Many of my fellow students at the Telfer School of Management will be graduating this year, and will be moving on to their next stage in life. Similarly, many people in my age group are upgrading their lifestyles for a variety of reasons – these are indeed the transition years! One of these transitions includes buying their first piece of real estate – likely something small, like a condo for example (which was my first purchase many years ago). I thought I would ask for some expert insight into what you should all know when considering to buy your first piece of Real Estate, and here is what I have for you:
Mr. John Walsh, a Mortgage Broker with Mortgage Alliance, and also the founder of the Ottawa Real Estate Investors Organization (http://www.oreio.org/ ), has the following to say about first time home buyers:
The biggest fear most of the first time home buyers have from my perspective is that they don’t quite know what’s going on. They are not “experts” in financial matters and when they approach what many perceive as the “big scary bank”, they tend to assume that they are being taken care of (or taken to the cleaners). Whether they are or not depends largely on their personal history with the bank.
The quote I like to give people is that banks are in the business of making money. They are very good at it. To the tune of almost $1B a quarter. Given that this is their focus, do you believe it is in their “best interest” (pardon the pun) to give you the lowest possible rate or do you think it might be a conflict of interest?
As a mortgage broker/agent/professional, I get paid by all the lenders. I also get their best rates and terms automatically as we are “viewed” by the lenders as volume customers. So my interest, is in doing what’s best for my client. My bottom line is also my clients bottom line.
Best advice for anyone buying or not is to pull your own credit bureau. Find out what is on there BEFORE you decide to get a loan. Depending on the score (Becon or FICO as it’s commonly referred to) you receive will determine much of the time the kind of rate you will get. The lower the score the higher the risk and the higher the rate and vice versa.
That $20 Zellers bill that you were never notified of that has been sent to collections could prevent you from getting a mortgage. It just happend to a client of mine.
I also like to compare investing in real estate long term with the stock market. In a given 15 year span, real estate has shown the ability to almost double in value. Worst case senario, the building value drops to near zero. It’s still a place to live and the land will always have some value. Stocks? They can double in shorter time frames, but how low can it go? Well, I guess you could always use it as wallpaper in your house. 🙂
The best time to plant a tree was 15 years ago. The next best time is now. -anchient Chinese proverb.
Mr. Walsh can be reached at jwalsh@mortgagealliance.com or 613-237-7044 x148, or check him out at http://ForAllYourMortgageNeeds.com .
This is great advice. I can personally vouch for the importance of verifying your Credit History. Fill out this form: http://www.equifax.com/ecm/canada/EFXCreditReportRequestForm.pdf
and fax it to Equifax for your Free Credit Report (something I recommend to all my clients).
Next Up: Margaret Burniston, Broker at Partners Advantage GMAC Real Estate. Margaret is a very kind and intelligent woman who is great at what she does. I have recommended her to family and friends before and she has always been a great help.
Margaret tells me that most first time home buying clients are surprised by the amount of additional closing costs that are require. Conveniently enough, she prepared a list of these costs for us today. Here they are:
Commom Home Buying Costs
Purchasing a home can be one of the most exciting and satisfying experiences. Wise home buyers plan for an additional 1.5 – 1.75% of the price to cover these items involved with the purchase.
Deposit
As a general rule all offers are submitted with a monetary deposit. The amount will vary with the value of the property. Unlike the other items listed, deposit monies are part of the purchase price and will be deducted from the balance due on closing.
Home Inspection
A knowledgeable home inspector will spend 2 – 4 hours with you examining the home with you. They will check mechanicals, general construction, visible structure, and overall fitness of the property, a good home inspector will also identify ongoing maintenance items.
Condominium Status Certificate
Condominiums generally have a document called a Status Certificate outlining the condition, financials etc., of the condo corporation. A careful review of the certificate is recommended by the buyer or the buyer’s lawyer during the conditional period.
Land Transfer Tax
This tax is required by the government to be paid by the buyer at time of closing of the real estate transaction. Land Transfer doesn’t apply on your first home purchase.
Legal fees
The transfer of ownership of the property generally involves the use of a real estate lawyer. It is important to secure a lawyer as soon as possible after the offer has been accepted by the vendor.
Adjustments
This is a category of items that require apportioning (or splitting) on the closing of the transaction.
Title Insurance
Designed to cover unpredictable or unforeseen issues with the title of the property that become known after closing of the sale.
Home Insurance
All properties are required to carry valid home owners insurance. Covers fire and other hazards.
GST
Goods and Services Tax will be required on all service items including real estate commission and legal fees.
Margaret Burniston can be found at: www.buyandsellottawahomes.com and contacted at Margaret@buyandsellottawahomes.com or 613-836-3378 x236.
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