Inside Scoop Home Buyer London Ontario
| When buying a home in London, Ontario, a majority of buyers worry about buying the best place for them at the best price and without any issues. Blame it on Adam and Eve! Here are a few insider tips that will 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 condition. I said they should, but how would you know if it is unbiased and what comparables used and in what time frames? Without this knowledge, you could quickly bid too much, or worse, 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 quite 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 clearly, discuss these wants and needs with your Realtor, put it in writing and use them as a yardstick with which 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 his or her 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 not issue a mortgage without a survey or title insurance. Real estate lawyers tell me that 99% of transactions they do are with 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 conduct a thorough inspection of the home before you close. A good Realtor will enclose a home inspection clause in the offer, and only if the inspection report is suitable to 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 there is no Provincial Governing Body to monitor and ensure credentials. I have seen some doozies, some unbelievable reports, erroneous ones, and some great reports over the years.
Not Getting Mortgage Pre-approval
Pre-approval is quick, easy and free. Knowing beforehand what you qualify for will help you to avoid disappointment. When you are shopping for a home, this will give you more power; the seller will consider your offer as a serious one. As well, don’t get one approval. 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 in a home’s price. I have got buyers $5,000, $10,000, even $25,000 off a seller’s original price but never $50,000!
But be very careful with pre-approvals. Not all pre-approvals are the same. Check this great Globe and Mail article about ten things you should know about pre-approval here.
Make sure you identify and uncover all costs-large and short- far enough ahead of time. A good Realtor will discuss this with you, and you should consult all fees and costs with your lender, your lawyer and any other professional you may use.
Rushing the Closing
Take your time during this critical part of the process.
Will your Realtor take you through your planned house 2-3 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 back-up plan. If you or the sellers need a little more time to conclude the final arrangements, don’t let these delays upset or frustrate you.
If it’s not in Writing, It Doesn’t Exist.
All promises and discussions are to be in writing. 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 you plan to live in the home?
Buying & selling a home in London or anywhere, in fact, can cost money. If you potentially may have to move in the short term, the value of your home may not have 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 intend, 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 to come.
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? Is your credit 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 not to stretch 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, the big payment today 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. Useful calculators will give you a range of what you may qualify for. Then 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 of your total monthly income. Depending on your assets, credit history, job potential, and other factors, lenders can push the ratios up to 40-60% or higher. While we’re not advocating you purchase a home utilizing the higher ratios, you need to know your options.
Where will the money for the transaction come from?
Typically, homebuyers will 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 not always necessary – if you can prove that you are an acceptable financial risk for a lender. If your credit isn’t stellar, but you have managed to save 5-20% for a down payment, you will still appear to be an excellent financial risk to a lender. 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 associated with them.
The ongoing costs of homeownership.
Maintenance, improvements, taxes, and insurance are all costs above your monthly house payment. If you buy a condominium or townhouse, a monthly homeowner’s association or maintenance fee will be required. If these additional costs are a concern, you can make choices to lower or avoid these fees. If you are still unsure if you should buy a home after making these considerations, you may want to consult with an accountant or financial planner to assess how a home purchase fits into your overall financial goals.
I left the best for last: Make sure you know what you want!
Knowing what you want may sound simple, but many homebuyers do not have a firm idea in their head before they go out searching for a home. When you go shopping 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 find that you fall in love with one or another home for entirely different reasons. Is it better to buy the house with the large master 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 what you want.
To help you know what you want:
What do I NEED in my next home?
What would I LOVE in my next home?