First Time Home Buyers

Tips for First-Time Home Buyers

Are you among the thousands of people in Calgary who pay rent each month, knowing full well that you will never see that money again? For many, this need not be the case. Instead, why not take that money and build it into an investment that can last a lifetime? Right now there are excellent opportunities for first-time buyers. Mortgage rates are attractive and there are plenty of reasonably priced homes on the market.

What kind of home do you need and want?

Buying a home is a balance of many requirements such as family size, location, income and lifestyle. REALTORS® are excellent sources of advice and help in these matters. Not only do they have the experience and knowledge to make sure the choice you make will be the right one, but with access to the Multiple Listing Service® (MLS®), they can seek out suitable properties for you and provide you with a customized list of homes that meet your needs, wants and budget.

Ask yourself exactly what you need in a home. How many bedrooms? How close to schools or shopping centres? Do you plan to have more children? Do you need a garage or a finished basement? New homes offer extensive warranties and pristine conditions but may not have mature trees or landscaping. Older homes often include improvements such as finished basements or rec rooms, decks and patios. Be sure to have any resale home inspected for needed repairs or upgrading.

Next decide on a preferred location. Living in the city means you will be close to amenities such as theatres and shopping. If you prefer a more rural lifestyle, make sure the extra time spent driving each day won't detract from your enjoyment of the property.

Townhomes and condominiums are obviously suited to particular lifestyles or budgets. Townhome or condominium living offers convenience and often means sharing common areas such as parking, hallways and landscaping.
What can you afford?

Once you have determined what it is you want and need, you'll have to find out what you can afford. The first tip is to set a maximum price range instead of just an upper price. It's not always wise to buy the most expensive home you can afford but better to aim lower in anticipation of extra costs or fluctuations in your income.

A REALTOR® or your financial institution can help you determine the amount of the mortgage you can carry by calculating your debt-service ratio. The rule of thumb is that the sum of all your current loan payments (car, personal, credit card, etc.) plus your mortgage should not exceed 40 per cent of your gross income. In addition, mortgage payments and property taxes should not be more than 30 per cent of gross income.

Buying your first home may seem intimidating in the beginning, but with careful planning, a clear idea of what you want and the help of a REALTOR®, home ownership can be become a joyful reality for you and your family.

Buying a Home: a Sound Investment In Your Future

Why use your hard-earned cash to pay the landlord's mortgage when you could be using the rent money to buy a home of your own? That's a question many people ask themselves when they start thinking about moving out of the rental market to home ownership.

It's a big step. For most people, taking out a mortgage is the biggest financial commitment they will ever make. But buying your own home has always made sound financial sense. Here are some facts to think over when considering home ownership as opposed to renting.

• If you are 35 now and just buying your first home, you will likely be mortgage-free when you are 60 and sitting comfortably on a considerable asset.
   
• It's highly likely your investment will appreciate considerably in 25 years. It's important, however, not to buy with the intention of making a quick fortune. Think of home buying as a sound, long-term investment.
   
• Buying a home is a very effective way of saving regularly over many years. Even if you never buy into another retirement or investment plan, you are effectively putting money away for the future.
   
• Owning a home of your own means you and your family can set down roots, get to know your community and involve yourselves in it.
   
• Discover the pride of home ownership. You can fix the place to suit your particular needs. You can also have pets in your home.
   
• As your family grows and moves on to homes of their own, you will have the option of earning extra income by renting out spare rooms or floors, if local bylaws allow.
   
• If you are planning to borrow money from a bank or other financial institution, owning your own home is a definite plus when it comes time to negotiate.
   
• You may not need as much money as you think to get into the home market. Qualified buyers can buy a house with as little as five per cent down through the Canada Mortgage and Housing Corporation's (CMHC) mortgage insurance scheme. You may also be able to use RRSP funds as part of your down payment.
   
• With many kinds of investments, you have to pay a capital gains tax on profit you make. If your home is your principal residence, this tax does not apply.

Buying a Home: Old Versus New

Are you in the market for a home? If so, do you see yourself in a cozy character home with ornate fireplaces, or does the image of a brand new home with today's state-of-the-art technology appeal? Either way, you will find that the rewards of buying your own home are many. The security, comfort and peace of mind you get from home ownership, regardless of your preference for old or new, are well worth the investment.Attractive mortgage rates, government incentive programs and a wide selection of housing options available through the Multiple Listing Service® (MLS®) make this a good time to buy.

Look and Compare

As you start your search for a home, it is a good idea to enlist the services of a REALTOR®. REALTORS® have access to the MLS® system and can help narrow the search by providing you with a list of available properties in the price range and location that suits you.

Your selection, to a large extent, will be determined by your lifestyle and in most cases becomes a matter of compromise. For instance, you may find an older home that needs some renovation work, but this may not necessarily fit into your budget plans or your hectic schedule if you plan to do a lot of the work yourself. On the other hand, you may find a new home attractive but would have to spend extra money on landscaping and installing some of the amenities that may be a part of the package in an older home.
Advantages of an Older Home

With an older home, you can see exactly what you are getting -- structural faults are generally easier to see and can be or have been corrected. The character of the neighbourhood is established and a variety of local services is usually available. In addition, the landscaping around the home has already been completed. There are generally fewer move-in costs because basic features like drapery tracks are already installed. Chattels -- such as special lighting fixtures --are often included in the sale of an older home.
Advantages of a New Home

A brand new home also has advantages. You have much more flexibility with a new home in customizing your decor and landscaping to suit your tastes. You get fresh, unblemished walls and you can usually choose the type of flooring, carpeting and cupboards that you want. You usually get much more storage space (such as closets) and larger rooms. In addition, today's minimum standards for plumbing, electrical, insulation and heating systems are higher than ever before.

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Buying a Home: Your Needs and Wants

The current combination of attractive mortgage rates, home buying incentive programs and a wide selection of homes from which to choose means now is a great time to consider buying that first home or moving to something that better serves your needs.
Location, Location, Location

Location is one of the most important factors in making any real estate purchase. For example, if you work in downtown Calgary and you are comfortable with the idea of commuting, you might want to consider buying a home in one of the outlying communities where lots may be more picturesque and peaceful. On the other hand, living closer to the city centre often means a short commute to work and easy access to shops and entertainment facilities.

When focusing on location, you will likely want to consider other important factors like the proximity of schools, access to public transit and shopping facilities, etc.

Identify Features You Need And Want

Once you have decided on the location you prefer, it is time to identify your needs so that you can zero in on the home of your choice. For instance, if your family is outgrowing its present apartment or home, you know you are going to require something bigger and more comfortable -- possibly with more bedrooms and a second bath.

In addition to your needs, you should also consider your wants -- things you would like to have if you can afford them and if they are available. Remember, the time you take to think about these things now will prove invaluable later during your discussions with a REALTOR®.

Matching Needs And Wants With Available Properties

With access to the Multiple Listing Service® (MLS®), a co-operative listing system that offers maximum exposure of homes listed for sale, your REALTOR® can draw up a customized list of homes that as closely as possible match your needs, wants and budget in the locations of your choice.

Take your lifestyle into account and the things that could enhance or detract from your daily enjoyment. Then add these preferences to your needs or wants shopping list. Your REALTOR® will be pleased to arrange for you to see the homes for sale that appeal to you the most and will offer invaluable guidance throughout the home-buying process.

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Checklist for House Hunting

If you are thinking of buying a home in the near future, a REALTOR® can provide invaluable help in finding the right home in the right price range in the area you want to live. Through access to the Multiple Listing Service, (MLS®) a REALTOR® can give you a customized list of homes for sale that match your needs and wants and budget.

A house hunting checklist will help you keep track of the advantages and drawbacks of each home. Ensure the checklist includes the basic information regarding location, asking price, annual property taxes, mortgage terms and any applicable zoning restrictions.
Exterior

Jot down your impressions of the exterior of the home, noting the lot size and shape, position of the home on the lot (facing north, south, east or west). Note the condition of the landscaping and whether the yard is fenced.

Check the condition of the siding and note whether the home has an attached or detached garage. Be sure to take a good look at the roof and note its general condition and age. It's also important to examine the foundation of the home for any visible cracks or holes.
Interior

Note whether the home has a separate front hallway. Check the windows to ensure they open and close easily and note the general condition of the doors. The kitchen is an important room in any home, so pay attention to its size, the condition of the appliances, sink, cupboard space, counter tops, flooring, lighting and electrical outlets. Be sure to ask whether any or all of the appliances are included in the sale.

It may be that a separate dining room, a family room and fireplace is important to you. Note also the size of the bedrooms and closet space and whether there are any window coverings or adjoining bathrooms. Also make note of the flooring and room colours.

Make notes on the number and size of bathrooms and the conditions of the fixtures. Check all faucets and flush toilets to make sure they are in good working order and to see if there is adequate water pressure.
Basement

Check whether the basement is full or partial, finished or unfinished and whether there is adequate room for walking about. Note whether there is a utility area and whether the washer and dryer are being sold with the house. It is also very important to ask about the type of heating, water service, plumbing (copper or other), electrical amperage and insulation.

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Don't Forget Closing Costs When Buying a Home

Despite today's attractive mortgage rates and wide selection of affordable homes from which to choose, you should keep in mind “closing costs in addition to your down payment for that dream home.

These various charges can add up and for the most part they are all legally required payments in buying a property. These payments include:

• Legal fees: since a lawyer or notary public is an essential part of your home-buying team, the work provided involves legal fees. Most legal fees include searching the title of a property, arranging a property survey if necessary, and handling other disbursements as required.
   
•  Mortgage insurance and application fee: for any high ratio mortgage, which is any mortgage in which 75 per cent or more of the house's purchase price is covered by the mortgage, the lender requires mortgage insurance.
   
• Property insurance: this insurance covers the replacement value of your home and its contents. Most mortgage lenders will require proof that you have this insurance before processing a mortgage.
   
•  Home inspection: a professional home inspector knows what to look for and can confirm or add to the information you have gleaned from the REALTOR® or your inspection.
   
• * GST: GST is payable to some degree on the purchase price on all new homes, although partial rebates are available on the purchase of most homes. A resale residential home is usually exempt from GST.
   
• Extra charges: you may also be required to pay the costs of such things as heating oil in the tank, or other costs incurred by the seller, but included with the house, prior to the closing day.
   
• Hook-ups: there may be hook-up charges required for appliances and services such as telephone, TV cable, hydro and other utilities.
   
• Moving costs: don't forget the basic costs involved in moving from your old place into your new home, particularly if you use a professional moving company.

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Helpful Hints on Buying a Home

Buying a home is likely one of the biggest investments you will ever make. You will need to make a number of decisions about this purchase that should be based on the best information available. The best advice you can obtain on buying a home will come from a real estate professional -- a REALTOR®.

REALTORS® are members of The Canadian Real Estate Association who subscribe to a strict Code of Ethics and high Standards of Business Practice. Members of the Calgary Real Estate Board are members of Canadian Real Estate Associations.

The following is a list of services you can expect to receive from a REALTOR® when you buy a home:

• A REALTOR® will fully explain the details of your working relationship (called “agency”) so that you are clear as to when a REALTOR® is working for you or for the seller.
   
• A REALTOR® has access to hundreds of current listings of homes for sale because of a co-operative system called the Multiple Listing Service® (MLS®). A REALTOR® can provide you with a customized list of homes that best your needs -- size, style, features, location, proximity to schools, hospital and shopping, etc. – and then make arrangements for you to view those homes that appeal the most.
   
• A REALTOR® will help you determine how big a home you can afford. Assessing the many financial alternatives is an important consideration when buying a home. REALTORS® are familiar with the local lending market and can offer helpful advice.
   
• A REALTOR® has no emotional ties to any type or style of home and can be objective in pointing out the merits of one home over another.
   
• A REALTOR® will have information on zoning changes, taxes, utility costs, school and recreation services that could affect your decision to buy a home in a specific area.
   
•  A REALTOR® will assist you in negotiating the terms of your purchase. Presenting offers and handling counter offers can be a nerve-wracking process for someone who is not experienced in the art of negotiating.
   
• Finally, a REALTOR® will advise you of the legal process required in obtaining title and taking possession of your property. The costs associated with buying a home such as insurance, mortgage registration and legal fees will be explained in detail.

A REALTOR® 's knowledge and skill can help in many ways to make the experience of buying a home a pleasant and rewarding one for you and your family.

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No Time Like the Present to Buy a Home

If you are tired of renting and have always wanted a home of your own, now is an excellent time to take the home ownership plunge. Attractive mortgage interest rates, government incentive programs and an excellent supply of homes for sale are making the dream of home ownership possible for more would-be buyers.

Consider Using Your RRSPs

You may want to take advantage of the RRSP Home Buyers’ Plan. The program allows you to use your Registered Retirement Savings Plan (RRSP) contributions (up to $20,000 per person, $40,000 per couple) to buy or build a home. You must be a first-time buyer or at least not have owned a principal residence for four consecutive years in order to qualify under the plan. Remember, no income tax is deducted from these funds as long as they are repaid to an RRSP according to the government’s repayment schedule.

Different Mortgages

A number of different mortgage options are available. Under a conventional mortgage, lenders will loan you up to 75 per cent of the appraised value or purchase price of the property (whichever is lower) to a maximum set by government regulation and you must come up with the remaining 25 per cent yourself. If you don’t have the 25 per cent down payment, a high-ratio mortgage may be available that could provide most of the required funds. The proviso is that high-ratio mortgages must be insured and the cost falls to you. Check with your lending institution or mortgage broker to see whether you would be eligible for such a mortgage.

Variable-rate mortgages are usually offered for both conventional and high-ratio mortgages. If interest rates climb, you will be paying more per month in interest; if rates drop, you will be paying more off your principal. Fixed-rate mortgages, on the other hand, maintain the same rate of interest over the entire negotiated term.
Examine Your Needs

It is never too early to start considering where you would like to live and the type of house that best suits your needs. This is where a REALTOR®’s services prove invaluable. REALTORS® have access to the Multiple Listing Service® (MLS®) which is a co-operative listing system that offers maximum exposure of homes listed for sale. A REALTOR® can help you zero in on the type of home you want with a quick search on the computer. Once you have defined a few key parameters like price, location and number of bathrooms, a REALTOR® can provide you with a customized list to assist you in your search.

Defining your focus is important because there are plenty of housing options available in the Greater Victoria area. You will have to choose the property that is right for you from among new houses, resale homes, townhouses and condominiums. A REALTOR® is a highly trained professional who can help you choose the one that best suits your current and projected lifestyle. A REALTOR® will accompany you as you view homes and provide you with all the pertinent information to make an informed decision. So, if you are ready for home ownership, now is a good time. Many Canadians would agree that owning a home is one of the best investments you can make and helps provide financial security for retirement.

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Picking the Right Neighbourhood

You have decided to buy a home. You've analyzed your budget, talked to a REALTOR® and figured out what kind of house you want. But, the most important step may have been left until last: picking the right neighbourhood.

Choosing not only the proper community, but also the right neighbourhood, can have a tremendous impact on your family's happiness and the value of your investment.

The first thing many people do when considering a move is drive around various communities gaining a sense of which areas they like. Buyers find out how close the major highways are and if the neighbours keep their yards tidy. Most will make sure they know the location of the closest mall. But what about public transit, colleges, schools, libraries, parks, recreation centres and fire or ambulance stations? Is the local police station close to your prospective neighbourhood? All of these factors can make or break a decision to buy a certain property.

Your REALTOR® can provide you with a wealth of general information on different neighbourhoods. For detailed information, it's a good idea to contact the appropriate agency directly. Here are a few suggestions to consider:
Contact the municipality

Municipalities have a wealth of information on hand. Some distribute brochures and booklets containing the locations of colleges, libraries, ambulance stations, hospitals, parks and transit stops. It's also a good idea to check the location of recreation centres, swimming pools, ice rinks and the like, along with the programs they offer.
Call the local police and fire departments

Ask them how many stations service the community and their locations. Also ask about response time to emergencies.
Contact local School Boards

The Calgary School Board will be able to give you information on the locations of elementary and secondary schools within their jurisdictions. It's a good idea to mark the routes your children would take and then walk them yourself.
Your REALTOR® and MLS®

Your REALTOR® will be able to offer you general advice and information on many of the above topics. Remember, your REALTOR® has access to the Multiple Listing Service® (MLS®) and can provide you with a customized list of properties available for sale in the neighbourhood of your choice that meet your needs, wants and budget.

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REALTORS® Help Smooth the Home Buying Process

Finding the right home, getting a fair price, calculating mortgage rates, figuring out closing costs -- all of these factors make buying a home an often complicated and overwhelming process. However, a REALTOR® can guide you through the home buying process and transform this confusing experience into one of the most exciting times of your life.

Think of a REALTOR® as a professional who brings buyers and sellers together for the sale of a property. REALTORS® are licensed real estate professionals who are members of the Calgary Real Estate Board. REALTORS® have access to the Multiple Listing Service® (MLS®) which is Canada's most powerful real estate marketing system. This service provides REALTORS® with listing information on a wide variety of properties for sale which in all likelihood includes your "dream home."

Finding your new home

A REALTOR® will help you zero in on specific locations for your new home and will help you differentiate between your needs, wants and what you can actually afford.

A REALTOR® can show you what is available on the market and will then accompany you as you view homes and help you assess whether or not the property is right for you. When you have found your "dream home," a REALTOR® can help you select the most appropriate mortgage and financing options. It's often a good idea to get a mortgage pre-approved so that you know exactly what you can afford.

Signing the contract

A REALTOR® understands the laws and regulations that govern real estate transactions and has been trained to ensure you have a legally binding, enforceable contract. That's reassuring when you are relying on your REALTOR® to help you with one of the biggest transactions you will make.

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The Final Cost of Buying a Home

The purchase price of your new home is the biggest cost you will come across in your home-buying venture, but it is not the only one. A REALTOR® can provide you with helpful advice about other costs involved, some of which may include the following:

Application / Mortgage Broker Fee – Processing your mortgage application costs lenders money. Consumers may be charged a fee by a lender or mortgage broker for setting up a mortgage when income or credit issues become more sensitive to the approval process.

Appraisal Fee -- The money you borrow for your mortgage is usually a percentage of the home's purchase price, or of the market appraisal -- whichever is lower. The lender will use someone on staff or an independent professional to make this appraisal. You are normally responsible for this cost.

Land Survey Fee – A plot plan or survey of the property you want to buy is important to establish exactly where the boundaries are and make sure there are no encroachments such as part of your neighbor's house or garage sitting on your land. Your lending institution will want to see such a survey and can let you know what their requirements are.

Insurance -- If you are applying for a high-ratio mortgage -- that is, if you are borrowing more than 75 per cent of your home's purchase price -- you will have to pay for mortgage insurance to protect the lender in the event that you fail to make the necessary payments. As your new home will be used as security for your mortgage; the lender will want you to have extended coverage and fire insurance.

You may also wish to check out the cost of buying mortgage life insurance. This insurance ensures that the mortgage balance is paid off if you or a co-borrower dies.

Legal Fees -- These are the fees charged by a lawyer to help you complete the home-buying process. Disbursements are the costs involved in processes such as conducting a title search, drawing up the title deed and preparing and registering the mortgage.

GST -- When you buy a new home, the entire purchase price is taxable. You may, however, qualify for a partial GST rebate if you plan to live in the home yourself. Ask your REALTOR® for details. A "used" residential home is normally exempt from the GST. Remember that GST is also applied to the REALTOR®'S commission and most other transaction fees such as legal and appraisal costs.

Other Costs -- When you buy a home you will also want to budget for utility bills, annual property taxes and maintenance costs.