1) Pre-qualification

As a first time buyer, you must establish just how much home you can afford, and the costs of acquiring that home. Most Lending Institutions will grant you an interview for just that purpose. In order to avoid potential problems, you should bring to the meeting proof of down payment, and a letter from your employer stating your position and length of time with the company, as well as your salary. Most lenders will be looking for a minimum two years on the job. Caution is warranted here. After the Lender has qualified you using their "payment to income ratios", you may find that in these payments are substantially higher than your rent. Only you have the benefit of knowing your lifestyle. Always compare the qualifying figure to your present day rent. If the gap is too great, ask the Lender to reduce the loan amount to a figure you know you can afford.
 

Now that you know the maximum mortgage amount, add to it your down payment to arrive at the purchase price of the new home. You Lenders out there, remember to mention "closing costs" to these potential home buyers. That may account for up to 3% of the

purchase price of the home....a complete surprise to some of these purchasers.

2) Choosing an Agent.

The next logical step in the process is to choose a Real Estate Agent. Whether you buy new or existing housing, you need someone in your corner to negotiate with the Vendor of the property. You find this Agent through research. The best method is to ask your friends, neighbours, or Lawyer for a name. Ask the potential Agent over for a "get acquainted" cup of coffee. If you feel comfortable, ask them to provide literature for the first time buyer. You may want to interview several Agents. Once you have decided, advise them of that fact and instruct them to go shopping for a home valued at no more than the price you had established above.

3) Making the Offer.

Even if you were pre-qualified by the Lender, always make your purchase conditional upon successfully negotiating a mortgage within a certain time frame (usually 10 days). You may also want to make the purchase subject to a satisfactory pre-purchase inspection.
 

The offer itself will be in writing, coupled with a deposit ($1000), and be presented by your Agent to the Agent for the Vendor. The Vendor can accept or reject your offer, or accept it with some changes. This is called a "counter offer". You may accept the changes, or change them. When these changes have been accepted, the offer becomes binding on both parties.

Your Agent will deliver a copy of the accepted Purchase and Sale Agreement to your lawyer, a copy to your mortgage lender (or Broker) and a copy to you.

4) Pre-purchase Inspection.

If you had purchased "conditional on a satisfactory pre-purchase inspection", now is the time to order said inspection. This individual really won't care how much you paid for the house, his/her job will be to tell you what it will cost you to live there both in the short term (immediate concerns) and in the long haul (future quality controls concerns). You will be asked to pay for this service immediately. If the home quality meets with your expectations, ask your Agent to prepare a waiver for that portion of your offer.

5) Legal Search of Title.

The Lawyer normally has 20 days to "search the title". This will show any flaws on title. If you have not objected to the title within that time frame, all parties will assume that you have accepted the title.

6) The Application for a Mortgage.

If you have not already done so, this is where you go to apply for the mortgage. You visit your Lender, provide him/her with proof of

the family income, proof of down payment, and give them permission

to run a credit search. The Lender will now prepare a mortgage commitment for you, subject to appraisal/CMHC. There may be some

other conditions at this stage (ie. proof of balance of down payment, explanations of negative credit ratings, etc) which must be fulfilled as quickly as possible. Accept the commitment. Since the Lender's commitment is still subject to something, do not waive your financing condition.

7) The Appraisal.

The Lender (Broker) will now order an appraisal on the subject property. You will be asked to pay for this individual to "search" for comparable sales. By this method, the appraiser arrives at a value for the house. If the value is equal or greater than the purchase price, and if the home meets the Lender's quality requisites, you may ask your Agent to fill out a "waiver" for the financing condition. In other words, you had offered to buy the house conditional on financing, and now that you know the financing has been approved and the house fits the bill, you are taking away that condition. If this was a purchase with less than 25% down, the Lender will require a mortgage insurance company to insure the loan against "default". There are two such insurance companies in
 

Canada, CMHC (Canada Mortgage & Housing) and GE Capital Corp.

8) Waiver of All Conditions.

By now, all conditions of your offer have been met so you ask your Agent to prepare a "waiver of all conditions" to present to the Vendor. Now you've done it! You have bought a home.

9) Advice to Landlord.

You can now advise your Landlord that you have joined him/her as a home owner. You may negotiate the termination of your lease. If you have timed things properly, the end of your tenancy is at hand and you have already paid the last month's rent. You may want to assist the Landlord in showing your present abode to perspective future tenants. Start packing. Make arrangements for a moving truck and friends to help, or hire a mover for the possession date.

10) See Lawyer.

The day before possession day (possession day is the day when you actually can move in to your new home), the Lawyer will ask you to come to his/her office to sign mortgage papers, and bring in a certified cheque for the balance of the down payment (you have already given some money to the Vendor with the offer), his/her fees, disbursements (costs to the Lawyer for various certificates), land transfer tax (privilege of owning land in this fair province), sales tax on the CMHC insurance premium. The total amount will be

shown on the "Statement of Adjustments". You may want to ask your Lawyer to provide this piece of paper a few days before closing so you'll know approximately how much to expect. You will also be asked to bring with you proof that you have arranged to insure this new property against fire or theft.

11) Pick Up Keys.

Once the lawyers have done their thing, you may pick up your new keys at your Lawyer's office. Meet your moving truck at your new

home and enjoy.

Anyone of these three people you need to buy a home (the Lawyer, the Agent, or the Lender/Broker) should be able to answer all your questions. These people are working for you. Sometimes we lose sight of our priorities, we need a good kick. Feel free to provide the "boot".

Remember the steps in successful home buying:

1) you find how much you can afford, and gather your down payment,

2) you find the Agent, be satisfied with the Agent, hire the Agent,

3) you find the product, check out the product,

4) you offer to "conditionally" buy the product,

5) you find the Lawyer, get title checked,

6) you find the Lender, apply for the mortgage, get commitment,

7) you satisfy the conditions,

8) you waive the conditions, buy the house,

9) sign mortgage, and move in!