Home Buyer's Guide
Buying a home is likely to be one of the most momentous milestones in your life. And, as with any important milestone, there’s a lot that goes into making a home-buying decision. From family planning to financial responsibility, it’s completely normal to have many questions.
Whether you’re thinking of purchasing your starter home or are an experienced home buyer, our Home Buyer’s Guide will help guide you through those important questions. As for the rest? That’s why we’re here. Get in touch today — we’d be happy to hear about your unique situation and chat specifics.
WANT TO BUY A HOME IN OTTAWA?
Having a place to call your own can be a wonderful feeling. Owning a home can also be a smart investment for you and your family — as long as you have the financial and time resources to do so.
Before deciding to buy a home, it’s important to consider whether you have the financial security not just to purchase but to maintain a property of your own. It’s also important to consider where you’d like to live, how you’re going to find a home to buy, and how long the process takes.
We’ve created this Home Buyer’s Guide to give you a more detailed look at the exciting process that awaits you. Once you’re ready to begin your home buying journey, or if you have any questions at all, please feel free to contact us. We would be delighted to help you buy a house in Ottawa - whether it’s a rental property, a temporary relocation, or your forever home.
Deciding To Buy A Home
Your personal reasons for wanting to buy a home are unique to you. The first step to purchasing a home, then, is to get clear on why you’re buying. This will help you make decisions, get clear on what you’re looking for, and communicate your needs to your REALTOR®.
We recommend asking yourself these questions:
- Why do you want to buy a home?
- What expectations do you have from purchasing a property?
- Where would you like to live? In what kind of neighborhood?
- What is your timeline like for buying a home?
- What would you like your home to look like?
- What home features are most important to you?
- What are your “wants” versus your “needs”?
If you’re a first time home buyer, you may have more specific questions and needs. We recommend taking a look at our advice for first time home buyers, here.
Preparing To Buy A Home
Fantastic! You’re now clear on why you want to buy a home and have decided that home ownership is right for you. Now it’s time to consider what resources you have available.
Making sure that you are financially ready to buy a home is one of the most important steps in the home buying process, as buying a home is likely to be the largest purchase you’ll ever make. When preparing to buy a home, it’s ideal to have some savings and to have paid off as much debt as possible.
Get A Financial Overview
Before seeking a mortgage, it’s essential to see where you stand financially. We recommend looking at your finances to determine your monthly expenses and monthly debt payments.
Other important factors to consider:
- Net Worth - Your total assets, minus your total liabilities
- Gross Debt Service Ratio (GDSR) - A lending principle that states your monthly housing costs should not exceed 32% of your household’s gross monthly income (i.e., income before taxes)
- Total Debt Service Ratio (TDSR) - A lending principle that states your monthly housing costs and payments on all other debts (loans, credit cards, etc.) should not exceed 40% of your household’s gross monthly income.
Getting clear on these figures will help you figure out your financial health, and have a better idea of the mortgage amount you can be approved for.
Once you have a better understanding of your financial picture, you’re in a position to look for a pre-approved mortgage amount. This is an excellent step in making your home-buying experience less stressful and less time-consuming, as you’ll already know what price range to look for when browsing the market.
Our guide to mortgage advice will cover this part of the process in more detail. However, in general, your mortgage lender will be looking for the following information:
- Your personal information (with proper identification)
- Your job information, including salary
- Your sources of income
- Proof of financial assets, including bank account statements
- Evidence of financial liabilities, including loans and other debts
- Evidence of the source of funds for the down payment, deposit, and closing costs
Being prepared to buy a home also means being prepared for the additional costs. There are several expenses to consider other than your purchase price, including long term financial responsibilities. It’s important to keep in mind the following costs:
- One-Time Costs
- Down payment
- Legal fees
- Title insurance
- Inspection fees
- Property transfer
- Monthly Costs
- Mortgage payments
- Utility bills
- Maintenance costs
- Property tax
Choosing a REALTOR®
Buying a home is one of the most important things you will ever do, and it’s important not to leave things to chance. Working with a reputable, experienced REALTOR ® means you will have someone to guide you through the often complex process, helping you find your dream home while navigating complicated negotiations, changes in the real estate market, and all the finer details.
Your REALTOR’s ® Role
Your REALTOR ® can help you review your list of needs, help you figure out your price range, answer your questions about the local real estate market, and help you compare homes. Once you’ve found the right home for you, they can also help negotiate your terms and oversee the purchase so that you’re protected every step of the way.
Working with a REALTOR ® is the best way to make sure you are considering homes that work for you, so you don’t waste your time or efforts.
What To Look For In A REALTOR ®
When considering your options, here are some things to look for in a real estate agent:
- Credentials: To be a licensed real estate agent, you must take basic training and pass a licensing exam. A registered REALTOR ® is also a member of the National Association of REALTORS ® and follows their rules and regulations, including their Code of Ethics.
- Experience: How long have they been helping people like you buy homes? You want a full-time REALTOR® who is familiar with the Ottawa real estate market and the type of property you’re looking for.
- Availability: You’ll want to work with an agent who prioritizes their clients and is always there when you need them. At Nick Labrosse Real Estate, we communicate with you every step of the way - through email, on the phone or in person - to make sure you’re always in the loop.
- Reputation: What do ex-buyers have to say about them? Many REALTORS ® will include testimonials on their website, and you can also look online if any complaints have been made against them.
- Language: Ottawa is a bilingual city. Having a REALTOR ® who is proficient in both English and French can be helpful in the home buying process.
- Rapport: Finally, it’s important to find a REALTOR ® whom you can trust - someone who listens to your wants and needs and makes sure you feel comfortable, every step of the way.
We pride ourselves on meeting all these needs and more. Over more than a decade of helping home buyers find their dream home in Ottawa, we have what it takes to make your buying journey feel as easy as possible. Click here to learn more about our approach.
Now that you’ve found a REALTOR ® to help you find your dream home, it’s time to start looking at properties. With the right guidance, this can be a fun and exciting part of the process.
By now, you should already have an idea of what you’re looking for. You should have a firm idea of your budget, your list of needs, and the neighbourhoods you would like to consider. If you are new to the area, your agent can give you information on the area and help you evaluate important criteria like nearby schools, recreation options, and access to transportation.
If you’re able to, drive around the neighbourhoods on your list to get a feeling of what it would be like to buy a property in that area. Be sure to visit during both the day and the night. If you’re relocating or can’t physically visit these neighbourhoods, you can also browse listings online.
As you begin to narrow your options, be sure to let your REALTOR ® know about the ones that interest you the most. They can give you more information on the properties, including resale value, and organize a viewing. All Canadian REALTORS ® have access to the MLS ® System, a tool that allows them to show you which properties meet your criteria, get in-depth neighbourhood details and statistics, and even look at photos and virtual tours.
Closing the Purchase
Now that you’ve found the home you want to buy, the hardest part is over! To make it yours, you have to close the purchase successfully. Your agent will be able to help you navigate the finer details here, from making an offer to ensuring the property is inspected.
Once you’ve found the property for you, the next step is to make an offer that your seller will accept. Your REALTOR ® will work with you to come up with an attractive offer — one that works for you and reflects fair market value.
It’s completely normal for offers to go back and forth a few times, in a process called the “signback.” If your agent is experienced, he or she will have the right negotiation skills to make this part of the process as easy as possible while looking out for your best interests. You may choose to negotiate on aspects like price, financing, closing costs, decorations, necessary repairs, furnishings, closing date, and more.
Even a brand new build can have its problems, and a home inspection can cover you in case any issues are found with your home. If arranged as a condition of purchase, you can back out of or negotiate your offer based on what is found. Though it will cost you a few hundred dollars, it can save you long-term costs.
Your agent can work with you to find a reputable home inspector and arrange for the inspection to be completed. In the end, you’ll get a full written report on the condition of your home. Your inspector will typically look at:
- Plumbing and electrical, including dangerous wiring
- Walls and ceilings
- Heating, ventilation, and air conditioning (HVAC)
- Integrity of the foundation
- Presence of lead paint, mould, asbestos or pests
Once your offer has been accepted, the listing agent will require a deposit. This deposit will be held in a trust until the purchase is closed, when it will then be applied to your purchase price.
For example, if you are purchasing a home for $300,000 and you have agreed on a deposit of $10,000, then you will owe $290,000 at closing.
The Conditional Period
Your offer will detail certain conditions, which must be finalized during the conditional period. This period begins once your offer is accepted, and ends once all conditions have been met and the appropriate paperwork is signed.
Typical conditions include:
- Mortgage approval
- Home value appraisal (sometimes required by your mortgage provider)
- Home inspection
- Property insurance
The Firm Offer
Congratulations! Now that your conditional period has passed, you have officially purchased a new home!
Soon, you’ll be able to move into your brand new home. However, there are still some important steps in the home buying process. Here are some things to think about, now that it’s time to move:
- Pack your things. You can do this yourself, or work with a moving company. Either way, be sure to give yourself plenty of time to make sure nothing feels rushed. We can recommend local companies if you prefer to hand it off to someone else.
- Change your address. Now is a good time to let people know that you’re moving, including employers, government agencies, utility companies, banks, and anyone else who needs to reach you by mail.
- Home services. Start looking at utility providers in your new neighbourhood and comparing options.
It’s important to realize that your closing date and your moving date aren’t the same thing. You must wait for the property title to be transferred, and you may not receive your home until late in the day on your closing date (typical hours are between 1:00-5:00 PM). Plan for your move-in date to be at least a day or two after your closing date.
Before moving in your belongings, do a quick sweep of your new home to make sure everything is in place. If not, be sure to contact your lawyer and/or REALTOR ® as soon as possible.
If you’re like the majority of home buyers, you can’t afford to buy a home in cash. It is entirely normal to seek financing options, and mortgages are an essential part of buying a home. At the same time, however, most people don’t know a lot about mortgages. In this mini-guide, we’ll give you the information you need to get started.
Getting a pre-approved mortgage helps you know what kind of price range you’re dealing with as you search for your new home. It ensures you’ll only consider homes you can afford and can help you close the deal faster with less stress.
After you’ve gathered initial information on your financial health, including your current monthly payments and any assets and liabilities, get in touch with a range of mortgage lenders to discover your options. If you’re not sure where to start, we at Nick Labrosse Real Estate can connect you with qualified, trusted lenders in and around Ottawa.
Types of Mortgages
It’s important to consider a variety of options when trying to secure a mortgage to finance your home purchase. There are many options out there, but here we will explain the most common types of mortgages.
Regardless of what route you take, a conventional mortgage will cover up to 80% of the purchase price of your home with a typical amortization of 25-30 years.
FIXED MORTGAGE RATES
A fixed mortgage rate is a great option if you feel more secure knowing exactly how much your monthly payment will be. It can be a great help when budgeting your monthly costs and is something to consider if you plan to live in your new home for many years.
The maximum fixed rate mortgage in Canada is currently ten years. You can also make additional payments on your principal to pay off your loan more quickly.
A fixed rate mortgage is not always the best option. If you start your mortgage with a high interest rate, you will be stuck with that rate for the duration of the entire mortgage term. On the flip side, if you’re able to secure a low interest rate, you can rest assured that rate won’t increase with the market.
ADJUSTABLE-RATE MORTGAGE (ARM)
An adjustable-rate mortgage (ARM) may be a better option if you’re only planning to own your home for a short amount of time, if you’re expecting an increase in income (which could cover an increase in interest rate), or if you are more comfortable with risk. This is also a popular option when interest rates are very high.
In most cases, the interest rate at the time of securing your loan will be lower than a fixed-rate mortgage. The lower initial payments could allow you to qualify for a larger loan. However, your rate and payments may not stay low over time. With an ARM, your interest rate (and therefore your monthly payment) rises and falls depending on the prevailing rate. ARM interest rates are usually tied to the federal prime lending rate plus your lender’s margin.
There are usually caps on how much a lender can increase the interest rate on your ARM in a single year and over the life of the loan. Check with your lender if this is true in your case and, if so, calculate what the maximum payment would be with the maximum “capped” rate. If you can’t afford a payment of this amount, an ARM may not be the best option for you.
A convertible ARM has both the advantages of an ARM and a fixed-rate mortgage. In this case, the interest rate of your ARM is changed to a fixed rate after a set number of years. This is an attractive option when interest rates are high and falling, helping you secure a low fixed interest rate after you’ve been paying your mortgage for a few years.
If you choose a convertible ARM, it will be important to monitor interest rates over time, and you will likely pay higher-than-market rates. However, it does provide a great deal of flexibility.
Terms to Know
When negotiating a mortgage with your lender, here are some important terms you will come across.
- Amortization: This is the length of time it will take you to pay off the entire mortgage, typically 25 years. The longer your amortization, the lower your monthly payment, but the more you pay in interest over time.
- Down payment: The portion of your mortgage you pay up-front against your purchase price. The larger the down payment, the smaller the mortgage, and vice versa.
- Interest rate: The cost of borrowing money. Typically stated per annum, and can be a fixed rate (unchanged over time) or a variable rate (fluctuates with the market).
- Mortgage term: The length of time your lender has agreed to lend you money. This typically lasts anywhere from six months to five years, with renegotiation at the end of your mortgage term.
Where to Get a Mortgage
In most cases, there are two options for securing a mortgage: through a bank or a mortgage broker. We recommend considering both options to find the best rate and monthly payment for you.
Banks are the most popular option among first-time home buyers, or for people who already have bank loans and lines of credit. If you think you might need to develop a long-term relationship with your lender, especially if you think you’ll have additional financing needs, this can be a great option.
Most banks now make it easy for you to learn about their rates by listing both their fixed rate and ARM options online. However, they will only show you their mortgage rates, so any comparison will have to be done on your own. Though they may try to match a competitor’s rate, they are more limited in their customisation options.
Mortgage brokers typically work on commission, making them highly motivated to find you a deal that works for you. They are paid by the mortgage lender once your loan has been approved, meaning there’s no extra cost to you and no need to deal with complex negotiations.
Much like a real estate broker, your mortgage broker will browse the market to find you the very best rates and terms. After doing some research, they will give you advice on the deals that are out there and help you come up with the best offer for your budget and needs.
This is an ideal choice for people with a low credit score or with a negative mark on their credit history, as they will automatically know who will and won’t consider your application.
Mortgage brokers typically have established relationships with lenders, helping them secure discounts they can then pass on to you. On the other side, a mortgage broker may not be able to secure the same deal with a bank as you could, particularly if you’ve been banking with them for a long time.
First-Time Home Buyers
Buying a home can feel overwhelming at any point in your life, but the process is generally quite intimidating to first-time homebuyers. As someone who has never entered the world of real estate before, you likely have many questions. To help you out, we’ve created this guide for first-time home buyers to give you some answers and clarity.
How to Buy Your First Home
Whether you’re just looking for your ‘starter home’ or are in search of the house that will help your family build memories for decades to come, buying your first home is an equally exciting and daunting adventure.
If you’re like most first-time home buyers, nobody has introduced you to the process before. At Nick Labrosse Real Estate, we are passionate about using our many years of helping home buyers just like you to provide advice that eases your mind and makes you excited for the experience that awaits you.
This guide will help answer many of your questions about the real estate market and how to begin your home buying journey. For any other questions, and for answers to your more specific questions, please get in touch. We would love to help you find your dream home (or your ‘right-now’ home.)
5 Steps to Buying Your First Home
1. Understand the financial reality
Even before considering neighbourhoods or speaking with mortgage lenders, it’s a good idea to get a clear picture of your current financial situation. Buying a home is likely to be the biggest investment you ever make, and it comes with a lot of financial responsibility. Before moving any further, get clear on whether you can handle those responsibilities.
Buying a home involves much more than just the purchase price. It is recommended that you budget approximately 1.5% of your home’s purchase price to cover costs like land transfer taxes, mortgage insurance, legal fees, title insurance, home insurance, and utility hookups.
There will be both one-time and recurring costs in your home purchase, and it’s important to be prepared for both:
- One-Time Costs
- Down payment
- Legal fees
- Title insurance
- Inspection fees
- Property transfer
- Monthly Costs
- Mortgage payments
- Utility bills
- Maintenance costs
- Property tax
To determine whether you can cover those costs, take a look at your monthly income and your monthly expenses, including any debts (like loan payments or credit card payments.) Also take a look at your savings to see how much you have available for a down payment.
2. Get pre-approved for a mortgage
Now that you have a better idea of what you can afford, it’s time to meet with a mortgage lender to talk about mortgage pre-approval. This step will make your search much easier as you’ll have a solid idea of your price range.
You can read more about this step in our mortgage advice guide.
3. Discover first-time home buyer incentives
In Ottawa and across Canada, first-time home buyers are eligible for special programs and benefits. Let’s take a look at some of the incentives that you can tap into to save you serious money.
First Time Home Buyers (FTHB) Tax Credit
The First Time Home Buyers Tax Credit was introduced in 2009 to help first-time home buyers pay for the costs involved in the home buying process, like certain taxes and legal fees. It offers a $5,000 non-refundable income tax credit and can provide you with up to $750 in tax relief.
Land Transfer Tax Refund
As a first-time home buyer in Ontario, you can also receive a tax credit to offset a portion of your land transfer tax up to $4,000. You can claim for this refund within 18 months of buying your home and are only eligible if you have never owned property before.
RRSP Home Buyers’ Plan (HBP)
If you have an RRSP, this plan can allow you to withdraw up to $25,000 from it in a calendar year to buy or build your first home. Your home must qualify for the plan, and you must repay the full amount in 15 years.
Under Budget 2019, this amount may increase to $35,000 for withdrawals made after March 19, 2019.
4. Get clear on what you’re looking for
Before browsing the homes in your desired neighbourhoods, you should figure out what you’re looking for in your first home. We recommend making a “need” and a “want” list so you can easily pinpoint your priorities and evaluate properties in your search.
Your “needs” should include the features your family requires to live comfortably, like a certain number of bedrooms. Your “wants” should consist of nice-to-have features that aren’t a requirement, like a pool or a garage.
It would be best if you also were prepared when it comes to neighbourhoods. What areas in Ottawa would you like to live in? Be sure to get clear on what criteria are most important to you, like commuter routes, good schools, or quick access to recreation amenities.
Knowing these things in advance will make it that much easier for you to identify options and explain what you’re looking for to your real estate agent.
5. Find professional help
Buying a home is one of the most important things you will ever do, and it’s important not to leave things to chance. Working with a reputable, experienced REALTOR ® means you will have someone to guide you through the often complicated process, helping you find your dream home while navigating complicated negotiations, changes in the real estate market, and all the finer details.
Your real estate agent’s fees are entirely free to you, as they are typically paid by the home seller. A good REALTOR ® will have the right qualifications and experience with helping first-time home buyers find homes in your area. They should also have a good reputation and be willing to prioritize your needs, with frequent communication.
Are you looking for a reputable REALTOR ® in Ottawa? Nick Labrosse Real Estate has been helping people just like you find their dream home for 11+ years and is proud to always put our clients’ needs first. We’d love to help you find the perfect home for you and your family. Fill out the form below to get started.