Getting pre-approved for a mortgage is a great first step in the home buying process. Getting a pre-approval letter from a lender can start the ball rolling in the right direction.
First, you need to know how much you can borrow. Knowing how much home you can afford narrows down online home searching for suitable properties; thus, no time is wasted considering homes that are not within your budget. (Pre-approvals also help prevent disappointment caused by falling in love with unaffordable homes.)
Second, your lender’s loan estimate will show how much money is required for the down payment and closing costs. You may need more time to save money, liquidate other assets, or seek mortgage gift funds from family. In any case, you will have a clear picture of what is financially required.
Finally, being pre-approved for a mortgage demonstrates that you are a serious buyer to both your real estate agent and the person selling their home.
Declining home prices and reduced demand characterize a buyer’s market. Several factors may affect long-term and short-term buyer demand, like Economic disruption – a big employer shuts down operations, laying off their workforce, Interest rates trending higher, and High inventory are a few examples that create a buyers market.
A down payment is the money you have in your bank account to apply to the property purchase. Most lending institutions require that you put down between five to 10 percent of the purchase price.
Although technically not required to create a binding contract, a deposit is something most sellers require, which is a negotiable amount that is typically between five to 10 percent of the purchase price in the offer.
The Home Buyer’s Plan allows each first-time homebuyer to withdraw up to $25,000 from their RRSPs to purchase a residential property without having to pay taxes at the time of withdrawal. The amount must be repaid over a period of 15 consecutive years.
Homebuyers in BC pay a provincial Property Transfer Tax (PTT) when they buy a home. The tax is charged at a rate of 1% on the first $200,000 of the purchase price and 2% on the remainder up to and including $2 million. The PTT is 3% on amounts greater than $2 million. If the property is residential, a further 2% PTT is payable on the portion greater than $3 million.
Qualifying first-time homebuyers may be exempt from paying the PTT if their home’s purchase price is priced up to $500,000. There is a proportional exemption for homes priced between $500,000 and $525,000. At $525,000 and above, the rebate is nil.
Qualifying buyers of new homes may be exempt if their home’s purchase price is priced up to $750,000. There is a proportional exemption for homes priced between $750,000 and $800,000. At $800,000 and above, there’s no rebate.
A home inspection is a report on the home’s condition and includes structural and moisture problems and electrical, plumbing, roofing, and insulation. The fees range and are typically $500-$900 depending on the home’s size and the complexity of the inspection. Some inspectors also charge an additional fee for an older home or a home with a secondary suite, a crawlspace, or a laneway home.
Home shoppers typically pay no fees to an agent to buy a home.
For most home sales, there are two real estate agents involved in the deal: one representing the seller and another who represents the buyer.
Listing brokers represent sellers and charge a fee to represent them and market the property. Marketing may include advertising expenses such as radio spots, print ads, television, and internet ads. The property will also be placed in the local multiple listing service (MLS), where other agents in the area (and nationally) will be able to search and find the home for sale.
The listing broker compensates agents who represent buyers (a.k.a. buyer’s agent) for bringing home buyers to the table. When the home is sold, the listing broker splits the listing fee with the buyer’s agent. Thus, buyers don’t pay their agents.
The PST is generally not payable on services except for legal and notary fees. Both the GST and PST are paid on legal and notary fees.
Sellers can flat-out accept or reject an initial offer. But there a third path that is quite common, sellers can initiate a counteroffer. Remember this: a deal isn’t dead until it’s dead. So, if the seller proffers a counteroffer, you’re still in the game. You and your agent need to review it to determine whether the counteroffer is acceptable. If so, then approving it closes the deal immediately. Keep in mind, offers and counteroffers can go back-and-forth many times; this is not unusual, and negotiations are a part of what Realtor’s do as a matter of routine. Each revision should bring both parties closer together on the terms of the deal.
Typically you have to pay GST when purchasing a newly constructed home. There are several other scenarios where you may have to pay GST (for example, a substantially renovated home), so it is always good to inquire with your realtor before making an offer.
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