Buying a home…Getting Started – The Financials

Since this will likely be the most important purchase of your lifetime, smart financial planning is necessary from the start.  Doing the necessary prep work will ensure a smooth transition into your new home. 

Setting your financial guidelines and limits will be one of the first things you consider.  You will need to talk with your financial institution or a mortgage company/broker to get yourself pre-approved for financing so that you know exactly how much you can afford to spend comfortably.  When in discussion with your financial representative be sure to ask them to explain the various mortgage options available to you.  Most people focus only on the interest rate and the term of the mortgage but you should be aware that there are many other components of a mortgage such as amortization length, repayment options, pre-payment penalties, transferability that can affect the overall cost and value of the mortgage. 

Please note that being "pre-approved for financing" does not mean that you can place firm offers on any suitable property within your price range.  The pre-approval is an assurance that you can qualify for a mortgage up to a certain point, but your lender will still need to be assured that the property in question is suitably assessed for value by their team before they approve the release of any money.   It is always wise to make all offers to purchase Conditional on Financing approval.  Note: Sometimes buyers are challenged in multiple offer scenerios and they will remove this condition to help ensure their success in negotiating the sale.  We advise caution here.  You need to fully understand your financial position and the possible repercussions if the lender's appraised lending value is less than the purchase price.  A substantial down payment is advisable in these situations to afford flexibility.

You will need to make sure that you have funds available for a deposit when it is time to put in an offer. You must be able to access these funds quickly.  Requirements for the deposit can vary depending on the Seller's request, but generally it must be delivered within 24 hours of an accepted offer in the form of a certified cheque or bank draft.  It is not uncommon that the Seller requests a certified cheque or bank draft accompany the offer at presentation.  This is very common in multiple offer scenerios.

You will also want to establish a reserve fund for closing costs ( we'll chat about these in another posting ), renovations/improvements and unforseen repairs.  Not too often does anyone move into a new home without doing something to the home to give it their special touch. 

Once you have your financials in place you are ready to start!