Steps To Owning A New Home

The key to a successful buying experience is to be well prepared and well informed.

Find out about the typical buying process at a glance and check below for more in-depth information. Download checklists and other items from the tools section to guide you through your purchase.

The Typical New Home Buying Process - Buying a brand new home is a big decision and an important investment, and there is a lot to think about. You want to buy with confidence, enjoy the experience and know that you have made the best decision for you and your family. Typically, the process of buying a brand new home takes place over time and in several stages. To begin with, you want to take some time deciding on your priorities—what you want in a home, where you want to live and how much you want to spend—and then explore what's available. Once you have narrowed your choices down to one community, one builder and one home, you are ready to work out the details and sign a contract with your builder. Then it's time to step back and let the builder do the work. Before you start looking Get off to a great start by doing some pre-planning before you go house hunting. Discuss with everyone in your household what they want in a new home and surroundings. Make lists of what's important and divide them into…

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Mortgages - One of the first steps in buying a new home is to take a realistic look at what you can afford and how you are going to pay for it. If you are like most people, you will probably have to finance your home purchase with a mortgage loan. What is a mortgage? A mortgage is a loan that uses the home you buy as security. This loan is registered as a legal document against the title of your property. Here's a quick overview of some of the most common aspects of a mortgage that you need to understand. The principal is the amount of the loan, or the cash actually borrowed. The interest is the amount the lender charges for the use of the funds, or principal. Interest rates vary according to many factors, including terms and conditions of the mortgage. Mortgage payments are applied toward both principal and interest. The amortization period is the actual number of years that it will take to repay the entire mortgage loan in full. This normally ranges from 15 to 25 years. The term is the length…

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Types of Mortgages - There are two basic types of mortgages: Conventional mortgage The loan amount does not exceed 80% of the property value, defined as the lesser of the purchase price or the appraised value. High-ratio mortgage, or National Housing Act mortgage The amount is more than 80% of the property value (up to 95%). By law, a high-ratio mortgage must be insured against borrower default. The borrower pays a mortgage insurance premium (a percentage of the total loan amount) which can be added to the mortgage loan or paid in a lump sum in advance. The borrower must also pay an insurance application fee.

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How much can you afford to spend on a new home? - The amount of money you can afford to spend for a new home is determined by two factors: 1. Your downpayment. This is the amount of money you have available from your own assets. You need a minimum of 5% of the total purchase price as a downpayment. A larger downpayment means lower mortgage payments or, even better, that you can pay off the mortgage faster, thereby saving thousands of dollars in interest payments. Or you may be able to buy in a higher price range, if you qualify. (Be careful, though, not to stretch your budget to the limit, and to set enough money aside to cover the other expenses of buying a home.) First time home buyers can use their RRSPs towards a downpayment and closing costs. Under the federal government's Home Buyer's Plan, first-time buyers can borrow up to $25,000 tax-free ($50,000 for couples) from their RRSP savings. The funds must be repaid within 15 years, but you don't have to begin repayments for two years. 2. Your ability to carry mortgage debt.…

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Get Approval - It is a good idea to have your financing in place before you begin looking for your home. That way you can negotiate arrangements with your builder in full confidence and without delay. A pre-approved mortgage is preliminary approval by the lender for a mortgage up to a certain amount, usually with a guaranteed rate for a specified number of days (90 days and sometimes longer). If interest rates go down during that period, you will get the benefit of the lower rate. If they go up, your rate stays locked in. Pre-approved mortgage financing is simple to arrange, costs nothing and does not obligate you to go ahead with the loan, if you choose not to. The final mortgage amount and terms will be determined once you have reached a final agreement with your builder.

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Working With Lenders - Shop for a mortgage in the same way you shop for any other product. Banks, trust companies and other financial institutions are offering more ways to finance a new home purchase than ever before, so it is a good idea to do some checking before you make a final decision. Get information The Internet. Mortgage lenders and insurers offer a wealth of online information about the borrowing process and financing options. Printed information. Most lenders have a wide range of brochures and worksheets. Drop in at local branch offices for copies of these materials. Personal consultation. Make an appointment with a mortgage specialist to discuss your buying intentions and get mortgage pre-approval. A growing number of lenders offer flexible business hours, including evening and weekend meetings. Professional new home builders. Larger companies, in collaboration with financial partners, may offer mortgages to their customers at preferential rates. Mortgage experts may be available in show homes during…

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Apply For Your Mortgage - Home buyers have several options when it comes to applying for a mortgage loan. Simple applications can often be made over the Internet, or you can get the process started with a phone call. You may still need to visit the lender or broker in person to finalize the application. Alternatively, they may come to your home to make the process more convenient for you. Today's mortgage specialists are well trained and well equipped and able to process your application quickly. This reduces the stress and uncertainty of waiting for an answer; a quick turnaround can be key to getting the home you want. You can often get the results of your application immediately. This may be a conditional approval, pending verification of income, and so on. If the mortgage represents 80% or more of the value of the home, the loan must be insured against default. A separate application must be submitted to a mortgage insurance company, but electronic networking between lenders and insurers means little or…

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Mortgage Insurance - Few people have the resources to pay outright for their new home. The vast majority needs to borrow money to help finance their purchase and will go directly to a financial institution such as a bank, trust company, credit union or caisse populaire, or they may work with a mortgage broker who will arrange a loan for them. The process of getting mortgage insurance is easy and straightforward. After your lender has approved your mortgage in principle, they forward an application for insurance to a mortgage insurer. Applications for insurance can be processed and approved within minutes, or it may take longer if personal follow-up is required. Home buyers are required to pay a mortgage premium. The rate is calculated as a percentage of the mortgage and depends on the size of your downpayment. The premium can be paid as a lump sum upfront, or it can be added to your mortgage and incorporated into your monthly payments. Mortgage insurance is also portable. If you sell your home and transfer…

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Additional Cost of Buying a New Home - The key cost consideration for any home purchase is the price of the home itself. When you buy a brand new home from a builder, the cost typically includes the base price of the home (and lot) plus the price of any upgrades you choose, from fireplaces to additional landscaping. In addition, there are other costs that you should be aware of, from legal fees to mortgage insurance premiums, which can apply to a home purchase. Ask your new home builder and your mortgage lender about the specific items and typical costs that will apply to your situation. That way, you can budget for them and proceed with confidence, knowing that you will not be faced with unexpected last-minute expenses. Sales Tax When buying a newly built home up to $350,000, purchasers are entitled to a rebate of 36% of the GST, up to $8,750. Between $350,000 and $450,000, the rebate is reduced on a sliding scale, and there is no rebate on homes above $450,000. The rebate can be assigned to the builder at the time of purchase,…

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Buying From Plans and Model Homes - When you buy a brand new home, you will most likely make your decision based on the builder's plans or model homes, or a combination of the two. This requires careful thought and attention. It can be challenging to visualize what your home will look like when built, or imagine what it will be like to live in. It's also important to understand what is included with your purchase and what's not, down to the smallest detail. Experienced salespeople believe there are two keys to successful home buying from plans and models. First and foremost, deal with a professional new home builder—someone who has a solid reputation and professional sales staff who will work closely with you throughout the buying process. Secondly, don't rush. Take time to consider all aspects of your purchase, and ask lots of questions. The more information you have, the easier it is to eliminate uncertainties. Construction Quality Look closely at the overall quality of builders' model homes,…

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Standards, Upgrades, and Options - When you decide to buy a new home based on viewing a model home, remember that this is not the actual house that you will be living in. Most model homes have been improved with options and decorations for presentation purposes. Ask your builder and/or salesperson about the following common new home features—are they standard or upgrades? If upgrades, what is the additional cost, and what is the standard feature like? Inside Windows (including bay windows, accent and transom windows)—quality, glazing, low-E coating, material and locks Exterior doors—quality, material, sidelights Trim (windows, doors and baseboards)—plain or colonial, natural or painted Paint (interior or exterior)—type, quality and colours Patio door—width, quality, glazing, low-E coating, material Carpet and underpad—quality, material, weight, colours, backing, manufacturer's warranty Linoleum and vinyl flooring—quality, colours, patterns Ceramic tiles (floor and walls)…

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Design and Layout - Walking into the show home of a professional new home builder is bound to elicit a few "oohs" and "ahs". Dramatic entrances, sweeping vistas, soaring ceilings, gleaming floors, bold colours—today's new homes are designed with flair and creativity. With the incredible selection of styles and designs available today, it can be a challenge to narrow your choice down to a single home. As you visit model homes and look over builders' plans, take time to consider how various designs would work for you and your family. Space Today's design trends lean towards smaller well-designed homes, with little "wasted" space and all the details and amenities you could want. Before you start wondering about square footage in the particular model, consider the actual space available and if it is adequate to your needs. Often space is a matter of perception. High ceilings and large window areas can create a feeling of spaciousness without adding the cost of extra…

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