HOMEBUYING STEP BY STEP. A Consumer Guide and Workbook

Transcription

1 HOMEBUYING STEP BY STEP A Cosumer Guide ad Workbook

2 CMHC HOME TO CANADIANS Caada Mortgage ad Housig Corporatio (CMHC) has bee Caada s authority o housig for more tha 65 years. CMHC helps Caadias meet their housig eeds. As Caada s authority o housig, we cotribute to the stability of the housig market ad fiacial system, provide support for Caadias i housig eed, ad offer objective housig research ad advice to Caadia govermets, cosumers ad the housig idustry. Prudet risk maagemet, strog corporate goverace ad trasparecy are corerstoes of our operatios. For more iformatio, visit our website at or follow us o Flickr, Twitter, YouTube ad LikedI. You ca also reach us by phoe at or by fax at Outside Caada call or fax to Caada Mortgage ad Housig Corporatio supports the Govermet of Caada policy o access to iformatio for people with disabilities. If you wish to obtai this publicatio i alterative formats, call

3 Homebuyig Step by Step A Cosumer Guide ad Workbook CMHC offers a rage of housig-related iformatio. For details, visit our website at or call Cette publicatio est aussi dispoible e fraçais sous le titre : L achat d ue maiso étape par étape : Guide à l itetio des cosommateurs (61143)

4 This book is provided for geeral iformatio purposes oly. Ay reliace or actio take based o the iformatio provided is the sole resposibility of the user. Readers are advised to cosult appropriate professioal resources to determie what is suitable i their particular case. CMHC assumes o resposibility for ay cosequeces arisig from use of the iformatio provided i this guide. Caadia Cataloguig i Publicatio Data Mai etry uder title: Homebuyig Step by Step: A Cosumer Guide ad Workbook Rev. ed. Issued also i Frech uder the title: L achat d ue maiso étape par étape: guide à l itetio des cosommateurs Cat. o. NH15-114/2004E ISBN House buyig Caada Hadbooks, mauals, etc. 2. House buyig Caada Costs Hadbooks, mauals, etc. 3. Homeowership Caada Hadbooks, mauals, etc. I. Caada Mortgage ad Housig Corporatio. HD1379.H C Caada Mortgage ad Housig Corporatio. All rights reserved. No portio of this book may be reproduced, stored i a retrieval system or trasmitted i ay form or by ay meas, mechaical, electroic, photocopyig, recordig or otherwise without the prior writte permissio of Caada Mortgage ad Housig Corporatio. Without limitig the geerality of the foregoig, o portio of this book may be traslated from Eglish ito ay other laguage without the prior writte permissio of Caada Mortgage ad Housig Corporatio. Prited i Caada Produced by CMHC Revised: 2002, 2003, 2004, 2007, 2008, 2010, 2011, 2012, 2013, 2014 Reprited: 2002, 2003, 2004, 2005, 2006, 2007, 2008, 2009, 2010, 2011, 2012, 2013, 2014

5 TABLE OF CONTENTS Itroductio Step 1: Is homeowership right for you? 5 Step 2: Are you fiacially ready? 7 Step 3: Which home is right for you? 21 Step 4: The buyig process 37 Step 5: Now that you re a homeower 47 Words to kow whe buyig a home...52

6 Itroductio So, you ve fially decided to fulfill a lifelog dream ad buy your ow home... how excitig! You will fially have a place to call your ow, ad the power to make decisios about home improvemet ad reovatios. A home may also be a importat way for you to grow fiacially. Buyig a home ca be a challege. You ll have to deal with may differet people alog the way. Ad, you re sure to have lots of questios, such as: What should I ask my realtor? What kid of questios should I prepare for my leder? What is the differece betwee a appraisal ad a ispectio report? Ca I add reovatio costs to my mortgage? Where ca I fid iformatio that I ca trust? CMHC s Homebuyig Step by Step guide will make thigs easier for you by givig you the iformatio ad tools you eed to make a iformed ad resposible homebuyig decisio. This hads-o workbook provides examples ad worksheets to guide you through the etire homebuyig process. The iformatio i this guide is clear ad straightforward. It will help you kow who to ask, what to ask, ad what to do every step of the way. Whe preparig to buy a home you may read or hear words that are ufamiliar. At the ed of this guide you will fid defiitios for may of the words you ecouter durig the process. This guide will help make your homebuyig experiece excitig ad rewardig which it should Home with CMHC Our e-ewsletter is your ultimate source for depedable home care advice. Check out some of the past issues ad sig up today at

7 STEP 1 Is homeowership right for you?

8 Homebuyig STEP BY STEP Buyig a home is oe of the biggest emotioal ad fiacial decisios you ll ever make. Prepare by learig about the process of homebuyig ad the resposibilities of homeowership. The differeces betwee retig ad buyig a home are vast, ad there s a log list of pros ad cos for both optios. Ad, remember there is o oe best decisio for everyoe. Before movig forward, though, here are some questios to cosider: Do you have the ecessary fiacial maagemet skills? How fiacially stable are you? Are you ready to take o the resposibility of all the costs ivolved i homeowership, icludig mortgage paymets, repairs, ad maiteace? Are you able to devote the time required for home maiteace? There are pros ad cos for both retig ad buyig. Everyoe must make his or her ow best decisio. Buyig a home is ot for everyoe. Take a momet to thik through the advatages ad disadvatages of both owig ad retig. Use this worksheet to guide you. Advatages of Retig Disadvatages of Retig Advatages of Owig Disadvatages of Owig Read over your completed worksheet ad the thik carefully. Are the advatages of owig your home really bigger tha the advatages of retig? Are the disadvatages of owig your ow home really smaller tha the disadvatages of retig? If homeowership is for you, you must be both fiacially ad emotioally ready. Buyig a home is t oly about moey. You should liste to your heart ad take a hoest look at your lifestyle. 6 Caada Mortgage ad Housig Corporatio

9 STEP 2 Are you fiacially ready?

10 Homebuyig STEP BY STEP Olie Calculators Easy to use mortgage tools help you better uderstad your fiacial situatio. Determie how much house you ca afford, ad the maximum price that you should cosider. CMHC offers o-lie iteractive tools to calculate household budgets ad mothly debt paymets. For these ad other quick ad easy calculatios, visit ad follow these liks: Buyig a Home Homebuyig Step by Step Step 2: Are you Fiacially Ready? How ca you kow if you are fiacially ready to become a homeower? This step guides you through some simple calculatios to figure out your curret fiacial situatio, ad the maximum home price that you should cosider. How Much are You Spedig Now? The first thig you eed to figure out is how much you are spedig ow. To figure this out you ll eed to calculate: Your mothly household expeses Your mothly debt paymet Calculate Your Household Expeses What is your preset household budget? How much are you ow spedig each moth o household expeses? The Curret Household Budget worksheet o the ext page helps you take a realistic look at your curret mothly expeses. Fill i all the figures that apply to you, ad add them up. Calculate Your Mothly Debt Paymets Do you kow how much debt you are carryig? You eed this iformatio to figure out whether you are fiacially ready for homeowership. If you decide to buy a home, mortgage leders will ask for this iformatio. Use the form below to determie your curret mothly debt paymets. Fill i all the figures that apply to you. MONTHLY DEBT PAYMENTS AVERAGE MONTHLY AMOUNT Loas for property you ow $ Car loas or leases $ Persoal loas or lies of credit $ Credit cards $ Studet loas $ Other loas $ Total Mothly Debt Paymets (Add up all of the above costs) $ Calculate Your Total Mothly Expeses Your total mothly expeses are your household expeses plus your debt paymets. To calculate your mothly expeses, add the total from the Curret Household Budget form to the total from Mothly Debt Paymets form, usig the form below. Total Mothly Expeses Debt Paymets (Total from Mothly Debt Paymets form) TOTAL 8 Caada Mortgage ad Housig Corporatio

11 STEP 2 CURRENT HOUSEHOLD BUDGET Details Average mothly paymet Curret Housig Expeses Ret $ Electricity (if paid separately) $ Heatig costs (if paid separately) $ Water (if paid separately) $ Maiteace/Repair $ Parkig fees (if paid separately) $ Curret No-Housig Expeses Cable TV/Satellite/Video retal $ Car fuel $ Car isurace ad licese $ Car repairs ad service $ Charitable doatios $ Child care $ Child support/alimoy $ Clothes $ Cotets isurace $ Detal expeses $ Etertaimet, recreatio, movies $ Furishigs $ Groceries $ Iteret $ Life isurace $ Luches/Eatig out $ Medical expeses, prescriptios, eyewear $ Newspapers, magazies, books $ Persoal items $ Public trasportatio $ Savigs (bak accout, RRSPs) $ Telephoe/Cell phoe $ Other expeses $ Total Mothly Expeses $ Note: You may have other costs ot show o this worksheet. Additioal Curret Household Budget worksheets are available at the ed of this Guide. Caada Mortgage ad Housig Corporatio 9

12 Homebuyig STEP BY STEP How Much Ca You Afford? Before you begi shoppig for a home, it s importat to kow how much you ca afford to sped o homeowership. You will wat to pla ahead for the various expeses related to homeowership. I additio to purchasig the home, other sigificat expeses will iclude heatig, property taxes, home maiteace ad reovatio as required. Two simple rules ca help you figure out how much you ca realistically pay for a home. You must uderstad these rules to uderstad if you will be able to get a mortgage. Affordability Rule 1 The first rule is that your mothly housig costs should t be more tha 32% of your average gross mothly icome. Housig costs iclude your mothly mortgage paymets (pricipal ad iterest), property taxes ad heatig expeses. This is kow as P.I.T.H for short Pricipal, Iterest, Taxes ad Heatig. If you are thikig of buyig a codomiium or leasehold teure, you should kow that: For a codomiium, PITH also icludes half of the mothly codomiium fees. For leasehold teure, PITH also icludes the etire aual site lease. Leders add up your housig costs ad figure out what percetage they are of your average gross mothly icome. This figure is called your Gross Debt Service (GDS) ratio. To be cosidered for a mortgage, your GDS must be 32% or less of your gross household mothly icome. Use the table below to calculate your GDS ratio or use CMHC s olie calculators at GDS RATIO Your average gross mothly salary (before deductios)* $ Your spouse s average gross mothly salary (before deductios) Other mothly icome (from ivestmets or other o-employmet sources) $ $ (A) Total average mothly icome (add up all amouts) $ (B) Multiply amout (A) X 0.32 = GDS $ * Gross salary is icome before taxes. Affordability Rule 2 The secod rule is that your etire mothly debt load should ot be more tha 40% of your average gross mothly icome. Your etire mothly debt load icludes your housig costs (P.I.T.H.) plus all your other debt paymets (car loas or leases, credit card paymets, lies of credit paymets etc.). You have calculated these o the Mothly Debt Paymets form. This figure is called your Total Debt Service (TDS) ratio. 10 Caada Mortgage ad Housig Corporatio

13 STEP 2 Use the table below to calculate your TDS ratio ad to determie the mothly housig costs you ca afford after makig other mothly debt paymets. TDS RATIO (A) Total average mothly icome (A) from your GDS calculatio $ (B) Multiply (A) X 0.40 = TDS $ Add up your mothly paymets for loas, credit cards ad other debts Mothly auto paymet $ Mothly lie of credit or persoal loa paymet $ Mothly credit card paymet $ Mothly studet loa paymet $ Ay other mothly paymets $ (C) Add up the total mothly paymets listed above $ (D) Subtract (C) from (B) to fid the mothly housig costs you ca afford $ Your Maximum Home Price The maximum home price that you ca realistically afford depeds o a umber of factors. The most importat factors are your household s average gross mothly icome, your dow paymet ad the mortgage iterest rate. For may people, the hardest part of buyig a home especially their first oe is savig the ecessary dow paymet. NOTE: For CMHC-isured mortgage loas, the maximum purchase price or as-improved property value must be below $1,000,000, whe the loa-to-value ratio is greater tha 80%. Mortgage Loa Isurace Mortgage loa isurace helps protect leders agaist mortgage default, ad eables cosumers to purchase homes with a miimum dow paymet of 5% with iterest rates comparable to those with a 20% dow paymet. Olie Calculators Easy to use mortgage tools help you better uderstad your fiacial situatio. Determie how much house you ca afford, ad the maximum price that you should cosider. CMHC offers o-lie iteractive tools to calculate household budgets ad mothly debt paymets. For these ad other quick ad easy calculatios, visit ad follow these liks: Buyig a Home Homebuyig Step by Step Step 2: Are you Fiacially Ready? Caada Mortgage ad Housig Corporatio 11

14 Homebuyig STEP BY STEP The CMHC mortgage loa isurace premium is calculated as a percetage of the loa ad is based o a umber of factors such as the iteded purpose of the property (ower occupied or retal), the type of loa (i.e. purchase/costructio or refiace loa), the ability of a self-employed borrower to supply icome verificatio, ad the size of your dow paymet. The higher the percetage of the total house price/value that you borrow, the higher percetage you will pay i isurace premiums. The cost for mortgage loa isurace premiums is usually offset by the savigs you get from lower iterest rates. FINANCING REQUIRED PREMIUM % OF LOAN AMOUNT Up to ad icludig 65% 0.60 Up to ad icludig 75% 0.75 Up to ad icludig 80% 1.25 Up to ad icludig 85% 1.80 Up to ad icludig 90% 2.40 Up to ad icludig 95% Traditioal Dow Paymet 3.60 No-traditioal Dow Paymet 3.85 * Premiums i Maitoba, Otario ad Quebec are subject to provicial sales tax. The provicial sales tax caot be added to the loa amout. This table gives you a idea of the maximum home price you ca afford. HOUSEHOLD INCOME 5% DOWN PAYMENT MAXIMUM HOME PRICE 10% DOWN PAYMENT MAXIMUM HOME PRICE 25% DOWN PAYMENT MAXIMUM HOME PRICE $25,000 $3,000 $60,000 $6,300 $63,000 $18,900 $75,600 $30,000 $3,900 $78,000 $8,200 $82,000 $24,700 $98,800 $35,000 $4,800 $96,000 $10,100 $101,000 $30,300 $121,200 $40,000 $5,700 $114,000 $12,000 $120,000 $36,000 $144,000 $45,000 $6,600 $132,000 $13,900 $139,000 $41,700 $166,800 $50,000 $7,500 $150,000 $15,800 $158,000 $47,400 $189,600 $60,000 $9,300 $186,000 $19,600 $196,000 $58,800 $235,200 $70,000 $11,050 $221,000 $23,400 $234,000 $70,100 $280,400 $80,000 $12,500 $250,000 $27,200 $272,000 $81,500 $326,000 $90,000 $14,400 $288,000 $31,000 $310,000 $92,800 $371,200 $100,000 $16,275 $325,500 $34,800 $348,000 $104,300 $417,200 Figures are rouded to the earest $ Caada Mortgage ad Housig Corporatio

15 STEP 2 Do Your Calculatios Show You Are Ready? After doig the calculatios, do you feel fairly cofidet about begiig the homebuyig process? You re ready to proceed with homeowership. Do Your Calculatios Show Adjustmets Are Needed? You may eed to step back ad make some adjustmets. Did your calculatios show that you might have trouble meetig mothly debt paymet? If that s the case, you may fid it difficult to get approved for a mortgage. Here are some thigs you ca do to improve your situatio: Pay off some loas first. Save for a larger dow paymet. Take aother look at your curret household budget to see where you ca sped less. The moey you save ca go towards a larger dow paymet. Lower your home price remember that your first home is ot ecessarily your dream home. Here are some more helpful strategies: Meet with a credit cousellor. He or she ca help you figure out how to miimize your debts. Buy your home through a ret-to-ow program. These are sometimes provided by the builder or a o-profit sposor. Fid out about programs through which you ca help build your ow home. Ask the housig departmet of your muicipality if ay special programs exist. What are Your Next Steps? Get a Copy of Your Credit Report Before approvig a mortgage, leders will wat to see how well you have paid your debts ad bills i the past. To do this, they cosider your credit history (credit report) from a credit bureau. This tells them about your fiacial past ad how you have used credit. Before lookig for a mortgage leder, get a copy of your ow credit history. There are two mai credit-reportig agecies: Equifax Caada Ic. ad TrasUio of Caada. You ca cotact either oe of them to get a copy of your credit report. There is ofte a fee for this service. Oce you receive your credit report, examie it to make sure the iformatio is complete ad accurate. If You Have No Credit History If you have o credit history, it is importat to start buildig oe by, for example, applyig for a stadard credit card with good iterest rates ad terms, makig small purchases ad payig them as soo as the bill comes i. Caada Mortgage ad Housig Corporatio 13

16 Homebuyig STEP BY STEP If You Have Poor Credit History If you have poor credit, leders might ot be able to give you a mortgage loa. You will eed to re-establish a good credit history by makig debt paymets regularly ad o time. Most ufavourable credit iformatio (icludig bakruptcy) drops off your credit file after seve years. Cosider gettig some credit cousellig if you have a history of poor credit or talk to your leder to discuss optios. Get a Mortgage Pre-Approval It s a very good idea to get a pre-approved mortgage before you start shoppig. May realtors will ask if you ve bee approved. A leder will look at your fiaces ad figure the amout of mortgage you ca afford. The the leder will give you a writte cofirmatio, or certificate, for a fixed iterest rate. This cofirmatio will be good for a specific period of time. A pre-approved mortgage is ot a guaratee of beig approved for the mortgage loa. Eve if you have t foud the home you wat to buy, havig a pre-approved mortgage amout will help keep a good price rage i mid. Brig these with you the first time you meet with a leder: Your persoal iformatio, icludig idetificatio such as your driver s licese Details o your job, icludig cofirmatio of salary i the form of a letter from your employer All your sources of icome Iformatio ad details o all bak accouts, loas ad other debts Proof of fiacial assets Source ad amout of dow paymet ad deposit Proof of source of fuds for the closig costs (these are usually betwee 1.5% ad 4% of the purchase price) Make Your Mortgage Work for You Your leder or broker will offer you several choices to help fid you the mortgage that best matches your eeds. Here are some of the most commo: Amortizatio Period Amortizatio refers to the legth of time you choose to pay off your mortgage. Mortgages typically come i 25 year amortizatio periods but ca be as short as 15 years. Usually, the loger the amortizatio, the smaller the mothly paymets. However, the loger the amortizatio, the higher the iterest costs. Total iterest costs ca be reduced by makig additioal (lump sum) paymets whe possible. Paymet Schedule You have the optio of repayig your mortgage every moth, twice a moth every two weeks or every week. You ca also choose to accelerate your paymets. For example, for a $250,000 mortgage (5% iterest rate ad 25 year amortizatio) choosig a accelerated bi-weekly paymet over a bi-weekly regular paymet ($727 vs. $670) allows you to pay dow your mortgage more quickly. You could pay off the mortgage i just over 21 years ad reduce your iterest costs by almost $30,000. This usually meas oe extra mothly paymet per year. 14 Caada Mortgage ad Housig Corporatio

17 STEP 2 Iterest Rate Type You will have to choose betwee fixed, variable or protected (or capped) variable. A fixed rate will ot chage for the term of the mortgage. This type carries a slightly higher rate but provides the peace of mid associated with kowig that iterest costs will remai the same. With a variable rate, the iterest rate you pay will fluctuate with the rate of the market. Usually, this will ot modify the overall amout of your mortgage paymet, but rather chage the portio of your mothly paymet that goes towards iterest costs or payig your mortgage (pricipal repaymet). If iterest rates go dow, you ed up repayig your mortgage faster. If they go up, more of the paymet will go towards the iterest ad less towards repayig the mortgage. This optio meas you may have to be prepared to accept some risk ad ucertaity. A protected (or capped) variable rate is a mortgage with a variable iterest rate that has a maximum rate determied i advace. Eve if the market rate goes above the determied maximum rate, you will oly have to pay up to that maximum. Mortgage Term The term of a mortgage is the legth of time for which optios are chose ad agreed upo, such as the iterest rate. It ca be as little as six moths or as log as five years or more. Whe the term is up, you have the ability to reegotiate your mortgage at the iterest rate of that time ad choose the same or differet optios. Bleded Paymet: A mortgage paymet that icludes pricipal ad iterest. It is paid regularly durig the term of the mortgage. The paymet total remais the same, although the pricipal portio icreases over time ad the iterest portio decreases. Lump Sum Prepaymet: A extra paymet, made i lump sum, to reduce the pricipal balace of your mortgage, with or without pealty. A closed mortgage typically restricts the amout ad frequecy of the prepaymets you ca make. With a ope mortgage, however, you ca make a lump sum prepaymet at ay time without pealty. Makig prepaymets ca help you pay off your mortgage sooer ad ultimately save o iterest costs over the life of your mortgage. Ope or Closed Mortgage A ope mortgage allows you to pay off your mortgage i part or i full at ay time without ay pealties. You may also choose, at ay time, to reegotiate the mortgage. This optio provides more flexibility but comes with a higher iterest rate. A ope mortgage ca be a good choice if you pla to sell your home i the ear future or to make large additioal paymets. A closed mortgage usually carries a lower iterest rate but does t offer the flexibility of a ope mortgage. However, most leders allow homeowers to make additioal paymets of a determied maximum amout without pealty. Typically, most people will select a closed mortgage. Figure Out the Up-frot Costs There are may up-frot costs whe you buy a home. Early plaig will help make sure thigs go smoothly. Dow Paymet A dow paymet is the part of the home price that does ot come from the mortgage loa. The dow paymet comes from your ow moey. You ca buy your home with a miimum dow paymet of 5%, if you have mortgage loa isurace from CMHC. You eed a dow paymet of at least 20% for a covetioal mortgage. Caada Mortgage ad Housig Corporatio 15

18 Homebuyig STEP BY STEP Deposit The deposit is paid whe you make a Offer to Purchase to show that you are a serious buyer. The deposit will form part of your dow paymet with the remaider owig at time of closig. If for some reaso you back out of the deal without havig covered yourself with purchase coditios, such as fiacig, home ispectio, etc., your deposit may ot be refudable ad you may be sued for damages. The size of the deposit varies. Your realtor or lawyer/otary ca help you decide o the amout. Appraisal Fee Your mortgage leder may ask you to pay for a recogized appraisal i order to complete a mortgage loa. A appraisal is a estimate of the value of the home. The cost is usually betwee $250 ad $350 ad must be paid whe you cotract for those services. Havig a idepedet appraisal doe o a property before you make a offer is a good idea. It will tell you what the property is worth ad help esure that you are ot payig too much. The appraisal should iclude: Assessmet of the property s physical ad fuctioal characteristics Aalysis of recet comparable sales Assessmet of curret market coditios affectig the property Ask your realtor or other member of your team to help you fid a appraiser. Mortgage Loa Isurace Premium If you make less tha a 20% dow paymet, you have a high-ratio mortgage. With a high-ratio mortgage your leder will eed mortgage loa isurace. Mortgage loa isurace lets you buy a home with a miimum dow paymet of 5%. Most Caadia ledig istitutios require mortgage loa isurace because it protects the leder. If the borrower defaults (fails to pay) o the mortgage, the leder is paid back by the isurer. You pay a premium for mortgage loa isurace. Your leder will add the mortgage loa isurace premium to your mothly paymets, or ask you to pay it i full upo closig. Mortgage Broker s Fee You may have decided to use a mortgage broker. The job of the mortgage broker is to fid you a leder with the terms ad rates that will best suit you. Home Ispectio Fee CMHC recommeds that you make a home ispectio a coditio of your Offer to Purchase. A home ispectio is doe by a qualified home ispector to provide you with iformatio o the coditio of the home. Costs rage depedig o the age, size ad complexity of the house ad the coditio that it is i. For example, it may be more costly to ispect a large, older, home, or oe i relatively poor coditio or that has may pre-existig problems or cocers. Survey or Certificate of Locatio Cost The mortgage leder may ask for a up-to-date survey or certificate of locatio. If the seller has a survey, but it is more tha five years old, it will probably eed to be 16 Caada Mortgage ad Housig Corporatio

19 STEP 2 updated. You should ask the seller to provide a updated survey, especially if there has bee a ew additio, deck or fece built close to the property lie. If the seller does ot have oe, or does ot agree to get oe, you may have to pay for it yourself. Remember, you must have permissio from the property ower before hirig a surveyor to go oto the property. Ask your realtor to help co-ordiate this with the ower. A survey or certificate of locatio ca cost $1,000 to $2,000. Title Isurace Your leder, lawyer, or otary may suggest that you get title isurace. This will cover loss caused by defects of title to the property. Lad Registratio Fees Lad Registratio fees are sometimes called Lad Trasfer Tax, Deed Registratio Fee, Tariff or Property Purchases Tax. I some provices ad territories, you may have to pay this provicial or muicipal charge whe you close the sale. The cost is a percetage of the property s purchase price. Check o the iteret or with your lawyer (or otary) or other team member to fid out about the curret rates. These fees ca cost a few thousad dollars. Water Tests If the home has a well, you will wat to have the quality of the water tested to esure that the water supply is adequate ad the water is drikable. You ca egotiate these costs with the vedor ad list them i your Offer to Purchase. Septic Tak If the house has a septic tak, it should be professioally checked to make sure it is i good workig order. You ca egotiate the cost with the vedor ad list it i your Offer to Purchase. Estoppel Certificate Fee (does ot apply i Quebec) This applies if you are buyig a codomiium, or strata uit, ad could cost up to $100. Also called a Status Certificate it outlies a codomiium corporatio s fiacial ad legal state. Prepaid Property Taxes ad/or Utility Bills Property taxes are charged by the muicipality where the home is located. They are based o the value of the home. The seller may have already paid property tax or other expeses that apply to the time after the house passes ito your hads. You eed to pay back the seller for taxes ad other costs (icludig items like fillig the oil tak). Property Isurace The mortgage leder requires you to have property isurace because your home is security for the mortgage. Property isurace covers the cost of replacig your home ad its cotets i case of loss. Property isurace must be i place o closig day. Legal Fees Legal fees ad related costs must be paid o closig day. The miimum cost is $500 (plus GST/HST). I additio, your lawyer or otary will charge you direct costs to check o the legal status of the property. Ted ad Shayla Ted ad Shayla have foud a ewly built home. The askig price is $200,000 icludig the GST. After addig together weddig gifts, a small iheritace ad other savigs Ted ad Shayla foud that they have $28,900. Ted ad Shayla wet to a leder ad got a mortgage pre-approval of $196,000. They decided o a dow paymet of $20,000. Because the dow paymet is less tha 20% of the price, they eed to get mortgage loa isurace. At the bak, they are advised that the premium for their mortgage loa isurace is 2% of the total loa amout they would have to pay $3,600 for their mortgage loa isurace. They were happy to lear that the mortgage loa premium could be added to their mothly mortgage. Ted ad Shayla s Up-frot Expeses Whe Ted ad Shayla made a offer o the bugalow, they provided a $1,000 deposit. Sice their dow paymet would be $20,000, they eed to pay a further $19,000 at time of closig. A appraisal was ot requested by the Leder. They hired a professioal Home Ispector for $500 to visually ispect the home to idetify potetial problems. They were required to obtai a lad survey which cost them $1,000. Because their provice requires lad registratio, they had to pay $3,000. Ted ad Shayla s realtor advised that she had heard about water problems i the area so they decided to get a water test doe for $175. I order to get a mortgage they had to pay $50 for their first moth of property isurace. Property taxes will be added to their mortgage paymets. But Ted ad Shayla had to pay the taxes that were left for the first year which was $1,250. Their lawyer s fees were $950. They did t eed to buy appliaces, or sow removal ad gardeig equipmet. Their movig costs were $250. For their cable, iteret ad telephoe package they paid a small hook-up fee of $75. Dow paymet $20,000 Closig Costs $7,250 Total Up-Frot Expeses $27,250 Caada Mortgage ad Housig Corporatio 17

20 Homebuyig STEP BY STEP Other Costs Depedig o your situatio, you may have some other iitial expeses to cosider: Movig expeses Whether you ll be hirig a movig compay or retig a truck ad askig frieds for help, there are likely to be movig expeses. Reovatios or repairs Ca reovatio or repair be delayed, or are some ecessary to do immediately? Codomiium fees Do you have to make the iitial paymet for these mothly fees? Service coectio fees Telephoe, gas, electricity, cable TV, satellite TV, Iteret, ad so o, may charge service coectio fees. Some utilities may ask you to pay a deposit. Appliaces Does your ew home come with appliaces? Do you already have your ow? Gardeig equipmet Will you eed to buy gardeig equipmet the first summer i your ew home? Sow-clearig equipmet Will you eed to buy sow-clearig equipmet the first witer i your ew home? Widow treatmets Do blids or curtais come with the house? Decoratig materials Do you wat to re-pait or apply wallpaper? Do the floors eed to be refiished or re-carpeted? Do you have all the tools you eed for decoratig? Had tools Do you have the basic had tools you ll eed for your ew home? Dehumidifier Will you eed a dehumidifier to cotrol moisture levels? Use the Home Purchase Cost Estimate form o the ext page to help figure out your estimated up-frot costs. 18 Caada Mortgage ad Housig Corporatio

21 STEP 2 HOME PURCHASE COST ESTIMATE Descriptio of cost Average mothly paymet Cost of Home Purchase price $ GST/HST (if applicable) $ Total Cost of Home (add the purchase price ad GST if applicable) $ Up-frot Costs Appraisal fee (if applicable) $ Deposit (to be paid whe you sig the Offer to Purchase) $ Dow paymet $ Estoppel certificate fee (for codomiium/strata uit) $ Home ispectio fee $ Lad registratio fee $ Legal fees ad disbursemets $ Mortgage broker s fee (if applicable) $ Mortgage loa isurace premium (ca be icluded i your mortgage) $ Prepaid property taxes ad/or utility bills adjustmet $ Property isurace $ Survey or certificate of locatio cost $ Title isurace $ Other $ Total Upfrot Costs $ Other Costs Appliaces $ Gardeig equipmet $ Sow-clearig equipmet $ Widow treatmets $ Decoratig materials $ Had tools $ Dehumidifier $ Movig expeses $ Reovatios or repairs $ Service hookup fees $ Codomiium fees $ Total Other Costs $ Total Costs (add up Total Cost of Home, Total Up-frot Costs ad Total Other Costs) Additioal Home Purchase Cost Estimate worksheets are available at the back of this Guide. $ Caada Mortgage ad Housig Corporatio 19

22 Homebuyig STEP BY STEP NOTES 20 Caada Mortgage ad Housig Corporatio

23 STEP 3 Which home is right for you?

24 Homebuyig STEP BY STEP Oce you have a good idea about your fiaces, you ll eed to thik clearly about the home you d like to buy. Your Needs Now ad i the Future Try to buy a home that meets most of your eeds for the ext 5 to 10 years, or fid a home that ca grow ad chage with your eeds. Here are some thigs to cosider: Size How may bedrooms do you eed? How may bathrooms do you eed? Do you eed space for a home office? What kid of parkig facilities do you eed? For how may cars? Special features Do you wat air coditioig? If so, what type? Do you wat storage or hobby space? Is a fireplace or a swimmig pool high o your list? Do you have family members with special eeds? Do you wat special features to save eergy, ehace idoor air quality, ad reduce evirometal impact? Lifestyles ad stages No matter what type of housig you choose, you must have a clear idea of your eeds today as well as your possible future eeds. These are some examples of questios home buyers might ask: Do I eed a home office? Do I pla to have childre? Do I have teeagers who will be movig away soo? Am I close to retiremet? Will I eed a home that ca accommodate differet stages of life? Do I have a older relative who might come to live with me? The CMHC worksheet Home Features Checklist o the ext page ca help you thik about what you eed today, ad what you may eed i the future. Is FlexHousig for you? FlexHousig TM is a housig cocept that icorporates, at the desig ad costructio stage, the ability to make future chages easily ad with miimum expese to meet the evolvig eeds of its occupats. FlexHousig TM allows homeowers to live i their home for a loger time perhaps a etire lifetime. By addig or removig walls you ca make the home suit your lifestyle. 22 Caada Mortgage ad Housig Corporatio

25 STEP 3 HOME FEATURES CHECKLIST Resale Type of Home Detached Towhouse Highrise New Semi-detached Duplex Low-rise Bedrooms Bathrooms Master bedroom e suite Yes No Groud floor bathroom Yes No Type of owership Freehold Codomiium Age of home Lot size Small Medium Large Quiet street Yes No Type of exterior fiish Brick Wood Alumium sidig Viyl sidig Combiatio brick ad sidig Widows Glazig Sigle Double Triple Low-E Costructio Wood Viyl Alumium Other Eat-i kitche Yes No Separate diig room Yes No Separate family room Yes No Fireplace Yes No Woodstove Yes No Spare room for de or home office Yes No Basemet for storage or workshop Yes No Apartmet for retal icome Yes No Deck or patio Yes No Isulatio values Basemet Walls Ceilig Private driveway Yes No Garage Attached Detached Foudatio costructio Cocrete Cocrete block Preserved wood Sewer Muicipal Septic system Water Muicipal Well Water heatig Gas Electric Oil Carport Yes No Security features Yes No Barrier-free Yes No Close to (approximate km) Electrical system 100 amp 200 amp Other Fuses Circuit breakers Eergy Ratig Yes No Ratig Type of heatig fuel Oil Gas Electric Wood Heat recovery vetilator Yes No Air coditioig Cetral Widow Work Public trasportatio Shoppig Recreatio facilities Places of worship Police statio Hospital Veteriaria Spouse s work Schools Parks/playgrouds Restaurats Doctor/detist Fire statio Additioal Home Features Checklists are available at the back of this Guide. Caada Mortgage ad Housig Corporatio 23

26 Homebuyig STEP BY STEP The Right Choice for Keith ad Joy Keith ad Joy hoped to have two childre, ad room to ivite oe of their parets to live with them, if eeded. After learig about FlexHousig, they decided to buy a three-bedroom FlexHouse that could chage with their eeds. After three years, Keith ad Joy had a little boy, amed Jake. He took the secod bedroom, ad their may overight guests used the third oe. Whe Jake was three, Joy had the guest bedroom divided ito a home office for herself, ad a smaller guest bedroom. Each room had its ow widow, closet, wirig, ad lightig. Two years later, baby Ella was bor ad the small bedroom became hers. To create a guest bedroom, the attic was reovated to iclude a bathroom ad closet. Because this was a FlexHouse, the space already had wirig ad plumbig. The roof desig allowed for useable attic space. Sadly, a few years later, Keith s mother passed away ad they ivited his father, Robert, to come live with them. Their FlexHouse had pre-desiged ad prebuilt features so that they could create a exteral additio. This gave Robert the idepedece of his ow space. Whe Jake had become a teeager, ad Robert had passed away, Jake asked if he could move to the attic bedroom. Ella moved ito Jake s larger bedroom. Her smaller bedroom became a readig room. I a adaptable home, space ca be arraged ad re-arraged without expesive retrofits ad reovatios. Desigig a adaptable home ivolves aticipatig possible ew uses for rooms, potetial traffic flow, ad future requiremets at the desig stage. What Locatio Should You Choose? Locatio is a critical factor. A home with everythig you eed but i the wrog locatio is probably ot the right home for you. Here are some thigs to cosider: Do you wat to live i a city, a tow or i the coutryside? How easy will it be to get to where you work? How much will the commutig cost? Where will your childre go to school? How will they get there? Do you eed a safe walkig area or recreatioal facility, such as a park, earby? How close would you like to be to family ad frieds? What is a Sustaiable Neighbourhood? A sustaiable eighbourhood meets your eeds while protectig the eviromet. Homes i a sustaiable eighbourhood are located ear shops, schools, recreatio, work ad other daily destiatios. This helps reduce drivig costs ad lets residets ejoy the health beefits of walkig ad cyclig. Lad ad services, like roads, are used efficietly. Sustaiable eighbourhoods also feature a choice of homes that are affordable. I your search for a sustaiable eighbourhood, here are some thigs to cosider: Easy trasportatio Are stores, schools, recreatio facilities, restaurats, ad health services withi walkig or cyclig distace? Will your childre eed to take a bus to school? Ca they walk to the park? Ca you do most of your shoppig without a car? Are there earby bus stops ad cyclig laes? How log is the bus ride to work, or school? Ca you safely bike? House size ad features Are the homes compact with shared walls to reduce heatig costs? Are homes reasoably sized with lots requirig less upkeep? Are there differet dwellig types (such as sigle-detached, semi-detached, towhouse ad apartmets) i the eighbourhood? Are the lots modestly sized? Roadways arrow? Driveways/parkig areas small? Do atural drai ways lead to streams or park lads? Is there ative vegetatio ad streams with woodlad edges? 24 Caada Mortgage ad Housig Corporatio

27 STEP 3 Look ad feel Safety Do the buildigs have a friedly face to the street? Are the commuity cetres, shops ad meetig places welcomig? Are there trees liig the street? Do you fid the homes iterestig to look at? Do the buildig sizes feel comfortable to you? Are the roads easy to walk alog or cross? Do the homes have eyes o the street? I other words, are there people aroud who might watch out for you? Is there somewhere to go i a emergecy? Is there adequate street lightig? Are there safe places for childre to play? Are the streets safe for cyclists ad pedestrias? Is traffic slow movig ad light? Do You Wat a New Home or a Previously-Owed Home? A ew home is oe that has just bee built o oe else has lived i it yet. You might buy a ew home from a cotractor who has built it, or you might hire a cotractor to build it for you. A previously-owed home (ofte called a resale) has already bee lived i. Here are some characteristics of each type of home: New Home Up-to-date A ew home has up-to-date desig that might reflect the latest treds, materials ad features. Choices Costs You may be able to choose certai features such as style of sidig, floorig, cabiets, plumbig ad electrical fixtures. You may have to pay extra if you wat to add certai features, such as a fireplace, trees ad sod, or a paved driveway. Make sure you kow exactly what s icluded i the price of your home. Taxes such as the Goods ad Services Tax (GST) (or, i certai provices, the Harmoized Sales Tax (HST)) apply to a ew home. However, you may qualify for a rebate of part of the GST or HST o homes that cost less tha $450,000. For more iformatio about the GST New Housig Rebate program, visit the Caada Reveue Agecy website at A ew home will have lower maiteace costs because everythig is ew, ad may items are covered by a warraty. You should set aside moey every year for future maiteace costs. Sigle-family Detached Home: Free-stadig home for oe family, ot attached to a house o either side. Sigle-family Semi-detached Home: Home for oe family, attached to aother buildig o oe side. Stacked Towhouse: Two two-story homes are stacked oe o top of the other. The buildigs are usually attached i groups of four or more. Each uit has direct access from the outside. Strata (or Codomiium): A uit, usually i a highrise or lowrise, or a towhouse that ca be owed. You ow the uit you live i ad share owership rights for the commo space of the buildig. Commo space icludes areas such as corridors, the grouds aroud the buildig, ad facilities such as a swimmig pool ad recreatio rooms. Strata owers together cotrol the commo areas through a owers associatio. The associatio makes decisios about usig ad maitaiig the commo space. Caada Mortgage ad Housig Corporatio 25

28 Homebuyig STEP BY STEP Warraties A New Home Warraty may be provided by the builders of the home or the provice. Be sure to check all the coditios of the warraty. It ca be very importat if a major system such as plumbig, or heatig, breaks dow. New Home Warraties may be provided by provicial govermets. There are also private ew home warraty programs. I some provices a warraty may be provided by the builder of the home. Check with your realtor or lawyer/ otary to fid out what the ew home warraty program i your provice covers ad the umber of years it is i effect. Check the iteret for Home Warraty Programs i your provice. Neighbourhood ameities Schools, shoppig malls ad other services may ot be completed for years. Buildig Your Ow Home Some people prefer the challege ad flexibility of buildig their ow home. O oe had, you make all the decisios about size, desig, locatio, quality of material, level of eergy-efficiecy ad so o. O the other had, expect to ivest lots of time ad eergy. Resale Home Whe the home already exists, you ca see what you are buyig. Sice the eighbourhood is established, you ca see how easy it is to access services such as schools, shoppig malls, libraries, etc. Ladscapig is usually doe ad fecig istalled. Previously owed homes may have extras like fireplaces or fiished basemets or swimmig pools. You do t have to pay the GST/HST uless the house has bee reovated substatially, ad the the taxes are applied as if it were a ew house. You may eed to decorate, reovate or do major repairs such as replacig the roof, widows ad doors. What Type of Home Should You Buy? What types of homes will you be visitig with the idea of buyig? Do you see yourself livig i a detached sigle-family home? Or, perhaps a towhouse? Maybe, a duplex? Sigle-family Detached A sigle-family detached home is oe dwellig uit. It stads aloe, ad sits o its ow lot. This ofte gives the family a greater degree of privacy. Sigle-family Semi-detached A semi-detached home is a sigle-family home that is joied o oe side to aother home. It ca offer may of the advatages of a sigle-family detached home. It is ofte less expesive to buy ad maitai. Duplex A duplex is a buildig cotaiig two sigle-family homes, located oe above the other. Sometimes, the ower lives i oe uit ad rets the other. 26 Caada Mortgage ad Housig Corporatio

29 STEP 3 Row House (Towhouse) Row houses (also called towhouses) are several similar sigle-family homes, side-byside, joied by commo walls. They ca be freehold or codomiiums. They offer less privacy tha a sigle-family detached home, although each has a separate outdoor space. These homes ca cost less to buy ad maitai, athough some are large, luxury uits. Stacked Towhouse Stacked towhouses are usually two-storey homes. Two two-storey homes are stacked oe o top of the other. The buildigs are usually attached i groups of four or more. Each uit has direct access from the outside. Lik or Carriage Home A lik, or carriage home, is joied by a garage or carport. The garage or carport gives access to the frot ad back yards. Builders sometimes joi basemet walls so that lik houses appear to be sigle-family homes o small lots. These houses ca be less expesive tha sigle-family detached homes. Maufactured Home A maufactured home is a factory-built, sigle-family home. It is trasported to a chose locatio ad placed oto a foudatio. Modular Home A modular home is also a factory-built, sigle-family home. The home is typically shipped to a locatio i two or more sectios (or modules). Mobile Home Mobile homes, like maufactured or modular homes, are built i factories ad the take to the place where they will be occupied. While these homes are usually placed i oe locatio ad left there permaetly, they do retai the ability to be moved. Apartmet A self-cotaied uit i part of a buildig cosistig of a room or set of rooms icludig kitche ad bathroom facilities. Caada Mortgage ad Housig Corporatio 27

30 Homebuyig STEP BY STEP Forms of Owership People who do ot ret their home, ow it. There are two forms of owership. Freehold Freehold meas that oe perso (or two, such as joit owership by spouses) ows the lad ad house outright. There is o space co-owed or co-maaged with owers of other uits. Freehold owers ca do what they wat with their property up to a poit. They must obey muicipal bylaws, subdivisio agreemets, buildig codes ad federal ad provicial laws, such as those protectig the eviromet. Detached ad semi-detached homes, duplexes ad towhouses are usually owed freehold. Codomiium Codomiium owership meas you ow the uit you live i ad share owership rights for the commo space of the buildig. Commo space icludes areas such as corridors, the grouds aroud the buildig, ad facilities such as a swimmig pool ad recreatio rooms. Codomiium owers together cotrol the commo areas through a owers associatio. The associatio makes decisios about usig ad maitaiig the commo space. Lad Surveyor: A professioal who ca survey a property i order to provide a certificate of locatio. Appraiser: Certified professioal who carries out a appraisal. Leder: A mortgage leder is a istitutio (bak, trust compay, credit uio, etc.) that leds moey for a mortgage. Mortgage Broker: The job of the mortgage broker is to fid you a leder with the terms ad rates that will best suit you. What Professioals Should You Call O? Eve if this is t your first homebuyig experiece, you ll wat to get help from a team of professioals. Experieced ad kowledgeable professioals ca provide you with reliable iformatio ad aswers to your questios. These are the people who ca help you: Realtor Leder or mortgage broker Lawyer or otary Isurace broker Home ispector Appraiser Lad surveyor Builder or cotractor You will be doig a lot of iterviewig to establish your team. Use this hady CMHC worksheet o the ext page to help you keep track of the people you iterview ad the oes you fially choose. 28 Caada Mortgage ad Housig Corporatio

31 STEP 3 YOUR TEAM OF PROFESSIONALS Role Name Compay ame Address Stregths Weakesses Referral Telephoe Fees Role Name Compay ame Address Stregths Weakesses Referral Telephoe Fees Role Name Compay ame Address Stregths Weakesses Referral Telephoe Fees Role Name Compay ame Address Stregths Weakesses Referral Telephoe Fees Additioal Your Team of Professioals worksheets are available at the ed of this Guide. Caada Mortgage ad Housig Corporatio 29

32 Homebuyig STEP BY STEP The Realtor Your realtor s job is to: Help you fid the ideal home Write a Offer of Purchase Negotiate to help you get the best possible deal Give you importat iformatio about the commuity Help you arrage a home ispectio Fidig a Realtor Whe lookig for a realtor, do t be afraid to ask questios especially about possible service charges. Normally, the seller pays a commissio to the realtor but some realtors charge buyers a fee for their services. Use the CMHC worksheet Checklist for Evaluatig Realtors, below, to help you. If you would like to kow more about a realtor s ethical obligatios, go to the Caadia Real Estate Associatio s website at or call your local real estate associatio. CHECKLIST FOR EVALUATING REALTORS Name of Realtor: Cotact: Questio Which real estate compay do you work for? How log have you bee a realtor? Do you have a salesperso s licese or a broker s licese? Do you hold ay professioal desigatios? Do you work with other realtors or use assistats? What is the amout of commissio that you charge? What areas of the city/tow do you work i or are most familiar with? Do you uderstad what I am lookig for i a home? Do you have experiece workig with first-time buyers? (oly relevat if you are a first-time buyer) How may other buyers or sellers are you curretly represetig? Is there aythig I have t asked about you or your compay that you thik I should kow? Ca I have three refereces from other buyers you have worked with recetly? Aswer 30 Caada Mortgage ad Housig Corporatio

33 STEP 3 The Leder or Mortgage Broker May differet istitutios led moey for mortgages baks, trust compaies, credit uios, caisses populaires (i Quebec), pesio fuds, isurace compaies, ad fiace compaies. Differet istitutios offer differet terms ad optios shop aroud! Mortgage brokers do t work for ay specific ledig istitutio. Their role is to fid the leder with the terms ad rates that are best for the buyer. Fidig a Leder or Mortgage Broker Ask aroud. Your realtor, aother professioal, family members, or frieds may give you helpful suggestios. Look i the Yellow Pages uder Baks, Credit Uios or Trust Compaies for a leder ad uder Mortgage Brokers for a broker. Cotact the Caadia Associatio of Accredited Mortgage Professioals at , or visit the Associatio s website at The Lawyer/Notary Havig a lawyer/otary ivolved i the process will help esure that thigs go as smoothly as possible. You eed a lawyer (or a otary i Quebec) to perform these tasks: Protect your legal iterests by makig sure the property you wat to buy does ot have ay buildig or statutory lies, charges, or work or clea-up orders. Review all cotracts before you sig them, especially the Offer (or Agreemet) to Purchase. Offer to Purchase: A writte cotract settig out the terms uder which the buyer agrees to buy the home. If the Offer to Purchase is accepted by the seller, it forms a legally bidig cotract that bids the people who siged to certai terms ad coditios. Certificate of Locatio (or Lad Survey): A documet that shows property boudaries ad measuremets, specifies the locatio of buildigs o the property ad states easemets or ecroachmets. Estoppel Certificate: Also called a certificate of status, it outlies a codomiium corporatio s fiacial ad legal state. Fees may vary ad may be capped by law (does ot apply i Quebec). Lie: A claim agaist a property for moey owig. A lie may be filed by a supplier or a subcotractor who has provided labour or materials but has ot bee paid. Assumptio Agreemet: A legal documet siged by a homebuyer that requires the buyer to assume resposibility for the obligatios of a mortgage by the builder or the previous ower. Fidig a Lawyer Law associatios ca refer you to lawyers who specialize i real estate law. I Quebec, cotact the Chambre des otaires du Québec for the ames of otaries specializig i real estate law. Remember that a lawyer/otary should: Be a licesed full-time lawyer/otary Live/work i the area Uderstad real estate laws, regulatios ad restrictios Have realistic ad acceptable fees Be able ad willig to explai thigs i laguage you ca easily uderstad Be experieced with codomiiums, if that s what you are buyig Caada Mortgage ad Housig Corporatio 31