Home Buying: A Weighty Decision

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Legend believes in going beyond the grit and grime involved in building spectacular spaces to offer the best to our existing and prospective clients. From understanding your requirements to helping you zero in on your dream house, we extend ourselves through customization and post-sale service to help our clients make that all-important decision of buying a suitable home. To begin with, we've outlined some useful tips to assist you in your home search. This will be especially useful, if you are a first-time buyer.

How much can you spend on a new home?

Viewing homes can be fun, but beware of falling in love with a home beyond your price range. Buying a big house can sacrifice your future by making it impossible to:

  • Save for retirement
  • Provide for children's education
  • Take vacations

What you can buy depends on:

  • How much cash you have for a down payment and closing costs, plus
  • How much money a mortgage lender is willing to provide as a loan

Most homes are purchased with cash plus a mortgage loan. The cash is mainly for a down payment of about 20% of the property value but a small amount is needed for closing costs. The mortgage loan covers the difference between the purchase price and the cash down payment. Expect to pay higher interest rates and higher fees for mortgage loans when your cash down payment is less than 10% of the purchase price. A low down payment also means higher monthly payments which can stress your ability to pay other bills.

What you can afford depends on:

  • How much you can comfortably handle in monthly payments

There is no shortage of brokers and lenders willing to convince you that you can afford that dream house now. Beware of:

  • Adjustable rate mortgages that start with low monthly payments that can quickly grow beyond your ability to pay.
  • Interest only loans where monthly payments do nothing to reduce the amount owed on the mortgage loan. You build no equity and at the end of the term you still owe the entire amount of the loan

The most common mistake is to buy a home at the limits of your finances. Most of us need to focus on mortgage amounts less than the maximum a mortgage lender will lend. Unless confident that your income will be increasing sharply, don't accept a mortgage more than 80% of the maximum that mortgage lenders will give.

Get pre-approved for a mortgage loan to buy a home

Most first time home buyers want to look at homes... they often shop for a mortgage loan only after they've fallen in love with a particular house.

Potential Problems:

  • Your dream house gets sold to another buyer while you wait for mortgage loan approval.
  • Sellers refuse to consider your offer because without a pre-approved mortgage loan you can't prove you have the financial resources to purchase a home.
  • You pay through the nose for mortgage loans you could have gotten for thousands of rupees less if you had taken the time to shop.

Purchasing a home: Closing the deal and moving in

Appraisal:

  • The Mortgage lender will send a real estate appraiser to determine the value of the home you want to buy. If the appraised value is below the agreed sale price, the lender will not provide a mortgage loan to buy that home.

Property Inspections

  • The buyer or buyer's inspector makes a list of items that should be repaired by the seller.

Seller's repairs

  • The Seller may make all repairs to the home as requested, make some of the repairs, or refuse to make any repairs.

Things the Buyer must do:

Follow up with Mortgage lender or broker:

Make sure a cheque for the mortgage loan will be available at the closing. Mortgage documents and cheque should be delivered to the Closing Attorney.

Get Inspections done:

Get your inspections done early so that seller will have time to make any needed repairs.

  • Termite inspection
  • Roof inspection
  • General inspection of appliances, air conditioning & heating, electrical system, plumbing, sprinklers, etc.

Notify Utilities:

Notify electricity, telephone, water, trash and other services to advise them of your move-in date.

Get a copy of the settlement statement:

Review it with your real estate agent and question anything you don't understand.