Inside Scoop For London Ontario Home Buyers
When buying a home in London, Ontario and the area, buyers worry about buying the best home for them at the best price and without any issues. How can you do that? Here are a few insider tips to help you decide what is right for you.
Offering a price without sufficient information:
What price do you offer a seller? Is the seller’s asking price too high? Is it ideal? Without research on the market and comparable homes, you are bidding blind. A professional Realtor, who represents you, should offer an unbiased opinion on a home’s value based on market conditions and the home and neighbourhood conditions. I said they should, but how would you know if it is unbiased, what comparables are used, and in what time frames? Without this knowledge, you could quickly bid too much or miss out on a great buying opportunity.
Buying the wrong home.
What are you looking for in a home? A simple enough question, but the answer can be pretty complicated. More than one buyer has been swept up in the emotion and excitement of the buying process only to find themselves the owner of a home that is either too big or too small. Perhaps they didn’t consider the drive to work, the distance to school or the many fix-ups they want to deal with now that the excitement has died.
Take the time now to define your wants and needs, discuss them with your Realtor, put them in writing, and use them as a yardstick,” to measure every home you visit.
Before you sign any documents, be sure the property you are considering is free of all encumbrances. Your lawyer will do this for you as part of their fiduciary duty but ensure your Realtor will include clauses to protect you. The last thing you want to discover before you move in is tax liens, debts, undisclosed owners, leases, contracts or easements.
Inaccurate Survey or Clear Title
Most lenders will only issue a mortgage with a survey or title insurance, and real estate lawyers tell me that 99% of their transactions involve title insurance. Here is an excellent brochure explaining title insurance from the Financial Services Commission of Ontario.
Don’t expect every seller to disclose every physical detail that requires attention. Use a professional home inspector to inspect the home before you close thoroughly. A good Realtor will enclose a home inspection clause in the offer, and only if the inspection report is suitable for you would you waive that condition. (Get my free information: “The Role of a Home Inspector & What To Be Careful About”)
Unfortunately, anybody can call themselves a “Home Inspector,” and no Provincial Governing Body can monitor and ensure credentials. I have seen some doozies, some unbelievable, erroneous, and some great reports over the years.
Not Getting Mortgage Pre-approval
Pre-approval is quick, easy and free. You should know beforehand what you qualify for, which will help you avoid disappointment. Shopping for a home will give you more power; the seller will consider your offer as a serious one. Did you know that shopping for the best rate and terms could save you $50,000 or more over 20 years? Getting the best terms for you for a mortgage is more important than a home’s price. I have got buyers $5,000, $10,000, and even $25,000 off a seller’s original price but never $50,000!
But please be careful with pre-approvals. Not all pre-approvals are the same. Please take a look at this great Globe and Mail article about ten things you should know about pre-approval.
There may be some costs or fees you have yet to think about. A good Realtor will discuss this with you, and you should consult with your lender, lawyer and any other professional about all fees and costs.
Rushing the Closing
Take your time during this critical part of the process.
- Do you understand your mortgage details?
- Has anything been forgotten?
- Do the paperwork and documentation reflect your understanding of the transaction?
Will your Realtor take you through your planned house 2 to 3 days before closing? (To ensure that there are no unusual changes in the home condition that is supposed to stay stays).
Plan for Flexibility
Allow for contingencies and have a backup plan. If you or the sellers need more time to conclude the final arrangements, keep these delays from upsetting or frustrating you.
If it’s not in Writing, It Doesn’t Exist.
Don’t make any assumptions or believe any assurances. Have your real estate professional keep an ongoing log (in writing) of all discussions and get the seller’s written approval for all agreements.
How long do you plan to live in the home?
Buying & selling a home in London or anywhere, in fact, can cost money. If you may have to move in the short term, the value of your home may not have been appreciated enough to cover the costs of buying and selling. The length of time that it will take to cover those costs depends on various economic factors.
How long will the home meet your needs?
What features do you require in a home to satisfy your lifestyle now? Five years from now? People tend to remain in homes longer than they initially intended, primarily due to the work and expense associated with moving. Therefore it is worth considering a home with room to grow. Could the basement be turned into a den and extra bedrooms? Having an idea of what you’ll need will help you find a home that will satisfy you for years.
Your financial health – your credit and home affordability
Is now the right time financially for you to buy a home? Would you rate your financial picture as healthy? Do you think your credit is good? While you can always find a lender to lend you money, people with poor credit tend to pay far more to borrow. Some say that you should refrain from borrowing as much as you qualify because it is wiser to maintain your financial boundaries. The other school of thought says you should try to buy as much home as you can afford because, with regular pay raises and increased earning potential, today’s big payment will seem like less of an amount tomorrow.
To determine how much home you can afford, talk to a lender or go online and use a home affordability calculator. Helpful calculators will give you a range of what you may qualify for. Then you can call a lender. While some may say that the “28/36” rule applies, lenders are making loans customized to a particular person’s situation in today’s home mortgage market.
The “28/36” rule means that your monthly housing costs can’t exceed 28 percent of your income, and your total debt load can’t exceed 36 percent. Depending on your assets, credit history, job potential, and other factors, lenders can push the ratios to 40-60% or higher. While we’re not advocating you purchase a home with higher ratios, you need to know your options.
Where will the money for the transaction come from?
Homebuyers typically need some money for a down payment and closing costs. However, with today’s broad range of loan options, having a lot of money saved for a down payment is only sometimes necessary – if you can prove that you are an acceptable financial risk for a lender. If your credit isn’t stellar, but you have saved 5-20% for a down payment, you may still appear to be an excellent financial risk to some lenders. High-ratio mortgages can be a good option for those who haven’t managed to save a large chunk of money (who has?), but naturally, these have additional costs.
The ongoing costs of homeownership.
Maintenance, improvements, taxes, and insurance will exceed your monthly house payment. A monthly homeowner’s association or maintenance fee will be required if you buy a condominium or townhouse. If these additional costs are a concern, you can lower or avoid these fees.
I left the best for last: Make sure you know what you want!
Knowing what you want may sound simple, but many homebuyers may require a reality check before searching for a home. When you shop for a place to live, two homes compete for your attention: the one that meets your needs and fulfills your desires. Your goal is to find one home that does both!
When you look at homes, you may fall in love with one or another home for entirely different reasons. Is it better to buy the house with the large main bedroom with a large ensuite, the one with the large country kitchen, the one with a pool, or the one with a finished basement? Far too often, people buy a home for the wrong reasons and then regret their decision when the house does not meet their needs.
Do not shop with stars in your eyes: satisfy your needs first. Work with a good Realtor who will sit down with you and listen to your wants.
To help you know what you want:
What do I NEED in my next home?
What would I LOVE in my next home?