocate.

When setting out on your home search, consider how the currenthousing market may affect your immediate plans as well as yourlong-term goals. You probably already have a feel for the typicalselling price of homes in your area. But it’s a good idea to talk withreal estate agents, friends, co-workers, and anybody else you knowwho has recently bought or sold a home. Browse the newspaperlistings and look at houses and condominiums on the Web sites ofreal estate agencies and other realty Web sites, (such as www.mls.ca)which allow you to look up the market value of specific addressesand track change in the value. Over time, and as you actually viewproperties, you will get a good sense of the housing market in yourcommunity and how it might affect your decision.

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Choosing a real estate agent

A real estate agent or broker is licensed by a licensing body torepresent sellers or buyers of real estate. (If a real estate agent isn’toperating as an independent broker, then he or she reports to one.An agent has a “salesperson’s license,” which requires working for abroker. A broker’s license allows one to choose between operatingindependently or working for another broker.)

Licensed real estate agents must adhere to provincial laws. Realtorsbelong to various real estate associations across the county. Member-ship in these organizations is important to members and consumeralike. All members of the Canadian Real Estate Association (CREA),along with their provincial counterparts and local real estate boardssubscribe to the CREA Code of Ethics and Standards of BusinessPractice, which sets the standard for what is considered ethical andacceptable behaviour and methods of doing business for members.The Code of Ethics and Standards of Business Standards is strictlyenforced.

Your real estate agent is the person who is going to help you find the home you want and work to negotiate a deal on your behalf.You want someone who is honest, reliable, and has your bestinterests in mind.

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Appreciation is the increase in the value of a home over time. When the housing market isstrong, houses sell easily and resale values go up in a relatively short period of time. Of course,no one can predict what the economy or the housing market will do. Typically, though, housesdo appreciate over time. Here’s an example:

Assuming an average 4 percent annual appreciation rate, if you invested a $10,000 downpayment in a $100,000 home, your mortgage would be $90,000. After 10 years, your home’svalue would have increased to $148,000. If you subtract the balance of what you still owe onthe mortgage, which is about $68,500, you’ll see that your original investment of $10,000 hasgrown to a whopping $79,500 in home equity.

What is appreciation?

There are several ways to go about finding an agent. You can:

• Get referrals from friends or relatives.

• Check to see if your employer has a relocation service that you might beable to consult for recommendations.

• Talk to agents working at open houses. This can be especially helpful ifthe open houses are in the neighbourhoods you’re interested in.

You want to feel as comfortable as you can about your agent’sexperience, skills, and way of dealing with people. Before you settleon an agent, interview several and keep the following in mind:

• Ask for references from buyers, not sellers. Call buyers who during thepast year bought homes similar to the one you want. Ask the agentfor a list of references, but also poll family, friends, and co-workersfor the names of people who recently bought homes. Ask how theagent was to work with; whether the agent was available wheneverthey had a question or wanted to look at a home; whether they feltthe agent was up front and truthful; and whether they were satisfiedthat the agent helped them get a good deal on a home.

• Find out whom your agent is representing. Is it you? The seller? Both?Unless you are working with a buyer’s agent, the agent will be repre-senting the seller. The agent should tell you this from the beginning.Most provincial legislation requires dual agents to disclose this factup front. Decide whether you are comfortable working with anagent who also represents the seller.

• Make sure you agree with and understand any document your agent asksyou to sign. For example, some agents may ask you to sign an exclu-sivity agreement that says you will only work with them.

• After you’ve discussed what you’re looking for, ask a prospective agent tosum up what your needs are. This will head off any misunderstand-ings and reassure you that you communicated your needs and wantsclearly.

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• Find out how many clients an agent is serving and if the agent willhave enough time to fit you into his or her schedule. You want tomake sure your business is a priority.

• Ask yourself if you feel comfortable with the agent. Is the agent pushy?Did you feel intimidated or uncomfortable asking questions?

• Make sure your agent is familiar with the towns and areas you’reinterested in. Choose an agent who understands the local market,laws, and restrictions in the areas where you want to live.

Check out the Canadian Real Estate Association Web site(www.crea.ca) for more information.

In addition to being helpful, informative, and friendly, your agentshould listen to you and be proactive about finding what you’relooking for. Good agents will screen listings and weed out ones thatdon’t fall within your price range or don’t offer what you want orneed in a home. Good agents will also follow through with details,keep you informed of next steps, and keep the whole processrunning smoothly. Instead of just asking you what kind of home orneighbourhood you’re looking for, an agent should be willing tohelp you prioritize and to work through the decision-making processwith you.

Having an agent doesn’t mean you should stop educating yourself orlooking for homes on your own. Read the real estate section of yourlocal paper. Don’t just look at the listings—read the articles, too.This is often a good way to find out about any local programs orsubsidies your city or province might offer to homebuyers. Be sureto keep your eye out for open houses you might be interested in,and let your agent know if you find something you’d like to see.

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Types of agents

If you find an agent you like, make sure you understand if he or sheis a:

• Buyer’s agent, who works only for the buyer.

• Seller’s agent, who works only for the person selling the home, eventhough the agent’s commission may come out of your pocket. Keepin mind that because they are working for the seller, seller’s agentsaren’t obligated to get you the best deal.

• Dual agent, working with a dual agency that represents both buyersand sellers. Working with a dual agency doesn’t necessarily meanthat the same agent will represent the buyer and seller at the sametime, but it does mean that both agents work for the same company.Dual agency can create a conflict of interest for the agents, and youshould be clear about whom your agent is working for from thebeginning.

Working directly with a seller’s agentWhat happens if you find a home on your own and not throughyour agent? Can you approach the seller’s agent directly with a bid?This is an option, and one that some seller’s agents prefer because ifthe deal goes through they don’t have to share their commissionwith a buyer’s agent. But keep in mind that the seller’s agent worksin the best interests of the seller, not the buyer. It may seem to be,and can end up being, a less complicated way to buy, since you’restreamlining the process by involving only one broker. But makesure you look out for your own interests, and ask questions if youdon’t understand something. Since you don’t have an agent repre-senting your best interests, you have to make sure you’re doing thaton your own.

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How your real estate agent gets paid

An agent’s commission often ranges from 3 to 7 percent of a home’ssale price. This percentage is negotiated ahead of time between theseller and the seller’s agent. Technically, the seller pays an agent’scommission. But since the commission is usually factored in as partof the sales price of the home, the funds end up coming out of boththe buyer’s and seller’s pockets. Usually, your agent and the seller’sagent will split the commission. If you work directly with the seller’sagent for the home you end up buying, the seller’s agent receives theentire commission. (Agents who work for brokers split a portion ofthe commission with the broker.)

The bottom line is this: If the home doesn’t sell, the agents don’tmake any money. Beware of agents who try to rush you or whopressure you to close the sale as fast as possible. They are looking out for their own pockets and not your best interests.

Buying without an agent

You may know someone who purchased a home directly from anowner without using an agent. A home for sale by owner (FSBO)may be offered at a considerably lower price, since the owner doesn’thave to pay a commission to an agent. But there are risks involvedwhen buying directly from an owner—you are responsible for detailsthat an agent usually takes care of. These can include:

• estimating the market value of the home

• negotiations of the sale price and contingencies

• preparation of documents

• seller disclosures, including any “hidden defects”

• establishing trust accounts

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“Our broker was great and supplied us with listings of new homes every

week. But it got really overwhelming. So my partner and I decided to

take turns so we could give each other a break. One week it was her

turn to check out the listings—the next it was mine. If we found some-

thing we really liked, we’d go back together.”

–homebuyer

Consider the risks carefully. Even if you save money because anagent isn’t involved, there may be other costs and tasks you haven’tanticipated, such as securing homeowners’ insurance. And the timeyou will spend on the details that are usually handled by an agentmay be considerable. If you do decide to buy without an agent, it’salways a good idea to hire a lawyer to review any documents beforeyou go through with the transaction.

Investigating homes and communities

Looking at neighbourhoods and homes and imagining yourself livingthere are among the most exciting parts of the home-buying process.This stage can also be overwhelming and frustrating. You may fall inlove with a place only to have somebody else snap it up first. Be pre-pared for disappointments and, most important, keep a level head. It’svery easy to get caught up in a bidding war and offer more than youplanned. It’s also common, especially when the market is hot, to feelthat you need to act fast or risk being locked out of the housing mar-ket forever. While it’s true that you should be prepared to act quicklywhen you find a home that meets your criteria, you’ll avoid an expen-sive mistake if you do your research ahead of time and bid only on thehomes that you feel confident about. Remember, too, to be patient. Itcan take months of looking before you find the right home.

Learning about the community

Before you start looking at homes, think carefully about where youwant to live. It’s important to think about the influence that yourchoice of neighbourhood will have on your life—and your family’slife, too. Keep your future needs in mind. Schools may not be anissue if you don’t have children, but may be in the future if youdecide to start a family. The commute may be fine for your job now,but if you plan to transfer to a different office farther away, be sureto factor that into your search. The program that provided thisbooklet may be able to provide information and resources about theneighbourhoods you are considering.

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Questions to ask yourself as you start researching• What will your commute to work be like? Will you need to spend

more to get to work? Think about the costs of gas, wear and tear onyour car, or the costs of monthly train or bus passes.

• How much are the taxes? Property taxes differ form region to region.You can check with your local municipal tax assessor for taxinformation on a particular property, often for free. You can alsocontact a lawyer to find out how much you’d be paying in your newneighbourhood.

• What kind of neighbourhood do you want? Are you looking in a ruralor urban area? Does proximity to places like work, religious organi-zations or cultural centers, shopping, or major highways or streetsmatter to you? Are you looking for somewhere quiet or lively? Doyou want a neighbourhood that has lots of young people or youngfamilies, or a more mixed group of residents?

• Should you consider school systems? If you already have children, or areplanning to start a family in the home you will buy, this will proba-bly be a big influence on your choice of town or neighbourhood. But even if you don’t have children and don’t plan on becoming aparent, a good school system is important because it will often helpthe resale value of a home.

Ways to learn about a new community• Read the local newspaper in the community where you plan to buy a

home. You will get a sense for local politics, whether crime is anissue, what the schools are like, and more. If you live outside thearea where you want to buy a home, you will probably be able tofind the newspaper online. The Web site www.newsvoyager.comincludes links to community newspapers nationwide. Or you cansubscribe to the print version of the local paper and have it deliveredto your home.

• Spend some time in the community. Go shopping at local stores, have lunch at a local restaurant. Visit the library, health club, artgalleries—whatever you may be interested in—so that you get a feelfor what it would be like to live there.

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• Are the majority of homes occupied by the owners? A neighbourhood ofprimarily owner-occupied homes is a plus. People who live in theirown homes tend to take better care of their property and move lessoften than do people who rent. You can find statistics for owner-occupied homes at www.homefair.com.

• Look at crime statistics. You can also find crime statistics for communities across the country at the Statistics Canada Web site(www.statcan.ca) or through the RCMP or local police.

• Find out about the school system. Contact the local school divisionabout the school district. If you live close enough, you might wantto attend meetings of the local school committee or parent-teacherorganizations, especially if you have children who will be attendingthe school. You can get a lot of good information from talking withparents and school staff. Learn when and where meetings are held bycalling the school administration office.

• Visit the city or town planner’s office. Find out whether any large residential or commercial developments are in the works that maychange the character of the community. Narrowing your searchWhen you find a neighbourhood that seems to fit your criteria, visitat different times. Drive or walk through on a Saturday afternoon.Check it out during rush hour in the morning and evening. Get afeel for how quiet it is at night. Remember, you’ll be living therearound the clock.

• Are the homes in the neighbourhood well kept? Peeling paint, overgrownlawns, and other eyesores may be a sign that the neighbourhood is indecline. A neighbourhood that shows “pride of ownership” is onewhere homeowners take care of their property and enjoy living there.

• Do people seem friendly? Strike up a conversation with the people yousee and ask them about the area.

• Are homes being remodeled or built? Home improvement and buildingprojects are a sign that people are investing in their homes and, byextension, the neighbourhood.

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• Are there a lot of children around? If you don’t have children or don’tplan to have children, you may want to look for a quieter place to live.

• What is the surrounding area like? Take different routes to and fromyour community to get a feel for what the rest of the area is like.What types of businesses are nearby? Are there recreational areasclose by?

What kind of home should you buy?

By far the most popular home is the detached, single-family house,but that doesn’t necessarily mean that is the right home for you. Acondominium, multifamily, even a home in a gated community mayfit better with your lifestyle. Look at different types of homes andget a feel for the style you prefer by visiting open houses.

Single-family detached houseWhen considering whether to buy a single-family house, keep thefollowing points in mind:

• They’re easier to sell. A detached single-family house remains the mostpopular, which makes them easier to sell than any other type of home.

• They give you relative freedom and control over your environment. Aslong as you adhere to local zoning laws and building regulations,you are free to paint your house any color you want, landscape theyard as you wish, add a pool, or remodel the interior. There is nohomeowners’ association to restrict what you do with your home.

• You alone are responsible for upkeep and maintenance. Before buying a house, make sure you will be able to manage the yard work andmaintenance on the home. That large maple tree in the front yardmay provide welcome shade in the summer, but are you prepared torake up its leaves every year in the fall?

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Multifamily homeA multifamily home consists of two or more units. They may bemore expensive than single-family homes, but buyers typically getapproved for a bigger mortgage because of the potential for rentalincome. They also may be a way into the housing market for firsttime buyers. Often, buyers will purchase a two-family house jointly,usually with a relative who lives in one unit. Or they will live in oneunit while renting out the other. If you are thinking of buying amultifamily with a friend or relative, be sure to answer the followingquestions first:

• Who will be responsible for shared spaces? How will the yard work bedivided? If there is a shared driveway, who will make sure it isploughed in the winter?

• How will you work out shared costs? You should agree on how youwill contribute financially to landscaping, repairs, and exterior workon the house, such as painting or repairing the roof.

• What if one of you moves? Will the other have a say in who buys thevacant unit?

It’s a good idea to work with a lawyer who can help you anticipatewhat issues may arise and who will draft a legal agreement that willprotect both of you.

If you are thinking of purchasing a multifamily on your own andrenting out the vacant units, keep the following in mind:

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• You may qualify for a larger loan than if you were buying a singlefamily home. That’s because lenders may consider the potential rentalincome when deciding how much mortgage to give you.

• Your rental income will help defray the cost of paying off your mortgage.

• As a landlord, you are obligated to be timely with repairs and mainte-nance. Being a landlord is like running a small business. You will beresponsible for upkeep, maintenance, and repairs. If you can’t do thework yourself, you will need to hire contractors to do it for you. Thecosts of labour and material can quickly add up.

• You will need to keep the units occupied. The rent you collect will helpyou pay off your mortgage, so it’s important to have regular tenants.Experts recommend underestimating your monthly rental income by10 percent in case you unexpectedly lose a tenant. It’s also a goodidea to keep a contingency fund to cover three months of your oper-ating expenses.

• Finding good tenants may not always be easy. Before renting to aprospective tenant, be sure to check the applicant’s credit history,income, rent-payment history, and references. And because you willbe living so closely to one another, look for someone whom you willget along with.

• You will have to deal with potential tenant issues, including disputes,non-payment of rent, property damage, and finding new tenants

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when old ones decide to move out. Landlords must also follow thelaw when it comes to selecting tenants and collecting rent.

• Being a landlord will have an impact on your lifestyle. There may beissues of noise and parking to sort out. If you have more than onerental unit in your home, you may find yourself responsible for rela-tions between your tenants. You may find yourself spending yourfree time making repairs or preparing units for new tenants.

• A multifamily may not be as easy to sell as a single-family home. Singlefamily homes sell faster (and usually for higher prices) than othertypes of housing. So, when considering whether to buy a multifami-ly, research the market for that type of housing in your communityand how that may affect your future plans.

It’s important to get good legal advice before buying a multifamilyhome. As a landlord, you will be entering into a legal relationshipwith your tenants, so it’s vital that you know your local lawsgoverning landlord-tenant relationships. Look for a lawyer who iswell versed in the law and landlord-tenant responsibilities beforemaking the decision to buy a multifamily home.

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CondominiumIn some parts of the country, condominiums can be a good way toget into the housing market. Condominiums are a form of sharedownership. You own an individual unit in a building, but you sharethe maintenance of the entire building and property with the otherunit owners. You also pay an additional regular fee—usuallymonthly—to the condominium homeowners’ association. Becauseyou’re sharing certain expenses with other co-owners of the property,condos can often be more affordable than other kinds of homes.

If you are thinking about buying a condominium, keep thefollowing points in mind:

• You are automatically made part of a homeowners’ association when youbuy your condominium. You can tell a good deal about a condomini-um complex from the homeowners’ association meetings. Ask toreview notes from the last meeting. Look for any complaints by resi-dents or reports of upcoming projects.

• Ask what your homeowners’ association dues cover. In addition to nor-mal maintenance fees, a portion of the dues should be put intoreserve for repairs and replacements, like fixing a leaky roof or a newexterior paint job. You should receive the complex’s operating budgetto review as part of the purchase process. Review this document

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carefully before you make an offer. Experts recommend that 3 to 5percent of the total operating budget be set aside for predictablerepairs and replacements. If the reserve fund is too low, you could behit with additional expenses in the future.

• Find out what the required homeowners’ insurance covers. Ordinarily,the insurance covers the exterior of the complex such as the roof,foundation, and grounds. If this is the case, you may want toconsider additional insurance to cover your personal belongings aswell as the inside of your unit.

• Your condominium could offer less privacy than a detached house. Askto view the condo in the evening or on a weekend, when morepeople are likely to be in the building. Are the walls solid enough tobaffle noise?

• Some condominium associations can be extremely restrictive. Therestrictions can range from what kind of window treatments you canuse, to what kind of pets you may have, to the conditions underwhich you may be allowed to rent out your unit. Carefully examinethe association’s bylaws before you buy. If you don’t understandsomething, ask a real estate lawyer to review it with you.

In some cases, multifamily homes are sold as condo units. Becausethere are usually a smaller number of units involved, this issometimes a more informal kind of arrangement than participatingin a large condominium complex. Nevertheless, you still need to doyour homework ahead of time. If you are considering buying a “halfhouse,” also called a duplex condo, or one unit of a multifamilyunit, talk to the renters or owners with whom you’ll be sharing thehome. Find out how long they’ve lived there, if they’re planning tostay, and if they have any plans for the home or grounds like anexternal paint job or landscaping. Be sure to agree ahead of timehow you’ll divide up the expenses. For example, you may agree thatinstead of establishing a reserve fund, you will split the cost of therepairs as they happen. Agreements like these should, of course,always be in writing.

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Planned or gated communityYou may find both detached and attached homes in planned com-munities. These are neighbourhoods built from the ground up bydevelopers. Some planned communities are called “gated communi-ties” because there is a guard station or keyed security system at theentrance. Residents own their own homes, but share ownership ofcommon areas, such as playgrounds, lawns, and in some cases, eventhe roads. As with a condominium, shared ownership is through ahomeowners’ association.

If you are thinking of buying a home in a planned or gatedcommunity, keep the following in mind:

• You will enjoy a sense of safety and security. If you live in a gated com-munity, most of the people who come through your neighbourhoodwill live there. Just be aware that the gates don’t guarantee your safety.

• Planned communities are generally quiet. You’re not likely to have alot of traffic through your neighbourhood, and it will probably belocated away from busy commercial centers.

• You will have access to amenities. A planned community may includefeatures that you wouldn’t be able to afford on your own, such asswimming pools and tennis courts. There also may be playgrounds,dog parks, and other recreational areas.

• As with a condominium, you will pay a monthly fee to a homeowners’ asso-ciation. These fees pay for the upkeep and maintenance of the propertyand other costs. As with a condominium, find out what your duescover and check to see that the operating budget is well managed.

• There may be restrictions on your property. Your homeowners’ associationmay have rules about what color you may paint your house, how youlandscape your yard, even whether you can hang wind chimes. Makesure you’re comfortable with these restrictions before you buy a home.

• A home in a planned or gated community is likely to cost more than thesame house in a traditional neighbourhood. The features that make aplanned or gated community attractive—safety, security, amenities—also contribute to their higher cost.

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Fixer-uppersYou may be able to negotiate a good price on a home that needswork. However, make sure the home is still a good deal after youfactor in the cost of repairs and remodelling. Keep the followingpoints in mind if you’re considering buying a house that needs work:

• You may be living in a home that feels like a construction site. Considera fixer-upper if you don’t mind living in a home that either is under-going or is in need of renovation. Be prepared for the work to takelonger than you expect.

• You may live in the house for years before it’s fixed up to your satisfac-tion. Can you wait a few years for that second bathroom? Will itbother you to prepare meals in the tiny, dark kitchen until you savethe money to remodel? Remember, you will be living in the home;you should be relatively happy living in it from the beginning.

• If you are handy and can do the work yourself, you should also want todo the work. Make sure you not only have the time to do the work,but that you won’t mind working on your home during time offfrom your job, such as on weekends and vacations.

• Hire an architect or general contractor if your home inspector recom-mends this. A professional who can spot structural problems will helpyou avoid expensive surprises and may give you a rough estimate ofhow much work your home will need as well and how much thework will cost.

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1. The community or neighbourhood where I want to live:

(first choice) ______________________________________________________________________________________

(second choice) ______________________________________________________________________

(third choice) __________________________________________________________________________

2. My price range is $ ____________________________ to $ __________________________________

3. Minimum square footage of a home __________________________________________________

4. Lot size minimum __________________________________________________________________

5. Minimum number of bedrooms ____________________________________________________________

6. Minimum number of baths ______________________________________________________________

Use this checklist to narrow down the homes you are willing to look at.

Must-haves in a community

(check all that apply)

❑ Access to public transportation

❑ Parks, playgrounds nearby

❑ Walking distance to stores and services

❑ Sidewalks

❑ Good cell phone coverage

❑ Quiet neighbourhoods

❑ Good schools

❑ Trash removal

❑ Recycling

❑ ______________________________________

❑ ______________________________________

❑ ______________________________________

❑ ______________________________________

❑ ______________________________________

Must-haves in a home

(check all that apply)

❑ Room for pets or other animals

❑ Out-building such as a shed or a barn

❑ Garage

❑ Lots of natural light

❑ Central air conditioning

❑ In-home office space

❑ One-floor living

❑ Yard

❑ ______________________________________

❑ ______________________________________

❑ ______________________________________

❑ ______________________________________

❑ ______________________________________

❑ ______________________________________

HOME WISH LIST

Learning more

When you know what type of home to buy, visit as many in thiscategory as possible. Try to look at a dozen or so homes in you pricerange in the area where you want to live. You will learn what youlike and dislike, and you’ll learn to recognize a fair asking price. Youwill also learn about different styles of homes, such as ranch houses,bungalows, capes, and colonials, what type of floor plan you prefer,and which will best fit your lifestyle and needs. As you look atproperties, think about what is important to you. If natural light isimportant, look for plenty of windows and southern exposure. Isthere street-level access to the home? That will be important if youhave friends or family who cannot climb stairs. Train yourself tolook for the features that will affect your quality of life in the home.The wish list on the previous page can help you with this process.

Here are some starting points for your home search:

• Get on the multiple listing service (MLS). You can usually do thisthrough a real estate agent. It allows you to receive daily listings viafax or e-mail of homes that fit your specified criteria.

• Take tours. Your real estate agent should set up home viewings foryou. But you should also keep your eye out for open houses, whichare usually held on the weekends. Save the sell sheet you’re given. Itwill include details that you might want to look at later, like the ask-ing price, interior and exterior features, and property tax informa-tion. Also take notes about each home—they will begin to blendtogether. Be careful not to reveal anything to the agent hosting theopen house that could hurt your chance of getting a good deal.Remember, many agents work for the seller.

• Check online listings. Many Web sites offer real estate listings and thesites of individual brokers. Many of these Web sites offer details ofthe property, including number of bedrooms and the dimensions ofthe rooms, the number of bathrooms, the lot size, the year the homewas built, and amenities, such as swimming pools. Often, real estateWeb sites will feature interior and exterior photos and virtual toursthat give 360-degree views of the rooms and property.

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• Check newspaper listings. Try to get into the habit of checking outdaily or weekly newspapers in your community or neighbouringcommunities you’d like to explore.

Open houses

Visit as many homes for sale as possible to get a sense of what isavailable in your price range, which features you like, and whichones you don’t care for. Bring a notebook with you when you visitproperties for sale and take lots of notes. Jot down any features youfind especially desirable, such as a porch, a deck, hardwood floors, ora fireplace, and write down your overall impression about the home.Take home a copy of the fact sheet most real estate agents provideand keep this with your notes. When touring homes, take note ofthe following:

Exterior

• Is the yard well kept? If not, will you be able to fix it up yourself orhire someone to do it for you? If the lot is large, will you have thetime and the desire to maintain it?

• What type of siding and trim is on the home? Wood siding and trimrequires more maintenance than other types, such as brick, vinyl,and metal.

• If there is a driveway, will it accommodate more than one car? If not,will you be able to park a second car on the street?

• How big is the garage? Even if you only have one car, a two-cargarage will give you storage space for yard tools and other items.

• Is the home higher or lower than street level? A home that sits abovestreet level is likely to have better drainage than one below streetlevel. A steep driveway leading up or down to a house is considereda negative.

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Interior

• Are there water stains on ceilings or in the basement? If so, this mayindicate a leaky roof, ice damming issues, or flooding problems.

• Is mold visible in the bathrooms, basement, or elsewhere? Mold mayindicate a moisture problem and can cause extensive damage.

• Are there cracks in the walls or ceilings? Small cracks near the cornersare normal. Larger ones wider than one-sixteenth of an inch mayreveal structural problems.

• Do windows and doors close properly? If there are glass sliders, checkthat these glide smoothly along their tracks.

• Is the lighting adequate? Lighting in the kitchen and bathroomshould be adequate, but also take note of the natural lighting. Youmay find yourself avoiding rooms that are dark, even in the daytime.

• Are there enough kitchen cabinets? Think of your future needs. If youplan on having children, will the kitchen storage space be adequate?

• Is there enough storage space? Is there a closet in each bedroom? A coatcloset? A linen closet for sheets and towels? Is there storage space inan attic or basement? Will the storage space still be adequate in fiveor 10 years as you accumulate more possessions and your familychanges?

Plumbing, electrical, and heating systems

• Is there adequate water pressure? Flush toilets and turn on the bath-room faucet at the same time. The water should continue to flow.

• Are there ground fault interrupter (GFI) outlets near the kitchen andbathroom sinks? These cut the power if an electrical appliance comesin contact with water.

• How is the home heated? Does it use oil, natural gas, electric, orpropane? How much does it cost to heat the home in a typical year?Find out how old the furnace is. Furnaces have become more fuel-efficient in the last decade or so; a newer furnace may save youmoney on heating costs.

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• Does the home have zoned heat? Heating areas with separately con-trolled thermostats will save you money by allowing you to run theheat only where you need it.

• Where are the washer/dryer hookups? If they are in the basement, areyou prepared to carry laundry up and down the stairs?

• Is the electrical service adequate? You’ll need at least a 200-amp circuitto accommodate modern appliances. Older homes may have only 60or 100 amps. It can cost thousands of dollars to upgrade the electri-cal system.

• Is there municipal water or is there a well? If municipal, find out thecost of a typical water bill. If there is a well, expect maintenancecosts. Before buying a home with a well, have it inspected by a pro-fessional to make sure it produces sufficient water and that yourwater supply is free of contaminants.

• Is there municipal sewage or a septic system? A septic system must becleaned every one to five years depending on use, and be certified tolocal regulations.

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Making an offer and closing the saleOnce you find a home you want, with an asking price that

falls within your price range, the next step is to make a bid

(also called a purchase offer). But before you make your

official offer, you’ll want to make sure that it’s reasonable

and smart. Doing some research before you make your

purchase offer, hiring a lawyer or having your agent help

you with the contract and paperwork related to the offer

and the closing, and arranging for a home inspection are all

necessary steps to take as you approach a closing date.

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Keeping your emotions in check

Making an offer on a home is a big step in the home-buying process.How will you know when you’re ready to make an offer? Hopefully,you will find a home that you feel good about, that meets your criteria,and that is priced fairly and within your budget. It’s important to besure that you’re not making an offer because you feel pressured. Beforeyou do anything, take a step back and look at your motivation. Didyour real estate agent tell you that someone else is about to bid on thehouse and you need to act fast? Are you afraid that you won’t findanother home in your price range? Are you simply tired of looking athouses? If these kinds of reasons are driving you to make an offer, youmay want to step back and take some more time to think about it.

It’s important to recognize that making an offer on a home can beemotional. You may feel hope, dread, anxiety, and excitement all atonce. The key to making a smart offer is to remain as calm andobjective as possible.

Before bidding on a home:

• Ask yourself if the home meets your wants and needs. If it falls short incertain areas, will those things bother you when you’re living in thehome? Maybe the home doesn’t have the pool you hoped for but isperfect in every other way. You’ll probably still be happy there. But if your criteria included two bathrooms and the home has only one,you may regret your decision every morning when your family istrying to get ready for the day.

• Be sure you’re happy with the neighbourhood. Your perfect home mayturn out to be less so if it’s located within view of a freeway or if theneighbourhood is known for its high crime rate. The location ofyour new home is as important as the structure itself.

• Make sure it’s affordable. Your mortgage payments should allow youto meet your financial goals. Remember the top figure you set andbe sure to honour it.

• Talk it over. Discuss the home and your feelings about it with yourpartner, friends, and family. It helps to bounce thoughts and feelingsoff people you trust.

• Make sure the home and the community fit with your life goals. Imagineyourself living there in seven or 10 years with children or perhapsaging parents.

• Give yourself time to think. Ask yourself how you feel when you areinside the home. Do you feel good? This is one area where youshould honour your emotions.

Determining if the price is fair

Before making an offer, you will want to make sure that the askingprice is reasonable. The groundwork you did—researching theneighbourhood and similar homes, and looking at the home itself—should help you determine whether the asking price is fair. But youcan also:

• Ask your real estate agent for a comparable market analysis (CMA) ofhomes in the surrounding neighbourhood. Your agent should prepareone of these for you before you make an offer. A good CMA includesinformation about all recent sales (usually within the past six months)in the neighbourhood as well as all homes currently for sale that aresimilar to the one you want in price, size, and condition. For eachhome, it should include information such as the sale price (includingprice per square foot) and the condition of the home.

• Look at the home’s selling history, which usually includes the dates ofprevious transfers of title, the prices at which the house sold, andhow long the home has currently been on the market. Your agentcan provide you with this information.

• Remember that a seller’s price is usually slightly inflated to allow fornegotiation.

• Take a careful look at the house you’re considering as well as others on themarket in the same area. Compare how the homes are laid out, theiroverall condition, and details like ceiling height and closet space.

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The purchase offer

Once you’re confident that the sales price is reasonable, it’s time tostart the negotiation process. Keep in mind that everything isnegotiable: the price, the closing costs and points, the timing of theclosing, and the items included (such as fixtures and appliances)with the house. In some cases, these other factors can make or breaka sale, so give them careful attention when you are putting youroffer together. For example, if the sellers are building a new home,they might be more likely to go with an offer that allows them tostay in their current home for three months rather than one that’shigher but requires them to move in 60 days.

Once you make an offer, the seller will accept or reject it—usuallywithin hours. Sometimes a seller comes back with a counteroffer. Ifthis happens, review your budget and goals carefully. If the price issimply too high, don’t be afraid to say no and keep on looking, ormake a counteroffer of your own. A seller’s counter offer may includeconditions and terms not included in your original offer. For exam-ple, the seller may accept your offer, but on condition that you delayclosing for 90 days so their kids can finish out the school year. Yourpurchase offer is documented by a preliminary agreement, usuallycalled a “binder” or an “offer to purchase.” As the prospective buyer,you will be expected to secure the offer with a payment of “earnestmoney”—a good-faith deposit. This money is placed in a protectedtrust account. Both you and the seller sign this document, whichgrants you, the buyer, the right to purchase the property at the agreedprice and on agreed terms for a limited period of time while youapply for a mortgage, have the property inspected, check title to theproperty, and take other necessary steps.

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Beware of bidding warsIt’s not uncommon in a hot market for buyers to try to outbid each other with increasingly higheroffers. It’s very easy to get caught up in a bidding war, but usually the only one who benefits isthe seller because buyers often end up paying more than they planned to. A good strategy is toset your maximum price for each home you bid on and stick to it no matter how many times theseller comes back to you for a “best and final offer.” You may have to walk away from a biddingwar, but you’ll avoid paying more than you can afford. Patience is key when looking for a home.Sooner or later you will find something that you love and that you can afford.

It is important to pay careful attention to this document. If youchange your mind or are unable to purchase the property, you forfeitthe earnest money you have paid unless the binder clearly states thatit will be refunded.

Protecting yourself with contingencies

A well-constructed buyer’s offer will contain “contingencies” thatmust be satisfied in order for the sale of the home to go through.Two important contingencies that protect the buyer are contingen-cies related to financing and to property inspections. These contin-gencies should be drafted to allow a buyer out of the sale (andrecovery of the earnest money) if the buyer can’t obtain financing orif the property doesn’t pass a property inspection—for example, ifthere are structural or mechanical system defects.

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Choosing a lawyer

Most real estate brokers are not lawyers and are not permitted to provide legal advice. When youbuy a home, it is important to consult a lawyer experienced in real estate transactions for adviceabout your particular situation and the real estate laws in your province. A real estate lawyer willalso help you with the final details such as the purchasing agreement, which is a legally bindingcontract. It’s helpful to have your lawyer present at your closing. It’s not unusual for glitches toarise at the closing table. Your lawyer will be able to make sure everything goes smoothly.

To find a lawyer, you can often ask your mortgage lender for a recommendation. You can alsoask friends or relatives to recommend lawyers who have handled residential real estatetransactions for them, or you can contact your city or county bar association for listings.

Preparing for the closing

The busiest time for homebuyers is the time between when an offerhas been accepted and the closing—the day when papers pass andtitle to the property officially passes to the buyer. At times you mayfeel that your new home purchase has taken over your life. You’llwant to take time off from work to attend the home inspection andthe closing. There will likely be phone calls back and forth betweenyou, your realtor, your loan officer, and your lawyer. At other times,the process may feel painfully slow. It may take a month or so fromwhen you sign the purchase and sale agreement to the closing. Youwill feel more in control of the situation if you write out a timelineof the steps from now until the closing. This way you’ll know whatto expect next and how long each step may take.

You’ll be working closely with your agent, your lawyer, and yourloan officer to complete the following steps.

Signing the agreement of sale

If the seller accepts your original offer or if you accept a counteroffer, you and the seller will negotiate and sign an agreement ofsale—also called a purchase and sale agreement, purchase agreement,or sales agreement, depending on where you live. This agreementspells out the terms and conditions under which the seller agrees tosell and the buyer agrees to buy. Like the offer to purchase, it is animportant document, and you should make certain that it is writtenand negotiated in a way that allows you to opt out of the purchasewithout penalty if certain contingencies—such as obtaining financ-ing or that the home passes inspection—aren’t met. You shouldmake sure that you understand the terms of this agreement and thatyour lawyer reviews it for you.

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“We found our lawyer by taking a first-time homebuyer’s class

through our local adult education center. Since he was teaching

the class, we got a chance to get to know him while learning a lot

about the process of buying a home.”–homebuyer

Scheduling a home inspection

Before you go through with a purchase, have the home thoroughlyinspected. A certified home inspector will check the home to makesure it is structurally sound and that its systems are in good workingcondition. The results of your home inspection may affect your finalnegotiations with the sellers. For example, if the home inspectorfinds that the roof needs to be repaired, you can negotiate a lowerprice for the home or require that the seller have the work donebefore you close the sale.

Applying for the mortgage

If you haven’t been pre-approved for a mortgage you will have toapply for and secure your financing. By this time, you will have alsoreceived an estimate of closing costs in writing.

Ordering title, appraisal, and insurance

Your closing agent—your lawyer and/or your real estate agent—willorder title insurance to protect against other claims on the property.Most mortgage companies require you to get homeowners’ insur-ance, which protects their investment against fire, theft, and otheraccidents. Ask your friends, relatives, lawyer, or real estate agent forrecommendations of insurance brokers and be sure to compare ratesand policies before deciding on a policy. Your mortgage lender willalso order an appraisal—an expert estimate of the value of the prop-erty— to make sure the home is worth what you’re paying for it.

Receiving a mortgage commitment

If you’ve already been pre-approved for a loan, having the finaldocuments in hand could take as little as 48 hours from the time thefinal paperwork on the home is submitted to the lender. Otherwise,you may need to wait as long as a few months for the paperwork tobe ready. A “commitment” means your mortgage application hasbeen formally approved. Be sure to review it with your real estateagent and lawyer, sign it, and return it to the lender for finalprocessing.

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Final walk-through

Before you close on your home, you will want to take one last lookto make sure it’s in the shape you expect. This is especially impor-tant if you negotiated for anything to be repaired, removed, cleanedup, or left behind before the sale.

Transferring utilities

You’ll need to notify gas, electric, water, and other utility companiesthat you’ll be moving into your home after the closing date. Be sureto cancel utilities in your current home and notify the landlord ofyour departure, as specified in your lease.

Home inspections

Arranging for a home inspection is one of the most important stepsin the home-buying process. You and your partner will probablywant to be present during the home inspection. A thorough inspec-tion can take two to three hours or more, so be sure to block outenough time in your schedule. A home inspection report should listnecessary repairs and potential repairs. Before hiring a home inspec-tor, ask what kind of report they give. Some issue preliminaryreports that they generate on-site with hand-held computers, thenfollow up by e-mail with a complete report. The most commonkinds of home inspections are:

• Pre-purchase interior and exterior components inspection. This coverselectrical work, plumbing, heating and cooling systems, roof and gut-ters, smoke detectors, kitchen, bathroom, foundation, and insulation.

• Pest-control inspection. These inspectors will check for property damaged by insects and organisms such as termites and dry rot.Pest-control inspections are usually done in addition to pre-purchaseinterior and exterior components inspections.

• Architect or general contractor’s inspection. This is particularly impor-tant if you’re buying a home you plan to fix up. This inspector cangive you information on local planning codes and will tell you ifwhat you’re planning to do is structurally possible.

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How do you find a home inspector?• Ask friends, relatives, co-workers, or neighbours for recommendations.

Your real estate agent may also have recommendations.

• Check the yellow pages or local newspapers.

• Search for inspectors in your area through the Canadian Association ofHome and Property Inspectors (CAHPI) at their Web site, www.cahi.ca.

Check to see if your home inspector carries errors and omissionsinsurance coverage for mistakes an inspector may make, such asmissing a flaw in the home. Such errors can result in costly repairsfor the new homeowner. Inspector licensing and insurancerequirements vary from region to region. You can contact localgovernment offices for local regulations.

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Don’t be surprised or upset if the home inspection turns up some problems. Almost all do. If theproblems are significant but repairable, you’ll probably want to ask the sellers to fix the problembefore you move in or to lower the selling price of the home by the amount it will cost you tohave the problem repaired. If the inspector finds minor problems, such as a gutter that needsreplacing, you should probably let it go, unless there are so many little problems that you’reuncomfortable buying the home. If you don’t know much about homes, you may want to ask arelative or friend who is more experienced to come with you during the home inspection.

The closing

The closing day and time will be scheduled several weeks in advance.You may want to consider taking a vacation or personal day that dayor rearranging your schedule to allow you some time off. You willalso want to take one last walk through the property as close aspossible before the closing to make sure everything is as it should be.For example, if you’ve arranged with the seller for some correctivework to be done before the closing, you’ll want to check and makesure it’s been completed.

At the closing, you’ll need to pay any final closing fees: your costsminus the amount already on deposit. Your lawyer will tell you theexact amount to bring in the form of a bank cheque. The closing orsettlement—the legal transfer of the home to you—usually will takeplace at either the office of the lawyer or the real estate agent.

Be prepared to sign a lot of papers and to ask lots of questions. Youmay feel pressure to complete the necessary paperwork as soon aspossible, but it’s important to take as much time as you need. Onceyou’ve paid the remaining fees, signed all the papers, and closed thetrust account, your real estate agent will give you the keys to yournew home. You’re finally on the way to your new address!

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“When I bought my home, the seller offered the results from the home

inspection she’d had a few months earlier. Luckily, I chose to have my

own home inspection. Several problems were identified and I was able

to negotiate $1,000 off the asking price!”

–homebuyer

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Settling inCongratulations! You’ve successfully navigated the exhilarating

move from homebuyer to homeowner! . . . Now what?

Next steps

Your work is far from over. In addition to packing and moving,deciding where you want your furniture to go, and changing yourmailing address, you have three important tasks to do:

• Keep saving. Look at the worksheet in this booklet where youdescribed your long- and short-term goals. Make sure you haven’tstopped putting money into your retirement plans, for example. Isbuying a new dining room set more important than saving forretirement? No doubt some of your goals will change. But it’simportant to review them once more, re-establish your priorities,and find a way to adjust your budget to reach the ones you feel aremost important.

• Limit the money you spend on renovations and furnishings. Separatewhat you need to do from what you’d like to do. Fixing a leaky roofis a need, while a new bed and dresser are usually a want. Leaveyourself something to look forward to. Tackle each room one byone. Learn how to do simple repairs from a book or a continuingeducation course.

• Rebuild your emergency fund. More than likely, the down paymentand closing costs of buying your first home have drained any savingsyou may have reserved for emergencies. It’s important to build thisback up as quickly as possible. Waiting may cost you more money inthe long run if you have to put unexpected repairs or purchases on ahigh-interest credit card.

Recognizing buyer’s remorse

Many new homeowners go through a period that’s commonlyreferred to as “buyer’s remorse.” This usually happens once thehectic pace of the closing is over and you’ve had some time to settleinto your new home. You’ve noticed the imperfections you missedduring your initial visits. You’ve made a few mortgage payments andyou’re feeling the pinch. Many people begin to question whether

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they made the right decision. If you’re feeling buyer’s remorse,remember that it’s quite common and that it usually passes in a fewweeks. The following tips can help you deal with buyer’s remorse:

• Stop looking at homes for sale. If you’re still reading the real estate list-ings, getting MLS e-mails, or going to open houses, it’s probably timeto put that behind you. Tell yourself you’re a homeowner now andwhatever pops up on the market shouldn’t concern you any more.

• Are others feeding your concerns? Sometimes well-meaning friends andfamily members will question how much you paid or find flaws withyour purchase. Just remember, they probably don’t know the marketas well as you. Remind yourself that you put a lot of time and effortinto making an informed decision about buying your home.

• Remind yourself that your feelings are normal. Buying your first homeis a big step. A home is much more than just a purchase or a roofover your head. It’s often the culmination of years of hopes anddreams, and it’s very common for people to question their decisionat first.

Your life has changed in many ways since you started out on theroad to home ownership. You should feel great pride in all that youhave accomplished. So, pull up a moving crate, grab a slice of pizza,and enjoy the fact that you’ve made a sound investment in yourfuture—your own home.

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Helpful terms and glossaries

Most lenders’ Web sites have extensive and well-written mortgageand real estate glossaries to assist you in understanding theterminology of the industry. See the Canadian Real EstateAssociation (CREA) (www.crea.ca/public/buying_selling/glossary.htm)for a good example.

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We’d like to hear any suggestions or ideas you have on this

topic. Please write to us at [email protected].

Be sure to include the title of the booklet in your message.

Thank you.

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