Buying a home is not only a major financial decision; it is also a life changing decision. For many first time home buyers, understanding the entire home buying process can be overwhelming and quite stressful. You can remove that stress by knowing these eight simple things:

1.     1. Agents are not just for sellers
2.     2. Curbing your spending habits ensures you qualify for home ownership
3.     3. The importance of mortgage per-approval and finding a legitimate lender
4.     4. Avoid buying from the wrong seller
5.     5. Lay the groundwork, build a plan, and get moving
6.     6. Understand market trends
7.     7. What you see is not always what you get
8.     8. How to avert the financial stress of buying a home

If you take this information and empower yourself, the home buying process can be seamless and effortless. After all, you are not just buying a property, you are buying a home.

Agents not Just for Sellers

A buyer’s agent has the inside track when it comes to finding properties that are available for sale. Agents have access to listing services that are not available to the general public. They are also actively looking for opportunities such as homes that are for sale by owner or potential home sellers still contemplating listing their properties.

When selecting a buyer’s agent it is important to find one who will work for you and not the seller. An agent who is experienced and dedicated to you, the buyer, will work harder to show you more potential properties, keep you informed, answer your questions throughout the process, negotiate on your behalf, and concentrate on getting you the lowest asking price possible. During price negotiations, your agent is restricted from telling the seller any information about your other property interests.

Spending Habits to Ensure You Qualify for Home Ownership

The deciding factor that determines whether or not most people qualify for home ownership is their financial situation. For this reason, it is a good idea to get a mortgage pre-approval before you start home shopping. It is also important to remember that mortgage pre-approval is subject to a final evaluation, so you should not do anything to drastically change your financial situation before your purchase is final.

This means that making any major credit purchases while in the process of buying a new home, or while thinking about buying, is greatly discouraged. Making extra credit payments each month could hinder your ability to borrow sufficient funds. You could end up qualifying for less of a mortgage than you originally thought.

If you think spending funds on a vacation or a new vehicle will not affect your home buying ability, think again. As a general rule, every $100 paid per month to credit could cost you approximately $10,000 in home eligibility. For example, a monthly vehicle payment of $400 could mean you qualify for $40,000 less in a mortgage than you would have if you did not purchase the vehicle.

A simple rule to remember is to curb your spending habits until after closing. This includes both credit purchases and purchases made with savings. Why risk not getting a mortgage for purchases that can be made after you are in your new home?

The Importance of Mortgage Pre-Approval and Pre-Qualified

In the past, potential home buyers would often do their house shopping before they secured their financing. This method of putting the “cart before the horse” is not very effective in today’s mortgage market. You are potentially setting yourself up for disappointment if you cannot actually afford to buy the dream home you have selected.

Why not avoid the disappointment by simply getting pre-approved before you start home shopping?

Most lenders can pre-qualify your mortgage over the phone or online. The lender will ask basic questions about your financial history and current income, and then estimate how much financing you will qualify to receive. However, remember that getting pre-qualified is not the same as being pre-approved.

For example, a pre-qualified letter is simply an estimate which gives you a “ball park” figure of what a lender will give you. An application is not completed and financial information is not verified so there is no guarantee on the amount you can borrow.

Pre-approved means you have actually applied for a mortgage by filling out an application, you have received a credit report, and you have verified your income. Upon pre-approval you will know exactly how much you can spend on your new home, gaining you increased credibility with sellers as a serious, qualified buyer.

Avoid Buying from the Wrong Seller

When buying a home it is natural to seek the best price possible which usually means getting the lowest price. Most sellers are looking to make a profit when selling a property. Asking the right questions, such as why they are selling, is vital in getting a good deal.

If a seller is highly motivated to sell due to time restraints, relocation issues, or other financial pressures, such as already having purchased a new home with a possession date fast approaching, this could mean they will be more willing to sell for less than the asking price, or even for less than the house’s market value. Highly motivated sellers pose a definite advantage to the buyer.

Asking the right questions will also raise warning signs and alert you to the disingenuous sellers that you should avoid. Be cautious and ask the following:

• Does the property have liens that the seller is unable to clear?
• Does the seller own the property in its entirety?
• Is the seller giving excuses and stalling the home inspection and appraisal?
• Is the possession date constantly being pushed back?
• Does the seller have a new property or living situation lined up?

Lay the Groundwork, Build a Plan, and Get Ready to Move

When looking to buy a new vehicle, most people tend to shop around, compare prices, decide on features and color, practice their negotiation skills, and set the plan in motion. If you are prepared, the buying process can be effortless. Why not apply the same strategy to buying a home?

After you make the decide to purchase a home, it is important to envision every step involved and estimate what you need to successfully make the purchase happen. Ask yourself the following:

• How much can I afford to pay for a home? (Get pre-approved)
• How much will I need, and can I afford, for a down payment?
• What type of home do I want? (e.g. condo, town home, house, newly constructed, etc.)
• What do I need and want in a home? (e.g. # of bedrooms, # of bathrooms, garage, etc.)
• Where do I want to live? What is the best location for my living situation? (E.g. family, work, schools, etc.)
• What amenities are important to me in a community? (e.g. recreation centers, shopping, parks, public transit, etc.)

Understanding Market Trends

The real estate market is not static, so understanding market trends will help you decide the best time to buy. A normal market will see a higher than average number of properties listed and an average number of people looking to purchase. This type of market does not necessarily favor either side of the real estate transaction which means there is no definite advantage for the buyer or the seller.

A normal market is essentially a neutral market. Sellers may have fewer offers in this type of market, but it does not necessarily mean they are motivated to sell. So, as a buyer, you need to be prepared and understand that your chance to negotiate is likely, but you might be required to work for it.

In a competitive, or hot, market, homes can sell so quickly that they do not even make it to the listings. Sellers usually get multiple offers on their properties and can make large profits when buyers start offering more than the asking price. As a buyer in a hot market, it is important to remain in control and to be prepared because when a price battle occurs, you do not want to find yourself trying to pay more than the lender will give you.

When the market slows down and houses seem to be listed for long periods of time, the prices can drop dramatically. This is considered to be a cold market and can be unfavorable to the seller because buyers have time to shop around and make offers well below the asking price. Sellers generally accept these lower offers because there is no other interest in the property. However, as a buyer, do not try to exploit this market by offering unrealistic prices because you may lose out on your dream home.

What you See is not Always what you Get

When making a major financial decision to purchase a new or existing home, it is important to protect your investment. “Buyer Beware” is also a good motto to remember because what you see is not always what you get, especially when it comes to homes.

As a buyer, you are entitled to have an expert inspect the property so you know exactly what you are buying. Do not skip the home inspection.

Ensure that you have a professional organization conduct the inspection. This should be detailed and presented in written form as a contingency when you make an offer. It is also a good idea to accompany the inspector during the walk through so you can ask questions and learn from his or her candid remarks and comments while at the property. This is your best chance to get an honest and unbiased opinion of the property. The inspector will also provide a written assessment as to the condition of the property for your review. If you do not approve the report, you do not have to buy as long as you specified that in your offer letter. Most real estate contracts automatically provide an inspection contingency.

Know What you Need from a Mortgage

Knowing what you need from a mortgage is as important as knowing what you want from a home. If you know exactly what your needs are, you will be more likely to find the right mortgage for your situation.

While many lenders base their decisions to loan money on financial qualifications, there are still options available for almost every type of borrower. If you are unsure of your finances, market trends, or what type of mortgage would be most advantageous to your situation, you can consult a mortgage broker. A mortgage broker will help you determine a budget and what you can realistically afford to spend on a new home. A mortgage broker can explain the different types of mortgages available and ascertain which will work best for.

Land Transfer Tax Rebates (Provincial and Toronto)

Program

First-time buyers of new and re-sale homes are eligible to receive rebates of the provincial and Toronto land transfer taxes. The maximum provincial land transfer tax (LTT) rebate for first-time buyers is $2,000 and the maximum Toronto LTT rebate for first time buyers is $3,725. A FULL rebate of the Toronto land transfer tax is also available for ALL buyers who entered into Agreements of Purchase and Sale prior to December 31, 2007.

Details

Provincial LTT

• Provincial LTT is payable anywhere in Ontario (including Toronto)
• Maximum provincial LTT first-time buyer rebate is $2,000 (equivalent to the provincial LTT payable on a $227,500 property).
• For RESALE homes, the provincial rebate applies only to first-time buyers who entered into Agreements of Purchase and Sale AFTER December 13, 2007.
• First-time buyers of NEWLY CONSTRUCTED HOMES are eligible for the provincial rebate even if they entered into Agreements of Purchase and Sale prior to December 13, 2007.
• 0.5% of the amount of the purchase price up to and including $55,000, plus
• 1% of the amount of the purchase price between $55,000 and $250,000, plus
• 1.5% of the amount of the purchase price between $250,000 and $400,000, plus
• 2% of the amount of the purchase price above $400,000
• The provincial LTT for residential properties is calculated as follows (An easy-to-use calculator is available at http://NoHomeBuyingTax.com):

Toronto LTT

• Toronto LTT is payable only for properties in the City of Toronto.
  Maximum Toronto LTT first-time buyer rebate is $3,725 (equivalent to the Toronto
• LTT payable on a $400,000 property).
  ANY purchaser who entered into an Agreement of Purchase and Sale prior to
  December 31, 2007 is eligible for a FULL rebate of the Toronto LTT.
• Toronto LTT rebates are in addition to any provincial LTT rebate that the buyer
  qualifies for.
• The Toronto LTT for residential properties is calculated as follows (An easy-to-use calculator is available at www.NoHomeBuyingTax.com):
  • 0.5% of the amount of the purchase price up to and including $55,000, plus
  • 1% of the amount of the purchase price between $55,000 and $400,000, plus
  • 2% of the amount of the purchase price above $400,000

First-Time Buyer Eligibility
To be eligible as a first-time buyer for the provincial LTT rebate and/or Toronto LTT rebate,

• The purchaser must be at least 18 years of age.
• The purchaser must occupy the home as his or her principal residence no later than nine months after the date of the conveyance or disposition.
• The purchaser cannot have previously owned a home, or had any ownership
  interest in a home, anywhere in the world, at any time.
• If the purchaser has a spouse, the spouse cannot have owned a home, or had any ownership interest in a home, anywhere in the world while he or she was the purchaser’s spouse. If this is the case, NO refund is available to either spouse. Note: If a purchaser’s spouse owned an interest in a home BEFORE becoming the purchaser’s spouse, but not while the purchaser’s spouse, the purchaser may be eligible for some rebate.

More Information
Provincial LTT
Ontario Ministry of Finance:
1-800-263-7965

Toronto LTT:
City of Toronto:  416-338-0338