Buying your first home is among the most exciting yet nerve wracking experiences in our lives. Here are the key steps in the process to help you ease your mind.
During this week’s edition of Women & Money Montreal financial literacy Zooms, we were joined by special guest Residential Real Estate Broker Nathalie Procikevic to go over the first time home buying process.
1. GET A MORTGAGE PRE-APPROVAL
Before window shopping for homes, it is important to get pre-approved for your mortgage. This can be done either directly at a bank with a mortgage specialist, or you can use the services of a mortgage broker who will shop around for the best options for your.
In order to be pre-approved for a mortgage, you will need to provide a list of documents and go through a credit check in order to establish your creditworthiness and how much of a mortgage you qualify for.
This is not to be confused with a mortgage prequalification. A mortgage prequalification is provided within a few minutes and no credit check is done. It provides an estimate of what you can afford, assuming the information you provide is accurate.
During COVID 19, many realtors refused to show homes to those without a mortgage pre-approval. Now that we are post-COVID, having a mortgage pre-approval letter is still preferred.
2. FIND A REAL ESTATE BROKER
Working with a real estate broker is strongly recommended for every real estate transaction but even more so for first time home buyers. A good real estate broker can guide you through the home buying process, help you find properties that meet your criteria, negotiate offers, and handle paperwork. They also have access to a history of paperwork on any potential home you may be interested, which will help determine if it is worth the visit.
Another advantage? Working with a real estate broker as a buyer is free.
3. GO HOUSE SHOPPING!
This is the fun part of the first time home buying process. Your real estate broker will help narrow down your search. It is important to stick within your budget and to consider location location location, amenities of the home, and potential resale value.
4. MAKE AN OFFER
Once you find a suitable property, work with your real estate broker to make an offer. Your offer will include the offering price, conditions (usually financing and inspection), and other terms.
In the case of a counter offer, your real estate broker will help in your negotiations. The goal is to come to terms that both the seller and the buyer can agree to, ending with an accepted offer.
5. ACCEPTED OFFER & FULFILLING CONDITIONS
Once you have an accepted offer for your potential home, there are typically two conditions to fulfill – inspection and financing.
If you have a mortgage pre-approval, fulfilling the financing condition and getting a final approval letter from your lender should be relatively easy as long as there have been no changes in your situation since your original pre-approval letter.
If you do not have a mortgage pre-approval, contact a mortgage specialist or mortgage broker right away and prepare your documents to send asap. Every day is crucial. Any delays in financing can result in missing the financing deadline on the accepted offer, and the seller is under no obligation to extend the date of the financing deadline for you.
At the same time, schedule your home inspection. A home inspector will assess the condition of the property and identify any issues or potential problems. If there are any major issues to report, it may be possible to negotiate the selling price or even walk away from the deal if the repairs are too extensive.
Once these and any other conditions are fulfilled, congratulations – you are now (almost) a home owner!
6. CLOSING & NOTARY DAY
Once the conditions are fulfilled, the first thing to do is to contact a notary. If you do you not know one, your real estate broker or mortgage broker can provide a list of notaries you can contact.
If you are taking part in the Home Buyer’s Plan, contact your financial institution for assistance to complete Form T1036 from the Canada Revenue Agency.
Your notary will typically contact you around two weeks prior to the close date to schedule an appointment and to provide a list of costs and bank drafts to prepare. This can include notary fees and taxes on the mortgage default insurance premiums (consult your lender if this applies to you). “Closing” at the notary can require either one or two appointments, depending on the situation.
7. MOVING DAY!
Congratulations! You are officially a home owner.
Before you completely settle in, take a walk around your property and make sure all that was supposed to be there is actually there. Also, make sure everything works as it was supposed to. This can include appliances, garage doors, and swimming pools.
Purchasing your first home is not to be taken lightly. It can either be a dream come true or a complete nightmare. It can also be the biggest purchase of your life, or just the beginning of many real estate purchases.
The importance thing is to surround yourself with the right professionals who will guide you throughout your real estate goals.
Lin Sok is Mortgage Broker with Groupe Orbis. To discuss your mortgage preapproval or renewal needs, you can reach out here.
Nathalie Procikevic is a Real Estate Broker for Groupe Sutton Performer. Nathalie can be reached here.
If you missed this week’s Women & Money Montreal Zoom session on the First Time Home Buyer’s Process, you can view the full video here.
ATTENDEE Q&A
- For the mortgage pre-approval, what happens if you are self-employed and don’t have T4s? When you are self-employed you will need to provide your full T1 General from the two previous tax years. Your income will be based on the average of the last two years of declared taxable income. There are programs available if you don’t quite fit into this “box”; this can be discussed on a case by case basis.
- Is there a difference between buying a home or a condo? The process is pretty similar with slight differences. Many people forego an inspection on a condo but it is still recommended as you never know. Reading the financial statements from the condo association is also very important, as some condo associations are not up to date with their documents.
- How long is a mortgage pre-approval good for? Typically three months or if there are any changes in your financial situation. Also, mortgage pre-approvals don’t necessarily come with an automatic “rate hold”. Rate holds freeze a rate for either three or four months (depending on what was offered).
- What happens if you are interested in a condo and there is a tenant living there but we want to move in? Two key factors – who are you purchasing with and what is the length of time between you becoming the homeowner and the end of their lease? This process is called repossessing a dwelling and the parameters are defined on the Tribunal administratif du logement website here.
- Is it true you can’t buy a home with a working visa, you need to be a permanent resident? Those holding a valid work permit can purchase a home here in Canada as long as the work permit is valid for at least 183 days after the notary date. This is commonly known as the “foreign ban” in Canada and only applies to dwellings with three units or less and within Census Metropolitan Areas (CMA) and Census Agglomerations (CA). Complete details can be found on the CMHC website here.
- Is it better to go with a broker than a realtor? It’s a little confusing but real estate professionals in Quebec are called real estate brokers, whereas they are typically referred to as real estate agents elsewhere. They can informally be referred to as realtors. This is not to be confused with mortgage brokers, who take care of the financing of real estate and work with several different lenders.