Are you looking to buy your first home? How to get started? What is downpayment? These are some of the common home buying questions.
Below are answers to the top home buying questions asked by many first-time homebuyers that you will find helpful.
Cost of Buying First Home
1. How much down payment ?
Down payment is the portion of your own money that you paid toward the home price.
This is always the first question that many homebuyers asked.
The minimum down payment is 5% of the first $500,000 of the purchase price of the home, and 10% for the amount over the $500,000.
For example, if the purchase price is $700,000, the downpayment will be a total of $45,000
- 5% of the $500,000, which is $25,000
- 10% of the $200,000, which is $20,000
The purchase price minus the downpayment will be the balance amount from the bank or lender. The lender will loan you the amount you qualified for plus interest. This is your mortgage.
When your down payment is less than 20% of the purchase price, you will need mortgage loan insurance by CMHC. This is considered a high ratio mortgage. The mortgage loan insurance is to protect the lender if you have a problem paying your mortgage.
The mortgage insurance premium can be added to the principal of your mortgage.
When you have 20% or more as a down payment, there is no mortgage premium. This is the conventional mortgage where the lender loans you 80% or less of the purchase price of your home.
2. How much is the deposit
A deposit is the amount of money you pay when you make an offer to purchase the home. This is stated in the Offer of Purchase for the home. Once the offer is accepted by the Seller, you have to pay the deposit within one business day.
This deposit will become part of your down payment.
The amount of deposit varies. For a hot market, the Seller will request a 5% deposit. The more you put down as a deposit, will show that you are a serious buyer.
When you change your mind after the offer is accepted, there is no refund of the deposit. In some cases, you might get sued for not closing the deal.
If you have had some protection clauses like mortgage financing or home inspection, you might be able to get back your deposit.
3. What are the legal fees
When you buy a home, you will need a lawyer to prepare the legal documents to register you as the new owner of the property. How much are the legal fees will depend on where is the property located and the type of property.
4. Appraisal Fee
The mortgage lender will need to know how much the property is worth. The lender will hire a property appraiser to do the job.
Some lenders will ask you to pay for the cost. You can always negotiate with your lender.
5. Home inspection fee
It is advisable to hire a qualified home inspector to inspect the property before buying. This will be one of the conditions stated in the Offer of Purchase. An inspector will provide you with information regarding the condition of the property.
The fees for inspection vary for different types and sizes of homes.
6. Title insurance fee
Title insurance is a way to protect yourself from any financial loss related to a defect in the title of the property.
Normally your lawyer will advise you to get the title insurance. The fees vary with the price of properties.
7. Property Tax
When you own a home, you have to pay the property tax. Property tax is charged by the municipality where the home is located.
Property Tax is calculated based on the government-assessed value of the property.
You will be billed yearly. You have the options to pay yearly or quarterly.
When you are the new owner of your home, the previous owner might have paid the portions of the taxes when they are no longer the owner. In this case, you will need to pay the money to the seller. Your lawyer will do the paperwork.
8. Condo Maintenance Fee
If you buy a condo, there is a monthly condo maintenance fee.
In the same situation as the property tax, if the previous owner has paid the maintenance fees past those days they owned the condo, you will need to pay them back the money.
9. Property Insurance
Your mortgage lender will require you to buy the property insurance. This is because your home is the security for your mortgage. This insurance will replace your home and its content when your home is damaged by fire or water.
The property insurance must be in place on closing day.
10. Other Costs
When buying a home, there are some other costs which include moving expenses, renovation, and repairs.
Get to know the different type of houses
11. Detached Houses
These are individual houses where walls are not shared with neighbours
12. Semi-detached houses
These are a pair of houses joined by a wall
13. Row houses or Townhouses
These are individual houses joined to each other in a row. The houses at both ends of the row have one side of the wall adjoining the neighbour. The rest of the houses have walls joined to neighbours on both sides.
14. Condominium apartments
These include highrise, mid-rise, and low-rise buildings with individual housing units.
15. Location and Neighbourhood
Deciding on the location makes searching for a home easier. Maybe you want to live near to your workplace, friends or relatives. The type of neighbourhood or community is another consideration. Do you want to live close to schools, easy access to public transport, shopping, parks, and recreation?
If you have children and a preference for schools, you might want to check on the schools before looking for houses. This is to make sure that your house is within your preferred school boundaries.
16. Realtor
Do you need a realtor?
It will be so much easier for you if you have a realtor. Do not limit yourself to open houses and internet search on your own. A realtor can help you find all the houses that are for sale that fit your criteria.
When you are ready to buy your home, have your down payment and know how much loan you can get from a lender, you will have an idea of what price range of house you can afford.
At this time, you can start looking for a realtor.
How to work with a realtor
For a first time home buyer, ask your realtor lots of questions about buying a home
– What are the cost involved
– what you need to do before looking for a home
– how you will find a home
– what are the steps from searching until closing the deal
It makes buying process easier if you understand the whole process before searching for a home.
It is important that the realtor give you a buyer consultation.
At the same time, the realtor will ask you questions about what you want and need for your home.
Above are the top home buying questions for home buyers. If you have any other questions, feel free to contact us and we are more than happy to help.
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